The process of striking off a company refers to the removal of a company's name from the Register of Companies (ROC) maintained by the Ministry of Corporate Affairs (MCA) in India. This is a cost-effective and time-efficient method to close a company that is not carrying on any business activity. The process can be initiated voluntarily by the company or compulsorily by the ROC. Either the Registrar of Companies (ROC) may issue a notice requesting this or alternatively the business can ask themselves for this to occur directly with them. Section 248 to 252 of the Companies Act of 2013 describes this procedure.

Requirements for Strike Off

To be eligible for striking off, a company must satisfy the following conditions:

  1. No Business Operations: The company should not have carried out any business operations for the last two financial years.
  2. No Liabilities: The company should not have any pending liabilities or unsettled debts.
  3. No Ongoing Legal Proceedings: The company should not be involved in any active legal proceedings.
  4. No Assets & Liabilities: The company must not own any assets or have outstanding liabilities at the time of applying for strike-off.
  5. No Pending Filings: The company should have filed all necessary financial statements and annual returns up to the date of the application.
  6. Closure of Bank Accounts: The company should have closed all its bank accounts and obtained a closure certificate from the bank.

Process of Striking Off a Company

The strike-off process can be initiated either voluntarily by the company under Section 248(2) of the Companies Act, 2013 or compulsorily by the ROC under Section 248(1).

Voluntary Application to Strike Off a Company

A company may voluntarily apply for its name to be removed from the Register of Companies by passing a special resolution or obtaining the consent of at least 75% of its members (based on paid-up capital). After settling all outstanding obligations, the company can request a strike-off under the following circumstances:

  • The company fails to commence business operations within one year of incorporation.
  • The company has remained inactive for two financial years and has not applied for dormant status under Section 455 of the Companies Act.

Once the company submits its request, the ROC is required to issue a public notice as prescribed by the Act before proceeding with the strike-off.

Steps For Voluntarily Striking Off a Company

The following steps are involved in voluntarily striking off a company:

  1. Board Resolution: The company must pass a board resolution approving the strike-off process.
  2. Special Resolution: A special resolution must be passed by shareholders with at least 75% voting in favor of striking off the company.
  • File MGT-14 within 30 days from the date of passing of resolution in the general meeting.
  1. Approval from Creditors: If the company has creditors, their consent must be obtained.
  2. Filing of Form STK-2: The company must file Form STK-2 along with the following attachments:
    • Indemnity bond signed by directors (STK -3)
    • Statement of accounts (not older than 30 days from filing date) signed by Charted Accountant (STK – 8)
    • Affidavit from directors (STK-4)
    • Special resolution copy
  3. Scrutiny by ROC: The ROC examines the application and, if satisfied, issues a notice of striking off.
  4. Publication of Notice: The notice is published in the Official Gazette for public objections.
  5. Final Strike Off Order: If no objections are raised, the ROC strikes off the company and updates the MCA records.

Compulsory Strike-Off by ROC

The ROC can strike off a company if it:

  • Fails to commence business within one year of incorporation
  • Does not file annual returns and financial statements for two consecutive years
  • Is found to be in violation of the Companies Act, 2013

In such cases, the ROC issues a notice to the company and its directors, giving them an opportunity to respond. If no response is received, the company is struck off.

Draft Documents Required for Striking Off a Company

The following documents are required for the strike-off process:

  • Board and shareholder resolutions
  • Financial statements
  • Tax clearance evidence
  • Asset and liability statement
  • Proof of dissolution or winding up
  • Consent of creditors
  • Consent of regulatory authorities
  • Other jurisdiction-specific documents as required

It is advisable to consult legal professionals or government authorities for accurate and specific requirements.

Strike-Off Company Status

The strike-off company status refers to the condition of a company that has completed the strike-off or dissolution process. Once a company is struck off, it is officially removed from the register of companies, signifying the end of its legal existence. While specific procedures and terminologies may vary by jurisdiction, the fundamental concept remains consistent.

When a company is struck off, it is deemed inactive and is no longer legally operational. This status indicates that the company has ceased all business activities, and its assets, liabilities, and legal affairs are managed in accordance with the applicable laws and regulations.

Consequences of Strike Off

  1. The company ceases to exist as a legal entity.
  2. Directors may be disqualified from holding directorship in other companies.
  3. The company’s name becomes available for other businesses.
  4. Any assets left undistributed vest with the government.
Conclusion

Striking off a company is a straightforward process when all legal requirements are met. Companies that are inactive and do not wish to continue operations should follow the appropriate legal process to avoid penalties and non-compliance issues. It is advisable to consult a legal expert or company secretary to ensure a smooth closure process.