- Ishita Ramani
- | Company Law - Articles
- 21 Jan 2020
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Do you own a Company? Do you want to close down your Company? there are many questions that might be arising about strike off Company in your mind. Here we have made a compilation of the Most Frequently Asked questions.
Q1) How can i close my Private Limited Company?
Ans. The closure of a limited company depends on whether it is solvent (able to pay its bills) or insolvent (unable to pay its bills). If it is solvent, the easiest way to close it is for the directors to apply to Companies House to have it struck off the register. Alternatively, you can start a members’ voluntary liquidation. If your company is insolvent, the directors can propose a creditors’ voluntary liquidation process.
This course of action will require at least 75% of the voting shareholders (by value of their shares) to agree to the closure by passing a winding-up resolution. In certain situations, a company can be forced to close by its creditors or HMRC.
Q2) What does strike off of a company mean?
Ans. Strike Off means removing the name of the Company from the Register of Companies maintained by the Registrar of Companies.
It is more like a Closure of the Company and the Company will not be in existence after being Struck Off and cannot perform any operation thereafter.
Q3) What is the procedure for Closing a Private Limited Company?
Ans. Shutting down a company is a long and complicated procedure. A Private Limited Company can be closed down in various manners depending on the requirement of the owner.
- The owner can sell the company.
- Can close down the company by declaring the company ‘Defunct'(Striking of the company).
- Winding up or dissolving the company.
Selling of Private Limited Company:
A company can be sold by transferring the majority shares to the person best suited for the company. The procedure of eventually winds up the company, but only the majority of the shares are transferred with the responsibility of stocks.
Declaring the company Defunct:
Any company that wants to strike off its name from the registrar of the company can declare itself defunct by applying Form FTE and then the company can be shut down by the registrar of the company.
Winding Up of Private Limited Company:
Winding up of the private limited company is necessary in the case where the company needs to conclude its business or due to bankruptcy. The winding up method can be initiated intentionally by the shareholders or creditors, or it can also be done on the order of the tribunal (Compulsory Winding up ).
If the company is not dissolved and the assets are not collected as per the legal proceedings, the company is considered in operation, and hence the directors will be liable for completing all the compliances associated with the private limited company.
Q4) What are the main steps to close a Pvt.Ltd.Co.?
Ans. Companies may pursue a strike off by following each of the following specified steps:
Holding of Board Meeting:
The passing of Board Resolutions has been mandated for major enactments in the corporate sphere.
Closing of liabilities:
A company desirous of a strike off must have closed off all its liabilities.
Holding of General Meeting:
A general meeting of shareholders should be held by the company by passing a resolution for striking off the name of the Company.
Furnishing of Applications and documents:
Companies on the pursuit of strike-off must file an application to the Registrar of Companies (ROC), accompanied by the following documents:
- Indemnity Bond duly notarized by all directors (in Form STK 3).
- A statement of liabilities comprising of all assets and liabilities of the companies (certified by a Chartered Accountant).
- An affidavit in Form STK 4 (by all directors of the company).
- CTC of Special Resolution (duly signed by every director of the company).
- A statement concerning any pending litigations with respect to the company.
Implications of dissolvement:
If a company confirms its dissolvement, it shall cease its operations as a company from the date of such dissolvement, and the Certificate of Incorporation issued to it by the ROC shall be deemed to have been cancelled, except for the discharge of any existing liabilities or obligations.
Q5) How long does it take to Strike off of a company?
Ans. It usually takes at least 3 months for a company to be officially dissolved, but the length of time can vary considerably if the process is complex. Generally, however, a company will cease to exist no less than 3 months of the winding-up notice being advertised in the Gazette.
Q6) What happens after the registrar strikes off the name of the Company?
Ans. There are serious consequences for Directors of companies which are involuntarily struck off, particularly if the company is still trading.
- The company ceases to exist as a legal entity from the date of dissolution
- The assets of the company become vested in the state
- Where the company ceases to exist, banks will be unwilling to provide finance and future contracts with customers/ suppliers may be jeopardised
- Directors of companies that are involuntary struck off may be disqualified from acting as a Director or in the management of any company for a period of up to 12 years on application of the Director of Corporate Enforcement, as was seen in a recent court ruling.
- The company’s Shareholders and Officers are trading without the protection of limited liability and can be held personally liable for the debts of the company.
Q7) How do i revive or restore a stroked off Company?
Ans. Step by Step procedure for Revival of Company:
- Draft an appeal under section 252, in Form No. NCLT 9, with such modifications as may be necessary.
- Serve a copy of the appeal, to the Concerned ROC and Income Tax department.
- Submit the original appeal to NCLT.
- On the date of the hearing notified by NCLT appear before NCLT and present the case producing sufficient grounds for revival of Company and repudiate the claim of ROC that Company is not carrying on the business or ceased to be in business for the past two years.
- After hearing both the parties NCLT shall pass the order restoring the name of a company in the register of companies.
- File the copy of order with Registrar of Companies within a period of 30 days from the date of the order.
- File pending financial statements and annual returns with the Registrar within such time as may be directed by the Tribunal.
- The Registrar of Companies will change the status of Company from ‘Strike- off’ to ‘Active’.
Q8) When a company be struck off?
Ans. The company can be struck off under following circumstances:
- When a company has failed to commence its business within one year of its incorporation.
- When a company is not actively carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant Company.
In such circumstances either the registrar of companies will strike off the name of the company on his own or the company voluntarily apply for the strike off.
Q9) Can a struck off company still trade?
Ans. When a company is struck off, the name would be removed from the company register and it can not trade, sell its assets or make payments or even it can not get involved in any other business activities. The name of the company would be made available for new companies to use.
Q10) What are the documents required to strike off the company’s name?
Ans. The Company which is likely to be struck off must file an application to the registrar of the companies, along with the following documents:
- Indemnity Bond duly notarized by all directors (in Form STK 3).
- A certified statement of liabilities by a Chartered Accountant comprising of all assets and liabilities of the companies.
- An affidavit by all directors of the company in Form STK 4.
- CTC of Special Resolution duly signed by every director of the company.
- A statement concerning any pending litigations with respect to the company.
Q11) What are the grounds for strike off the company? In what conditions the Company’s name can not be struck off?
Ans: The company can be struck off under following circumstances:
- When a company has failed to commence its business within one year of its incorporation.
- When a company is not actively carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant Company.
The company can not be struck off if in the last three months:
- The company has Changed its name or relocated its registered office to another state.
- Made a disposal for the value of property or rights held by it (subject to conditions).
- Engaged in any other activity other than what is necessary or expedient for making an application under the concerned provision, and so and so forth.
- Filed an application to the Tribunal for the granting of Compromise or Arrangement, and a consensus for the same hasn’t yet been arrived at.
- Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.
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If actual paid up capital is Rs 10000 but it is wrongly shown as Rs 100000, then what compliances required before striking off name of Private Ltd company.