The process of striking off a private limited company refers to the removal of a company’s name from the Register of Companies (ROC), thereby ceasing its legal existence. This can either be initiated voluntarily by the company or by the Registrar of Companies (ROC) under specified circumstances.
Regulatory Provisions
The provisions governing the strike-off of a company are outlined in Section 248 of the Companies Act, 2013, along with The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016. The strike-off process can occur through two primary mechanisms:
1. Voluntary Strike-Off: When a company voluntarily applies for removal from the ROC register.
2. Strike-Off Initiated by ROC: When the ROC takes action to remove a company’s name based on specific grounds.
Power of the Registrar to Strike Off a Company
Section 248(1) of the Companies Act, 2013
The ROC has the authority to strike off a company’s name after providing a reasonable opportunity of being heard in the following cases:
1. Failure to commence business: If the company has not started operations within the first year of incorporation.
2. Inactive company: If the company has not conducted any business operations for two consecutive financial years and has not applied for dormant status under the Companies Act.
3. Non-payment of subscription money: If the subscribers have not paid their share subscription amount at the time of incorporation and Form INC-20A (Commencement of Business) has not been filed within 180 days of incorporation.
4. Physical verification failure: If, after physical verification of the registered office, it is found that the company is not carrying out any business or operations.
Voluntary Strike-Off by the Company
Section 248(2) of the Companies Act, 2013
A company fulfilling the above conditions can voluntarily apply for strike-off, provided it meets the following requirements:
1. Extinguishment of liabilities: All outstanding liabilities must be settled before filing the application.
2. Member approval: The company must pass a special resolution or obtain consent from at least 75% of shareholders (in terms of paid-up share capital). The special resolution must be filed with the ROC in Form MGT-14 before proceeding with the strike-off application.
3. Compliance with filing requirements: The company must ensure that all overdue financial statements and annual returns, as required under Sections 134 and 92 of the Companies Act, have been duly filed up to the last financial year in which it ceased operations.
Note: If the company is regulated under a special Act, prior approval must be obtained from the relevant regulatory authority before applying for strike-off.
Companies Not Eligible for Voluntary Strike-Off
Rule 3 of The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016
The following types of companies are not eligible to apply for voluntary strike-off:
1. Listed companies
2. Companies delisted due to non-compliance with listing or statutory regulations
3. Vanishing companies (companies that disappeared after raising public funds)
4. Companies under prosecution, inspection, or investigation
5. Companies with a pending compounding application
6. Companies that have accepted public deposits
7. Companies with unsatisfied charges (pending loan repayments)
8. Section 8 companies (Non-Profit Organizations)
Process of Filing a Strike-Off Application
To apply for strike-off, the company must submit E-Form STK-2 and MGT-14 (for passing special resolution ), accompanied by the following mandatory attachments:
Mandatory Attachments:
- Indemnity Bond – Signed by every director in Form STK-3 (or Form STK-3A for government companies)
- Statement of Accounts – Form STK-8, showing nil liabilities, not older than 30 days from the filing date
- Affidavit by Directors – Form STK-4, affirming the correctness of the application
- Special Resolution – Passed by the members for striking off the company
(Filing of MGT-14 – Submission of Form MGT-14 for registering the special resolution with the ROC)
- KYC Documents – Professional-certified KYC documents of directors
- No Objections from creditors – Company must obtain no objections certificate from creditors , if any
- Latest Financial Statements – Copy of the latest financial statements of the company
- ITR Acknowledgement – The latest filed income tax return acknowledgement
- Bank Closure Letter – Confirmation of the closure of the company’s bank account
Submission & Processing:
- The STK-2 form and attachments must be submitted to the Centre for Processing Accelerated Corporate Exit (C-PACE).
- Upon review, C-PACE may request additional information if required. The company must provide the requested details within 15 days of receiving the request.
Common Resubmission Remarks
During the review process, companies may receive resubmission remarks. Common issues include:
1. Bank Account Closure: The company must close its bank account before filing the application.
2. Attested ID Proofs of Directors: The department may request professional-certified ID proofs of current directors.
3. Assets and Liabilities: If outstanding payables are reflected in the latest filed balance sheet, an explanation regarding the settlement of dues may be required.
4. STK-8 Validity: The statement of nil assets and liabilities in Form STK-8 must not be older than 30 days from the filing of STK-2.
5. ITR Compliance: The company must ensure that all pending Income Tax Returns are filed before applying for strike-off, with the latest ITR acknowledgment attached.
Conclusion
The strike-off process is a structured legal mechanism for closing an inactive company. Companies must ensure they meet all eligibility criteria, settle liabilities, and comply with necessary filing requirements before initiating the application. Adhering to the proper procedure helps prevent legal complications and facilitates a smooth closure.
By CS Megha Paliwal
Author Bio
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