Summary: The strike-off of a company that has not commenced business and has not received share subscription money raises important legal and procedural questions under the Companies Act, 2013. Incorporation establishes the legal relationship between the company and its subscribers, and the absence of business operations does not automatically extinguish their subscription commitments. Section 2(55) recognises subscribers to the Memorandum as members, while Section 10(2) provides that monies payable by members under the Memorandum or Articles constitute debts due to the company. Consequently, unpaid subscription money may represent a recoverable claim requiring examination before the company seeks removal of its name from the register. Section 10A requires prescribed companies having share capital to file the commencement-of-business declaration in Form INC-20A within 180 days of incorporation, confirming receipt of the agreed subscription money. Failure to comply may attract penalties and, where the statutory conditions are satisfied, proceedings for removal of the company’s name. Section 248(1)(d) provides a specific ground involving non-payment of subscription money and non-filing of the declaration, while Section 248(2) governs voluntary strike-off applications subject to fulfilment of the prescribed requirements, including extinguishment of liabilities. The distinction between amounts receivable from subscribers and liabilities payable by the company is therefore particularly important. This article examines these provisions through a practical illustration, compares situations involving paid and unpaid subscriptions, and addresses frequently asked questions concerning bank accounts, subscriber obligations, Form STK-2, ROC proceedings, documentary requirements and restoration under Section 252.
- Legal Position of Subscribers and Unpaid Share Subscription Money
- Practical Illustration: Company Incorporated Without Receiving Subscription Money
- 1: Does the company have a claim against its subscribers?
- 2: Can the company apply for voluntary strike-off where no subscription money received or no Bank account has been opened?
- 3: Can the ROC also has power to strike off the company where no subscription money received or no Bank account has been opened?
- Suggested Practical Illustration: Two Possible Situations
- FAQ on Strike off : When Subscription Money is Not Paid
- 1. Can a company be struck off if its subscribers have not paid the share subscription money?
- 2. Are subscribers to the Memorandum of Association legally liable to pay the subscription money after incorporation?
- 3. Can promoters withdraw their subscription commitment if the company has not commenced business?
- 4. Is opening a bank account mandatory before applying for voluntary strike-off?
- 5. Can a company apply for voluntary strike-off without receiving any subscription money?
- 6. Does non-payment of subscription money automatically result in strike-off by the ROC?
- 7. What is the time limit for filing Form INC-20A?
- 8. What happens if the company does not file Form INC-20A within 180 days?
- 9. What is the difference between Section 248(1)(d) and Section 248(2)?
- 10. Can a company with no assets, no liabilities and no business activity apply for strike-off?
- 11. Is unpaid share subscription money considered a liability of the company?
- 13. What documents should be examined before filing Form STK-2?
- 14. Can a company be restored after its name has been struck off for non-filing of Form INC-20A?
- 15. Does the absence of business transactions automatically mean that the company has no liabilities?
Legal Position of Subscribers and Unpaid Share Subscription Money
The incorporation of a company does not necessarily mean that the company will commence business. In certain cases, the promoters may decide to discontinue the proposed venture shortly after incorporation. A common issue arises where the subscribers to the Memorandum of Association have not paid their share subscription money and the company has neither commenced business nor opened a bank account.
Under Section 2(55)(i) of the Companies Act, 2013, every person who has agreed in writing to become a member of a company and whose name is entered in its register of members is a member of that company. Under Section 10 of the Companies Act, 2013, the Memorandum of Association and Articles of Association, upon registration, bind the company and its members. The subscribers to the Memorandum become members of the company and are legally bound by their subscription commitments.
Practical Illustration: Company Incorporated Without Receiving Subscription Money
We can take an illustration as below-
ABC Private Limited was incorporated on 1 January 2026, with two subscribers to its Memorandum of Association:
- A – 5,000 equity shares of ₹10 each.
- B – 5,000 equity shares of ₹10 each.
The total authorised subscription was ₹ ₹1,00,000 total subscribed share capital.
However, after incorporation, the promoters decided not to proceed with the proposed business due to financial and commercial reasons.
The company:
- Did not open a bank account.
- Did not receive any subscription money from its subscribers.
- Did not commence business operations.
- Did not enter into any commercial transaction.
- Did not acquire any assets or incur any liabilities.
In these circumstances, the question arises whether the subscribers remain liable to pay the subscription money despite the fact that the company has never commenced business. Three distinct legal questions arise:
1: Does the company have a claim against its subscribers?
Section 10(2) provides that monies payable by members to the company under the Memorandum or Articles constitute debts due to the company.
The enforceability and timing of that obligation must be considered in light of the subscription terms and allotment status.
2: Can the company apply for voluntary strike-off where no subscription money received or no Bank account has been opened?
Yes, the company may apply for voluntary strike-off where no subscription money has been received or no Bank account has been opened subject to fulfilment of conditions specified under section 248(2) read with section 248(1)(d) which implies that:
Where a company has fulfilled the below conditions:
- the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and
- a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under Section 10A(1)
3: Can the ROC also has power to strike off the company where no subscription money received or no Bank account has been opened?
Section 248(1)(d), read with Section 10A(3), provides a specific statutory route where the subscribers have not paid their subscription money and the declaration has not been filed within 180 days, subject to the statutory conditions.
