Latest provisions for striking off a company | Companies Act 2013

Meaning :- Strike Off means removing the name of the Company from the Register of Companies maintained by Registrar of Companies (RoC). 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.

Relevant Provisions :-  Section 248 of Companies Act, 2013 read with The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016.

Grounds of which a company can be strike Off :

> A company has failed to commence its business within one year of incorporation;

> The company is not carrying out any business or Activity for preceding two  financial years and has not make an application for obtaining the status of Dormant Company under Section 455 of the Act.

> 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 sub­section (1) of section 10A of Companies Act, 2013.

> The company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.

Modes of Striking off a Company :-

Companies Act, 2013 provides two modes of strike off a Company.

• Strike off by ROC under Section 248(1) of the Companies Act, 2013.
• Strike off by Company by its own under Section 248(2) of the Companies Act, 2013.

 Strike off by ROC under Section 248(1) of the Companies Act 2013

The registrar if having a reasonable cause as mentioned above may send notice in Form STK-1 of Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 to the Company and all the Directors of the company informing his intention to remove company’s name from the record and request company to send its representations along with supporting documents within thirty days from the date of notice. This process can also be called as Compulsory removal of name from Registrar of Companies.

Strike off by Company by its own under Section 248(2) of the Companies Act 2013

The company can file an application in E-form STK-2 with Registrar of Companies suo -motto after extinguishing all its liabilities, by special resolution or with the consent of seventy five percent of the members in terms of paid up share capital, to the Registrar for removing the name of the Company on all or any of the above mentioned grounds.

PROCEDURE :-

Procedure for Voluntary Striking Off a Company under Section 248(2) of the Companies Act 2013 is as follows.

1. Holding of Board Meeting

The Company will hold Board Meeting for passing a Board resolution for the purpose of Striking off the name of the Company and to authorize any director of the Company to apply to Registrar of Companies.

2. Extinguishment of all the Liabilities

After passing of Board resolution the Company will extinguish all the liabilities before making application.

3. Holding of General Meeting or Obtaining Noc’s from Members

The Company will hold the general meeting of shareholders by passing a Special Resolution for striking off the name of the Company or it can obtain approval of 75% of members in terms of  paid up share capital of the Company. In case of Special resolution Company will file E-form MGT-14 within 30 days.

4. Approval of Concerned Authorities

In case if any other authority regulates the company, then the approval of such authority shall also be required.

5. Application to ROC by Company

Application in Form STK- 2 to be filed by the Company (Government filing fees of INR 10,000) along with following documents:

> Indemnity Bond duly notarized by every director in Form STK 3;

> A statement of accounts in Form STK- 8 containing assets and liabilities of the company made up for a day, not more than 30 days before the date of application and certified by a Chartered Accountant;

> An affidavit in Form STK 4 by every director of the company;

> A copy of the special resolution duly certified by each of the directors of the company or consent of seventy-five per cent of the members of the company in terms of paid up share capital as on the date of application;.

> In the case of a Company regulated by any other authority, approval of such authority shall also be required;

> A statement with respect to any pending litigations, if any involving the Company.

6. Process followed by ROC

After receiving an application, ROC shall publish a public notice STK- 6. Any objection on proposed strike off shall be sent within 30 days.

The notice shall be placed on the website of Ministry of Corporate Affairs, published in the Official Gazette and published in a leading English newspaper and at least in one vernacular newspaper where the registered office of the company is situated.

ROC shall simultaneously intimate the concerned regulatory authorities regulating the company, i.e. the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections if any.

After complying all the process, ROC shall strike off the name and dissolve the company by sending notice in the official gazette in form STK-7.

On the publication in the Official Gazette of this notice, the Company shall stand dissolved in effect from the date mentioned therein. The same shall also be placed on the official website of the MCA.

7. Other Provisions

If a company confirms as dissolved, it shall cease to operate as a Company from the date of dissolution and the Certificate of Incorporation issued by the ROC to it shall be deemed to have been cancelled except for the purpose of realizing the amount due to the company and for the payment or discharge of the legal liabilities or other obligations of the Company.

The Corporate liability, if any, of every directors and officer who was exercising any power of management directly or indirectly, and of every member of the Company dissolved, shall continue and may be enforced as if the Company had not been dissolved.

Important Note :-

Before 10th May, 2019, no specific provision existed in Company law which required any company intending to apply for strike off its name from the Register of Companies to file overdue returns (Form AOC-4 or Form AOC-4 XBRL, as the case may be, and Form MGT-7) before filing striking off application. The Registrars, in some cases were accepting striking off application without requiring companies to file such overdue returns and in some cases, companies were asked to file overdue returns. But now, w.e.f May 10, 2019, MCA has made a provision applicable across India by which companies are mandatorily required to file overdue returns prior to filing striking off application. Further, MCA has increased the fees for filing striking off application by a company from INR 5,000 to INR 10,000. On one side, Government has lowered the incorporation fees to zero for small companies but on other side, fees for exit option has been doubled.