Striking off of Company- Rules, Procedures & Applicability

Every company is started with a vision to run its business forever, but not all business are successful in long run. As we already are aware, that there is certain procedure to incorporate a company, run a company, likewise there is specific procedure to close a company. As on date, there are two ways to close a company.

1. Strike off company

2. Winding up of company

There is difference between both above methods, But my topic is about striking of company, so I will discuss about that only in my this article. Though, I am sorrowful about writing this article as a company is closing but this is the practical situation, where we as professionals on day to day basis consult management of the company to strike off their company, as their company is not working or say is defunct. Lets get started and know more about this topic and I have prepared this article in question and answer forms for easy understanding of readers.

What is meant by striking off of company name?

Striking off of company simply means closing of a defunct company, in fast way. It is simplest way to close a company.

Which company can get strike off?

Any company can get strike off whether it’s a

• Private company
• One-person company
• Public company
• Section 8 company

Note that even a dormant company can apply for striking of company.

What section governs Striking of company name from the register of companies?

The companies are governed by the companies Act, 2013 and its section 248 governs the striking off of company.

What are ways to strike off a company?

A company can get strike off in two ways:-

A) By company itself as Voluntary Striking off

B) By Registrar of Companies

Note that section 8 company cannot get strike off voluntary.

When a company cannot make application for voluntary striking off?

An application on behalf of a company shall not be made if, at any time in the previous three months, the company—

(a) has changed its name or shifted its registered office from one State to another;

(b) has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;

(c) has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;

(d) has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

What are the conditions before applying for striking of company?

As discussed above the pre-conditions are given as follows in both the cases.

A) A company can get apply for striking off voluntary after satisfying the below given conditions:-

i) Extinguishing all its liabilities and

ii) Taking approval from Members by special resolution

B) By Registrar of companies on finding of any of below given grounds:-

i) a company has failed to commence its business within one year of its incorporation or

ii) a company is not 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 or

iii) 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

iv) the company is not carrying on any business or operations, as revealed after the physical verification after registered office of company is found by Registrar of Companies.

What are the forms required to be filed?

While applying for striking off of company, two forms are required:-

a) E-form MGT-14

b) E-form STK-2

What are the fees associated with E-forms?

While E-form MGT-14 has normal associated fees, E-form STK-2 has fees of INR 10,000/-

What is the procedure to strike of company in case of voluntary striking off of company?

The procedure is very simple and is done step wise:-

i) Authorize officer or any director of company to convene a Board Meeting

ii) Sending of Board Meeting Notice atleast seven (7) days prior to board meeting along with detailed agenda.

iii) Convene Board Meeting and passing of Board resolution.

iv) Sending of Annual General Meeting / Extra-Ordinary General Meeting as the case may be

v) Convene General meeting and passing of Special Resolution.

vi) Filing of MGT-14 along with required attachments.

vii) Filing of STK-2 along with required documents.

viii) Registrar of companies after finding that all the attachments are fine and all the conditions are fulfilled and it is just and equitable to strike off the company, will strike off the company after publishing a public notice.

What are the documents which are required to attach with the forms?

The following documents are attached with the E-forms:-

• 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).
• Certified true copy of Special Resolution (duly signed by every director of the company).
• Copy of Board resolution authorizing the filing of this application.
• Indemnity bonds in Form No. STK-3
• An affidavit in Form STK-4
• A statement concerning any pending litigations with respect to the company.
• Copy of relevant order of delisting, if any, from the concerned stock exchange.
• No objection certificate from relevant regulatory department in case company is governed by such department.

How long it takes to strike of company name from the register of companies?

Once an application is made for striking off of company by filing E-form STK-2, the concerned Registrar of Companies (ROC) after verifying the documents will strike off the name of company and this procedure normally takes 3-4 month. However, if any objection is received from Registrar of Companies (ROC) this process might take extra time or even reject the application.

What is the procedure to strike of company in case registrar strike off company (ROC)?

If, as discussed in above point, ROC is satisfied that it is just and equitable to strike off company, after giving Public notice and sending notice to company and its directors and if no response is received within the time period stated in notice, strike off company.

Disclaimer: – The above article is prepared keeping in mind all the important and basic question which comes in mind of a professional or other stakeholder while applying for striking off of company. The author has tried to cover all the important and basic question. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

(The Author is Corporate Consultant and provides varied array of services including Start-ups mentor, Secretarial, Legal, Trademark, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- [email protected] and Contact Number: 91-8178515005)