Importantly, Section 10A(3) also requires the Registrar to have reasonable cause to believe that the company is not carrying on any business or operations.
Suggested Practical Illustration: Two Possible Situations
| Situation | Legal consideration |
|---|---|
| Subscribers have paid the subscription money, but the company has not commenced business. | The company may consider voluntary strike-off, subject to statutory requirements. |
| Subscribers have not paid the subscription money and the company has not opened a bank account. | The unpaid subscription obligation and its treatment during the strike-off process require examination. |
FAQ on Strike off : When Subscription Money is Not Paid
The following FAQs discuss the principal legal, accounting and procedural issues involved in striking off a company where the share subscription money has not been paid or where the company has not commenced business.
1. Can a company be struck off if its subscribers have not paid the share subscription money?
Yes. Section 248(1)(d) of the Companies Act, 2013 specifically provides a ground for removal of a company’s name where the subscribers have not paid the subscription money undertaken to be paid at the time of incorporation and the declaration under Section 10A(1) has not been filed within 180 days of incorporation.
2. Are subscribers to the Memorandum of Association legally liable to pay the subscription money after incorporation?
Yes, subject to the applicable subscription terms and legal requirements. Under Section 10(2) of the Companies Act, 2013, all monies payable by a member to the company under the Memorandum or Articles constitute a debt due from that member to the company.
3. Can promoters withdraw their subscription commitment if the company has not commenced business?
No, not merely on the ground that the company has not commenced business. Upon incorporation, the subscribers acquire the legal status of members, subject to Section 2(55) of the Act. Their subscription commitments cannot automatically be cancelled simply because the proposed business has been abandoned.
4. Is opening a bank account mandatory before applying for voluntary strike-off?
There is no general requirement that a company must open a bank account merely to become eligible for strike-off. However, the company must satisfy the applicable statutory conditions, including extinguishment of its liabilities under Section 248(2) and on the grounds specified under Section 248(1).
5. Can a company apply for voluntary strike-off without receiving any subscription money?
Yes, the company may apply for voluntary strike-off without receiving any subscription money subject to fulfilment of conditions specified under section 248(2) read with section 248(1)(d) which implies that:
Where a company has fulfilled the below conditions:
- the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and
- a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under Section 10A(1)
6. Does non-payment of subscription money automatically result in strike-off by the ROC?
No. Non-payment of subscription money does not automatically dissolve the company. The Registrar must exercise the statutory powers under Section 248 and follow the prescribed procedure, including issuance of the relevant notices and consideration of representations.
7. What is the time limit for filing Form INC-20A?
Under Section 10A(1), a company having share capital incorporated after the commencement of the Companies (Amendment) Act, 2019, is required to file the commencement-of-business declaration within 180 days of incorporation.
The declaration confirms that every subscriber to the Memorandum has paid the value of shares agreed to be taken by them.
8. What happens if the company does not file Form INC-20A within 180 days?
Failure to file Form INC-20A may attract action under Section 10A(2). Further, under Section 10A(3), the Registrar may initiate action for removal of the company’s name under Section 248(1)(d), where the prescribed conditions are satisfied.
9. What is the difference between Section 248(1)(d) and Section 248(2)?
Section 248(1)(d) deals with removal of a company’s name by the Registrar in circumstances involving non-payment of subscription money and non-filing of the declaration within 180 Days as specified under Section 10A.
Section 248(2), on the other hand, deals with voluntary applications made by a company for removal of its name after extinguishing all its liabilities and satisfying the prescribed requirements on or any of the grounds specified under Section 248(1).
10. Can a company with no assets, no liabilities and no business activity apply for strike-off?
Yes, subject to compliance with Section 248(2), the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, and other applicable statutory requirements.
However, the company must verify whether unpaid subscription money creates an amount legally payable to it before declaring that all liabilities have been extinguished.
11. Is unpaid share subscription money considered a liability of the company?
Not necessarily. Where subscription money is legally payable by a member, it may constitute an amount receivable by the company and an asset or claim of the company.
It is important to distinguish between:
- Unpaid share subscription money recoverable by the company.
- Outstanding liabilities payable by the company to third parties.
This distinction is particularly relevant when examining the requirement under Section 248(2) to extinguish all liabilities.
13. What documents should be examined before filing Form STK-2?
The company should examine the following documents and records:
- Memorandum and Articles of Association.
- Details of subscribers and their share commitments.
- Bank statements, if a bank account exists.
- Register of members and share allotment records.
- Financial statements and books of account.
- Status of Form INC-20A.
- Details of outstanding statutory dues and other liabilities.
- Applicable declarations and indemnity documents.
- Details of Creditors (Secured & Unsecured) and their No Objection Certificate
- Reason for Strike off to assess the ground under the law.
14. Can a company be restored after its name has been struck off for non-filing of Form INC-20A?
Yes. An aggrieved person may approach the National Company Law Tribunal under Section 252, subject to the statutory conditions and limitation period.
The Tribunal may order restoration where the requirements of the provision are satisfied. Relevant evidence may include proof of business operations, receipt of subscription money and other statutory records.
15. Does the absence of business transactions automatically mean that the company has no liabilities?
No. The absence of business transactions does not necessarily establish that the company has no outstanding obligations. The company must examine its incorporation-related commitments, statutory dues, contractual obligations and any other amounts payable or receivable.
Reference:
https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/
