Striking off a company under the Companies Act, 2013 is a formal process in which an inactive company, or dormant company is struck off from the official register kept by the Registrar of Companies (RoC). This can be done either voluntarily by the company or suo moto by the RoC or through Centre for Processing Accelerated Corporate Exit (C-PACE).
A company qualifies for strike off if it has stopped business, not commenced within a year of starting, or has not been in operation for two past financial years without applying for dormancy. Prior to application, it should pay all its liabilities, such as debts, and make sure that no legal proceedings against which any prosecution is outstanding. The firm also needs to clear outstanding annual returns, delayed financial statements, and shut down all bank accounts.
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Strike off under Companies Act of 2013 is a formal procedure of winding up a company. It is the process of deleting the name of the company from the public record. Strike off procedure is specified in the Companies Act, 2013 providing for a simple dissolution. Section 248 to 252 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, provides for an effective closing of the companies that do not exist.
Strike off procedure is specified in the Companies Act, 2013 providing for a simple dissolution. Section 248 to 252 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, provides for an effective closing of the companies that do not exist.Strike off is a removal of a suspended company from the register without paying off debts, whereas winding up is an official legal process to shut down a company by paying debts and distributing assets. Liquidation is one component of winding up aimed at actually selling off the assets of the company to settle with the creditors.
There are two broad categories of company strike off under the Companies Act, 2013: voluntary strike off, which is undertaken at the company’s initiative, and striking off by the Registrar of Companies (RoC), which is undertaken suo moto for inactive and defaulting companies. Both have specific procedures for de- registration of the company from the register of companies.
Voluntary Strike Off by the Company
Firms which are no longer in business, owe no debts or liabilities, and are not subject to any legal cases or insolvency are fit for a voluntary strike off. In Voluntary strike off the company shall have to adopt a special resolution and get shareholders’ consent, usually holding at least 75% of the paid-up capital. Then they shall have to submit all the required forms like Form MGT-14 and Form STK-2 with the Registrar of Companies.
Suo Moto Strike Off by ROC or C-PACE
A Suo Moto Strike Off by the Registrar of Companies (ROC) or via C-PACE (Centre for Processing Accelerated Corporate Exit) is when the ROC strikes off a company on its own initiative, dissolving the company. The action is undertaken when a company is dormant or non-compliant under law.
Essential conditions are non-starting of business within a period of one year from incorporation, no business for two successive financial years without dormant status, and default in paying the subscription amount by the subscribers.
C-PACE (Centre for Processing Accelerated Corporate Exit) is an expedited government portal that accelerates the process of striking off by facilitating quicker verification and approval for removal of dormant or non-compliant companies from the register.
For a voluntary strike-off application made on E-form STK-2, the following are required documents:
Indemnity Bond (STK-3) – notarised and signed jointly by all directors
Affidavit (STK-4) – notarised and signed separately by each director
Statement of Accounts (STK-8) – certified by a Chartered Accountant and within 30 days of making the application
No Objection Certificate (NOC) – if necessary, from involved authorities or third parties
Board Resolution Copy – authorising the request for strike-off
Special Resolution Copy – approved by the company’s members for strike-off
Other Documents – any other applicable attachments depending on the company’s circumstances.
A company can be struck off by the Registrar of Companies (RoC) due to several reasons. Below is a step-by-step checklist for strike off of a company:
Non – commencement: Failure to start business within one year from incorporation
Inactivity: The firm has not executed any business or operations for two successive last financial years. It has not made an application for dormant status (inactive company) in those years
Non – compliance: The subscribers of the memorandum failed to remit the subscription they agreed to pay when they were incorporated, and no declaration to that effect has been made within 180 days
Missing operations: The business or operations of the company are not carried on at all, as disclosed in a physical verification
Voluntary Closure: Shareholders can choose to close the company because of several reasons.
A company cannot strike off its name if, during the last three months at some time, it has:
Disposed of its property or rights before it stopped trading as part of normal business operations
Relocated its registered office to a different state or altered its name
Made an application to the National Company Law Tribunal (NCLT) for an arrangement or compromise pending
Conducted activities outside that necessary to make an application for strike off, meet legal obligations, or bring the company’s business to a close
Been in winding up, either voluntary or by order of the Tribunal.
If any such company makes an application for striking off its name in contravention of any of these conditions, it may be punished with a fine that is not more than ₹ 1 Lakh
ROC can strike off the company if it does not start business, failure to operate for two years, default in payment of subscription amount, and any physical verification results. The procedure followed by the Registrar of Companies (RoC) for striking off a company includes various steps as discussed below:
Notice from RoC: The RoC will issue a formal notice (E-form STK-1) to the company, notifying it of its intention to remove the name of the company from the Register. The company has 30 days in which to submit any valid objections or accompanying documents.
Public Notice: Where the company does not reply within the given time or offers no reasonable explanation, the RoC will issue a public notice in E-form STK-5, calling objections from the public. The notice is put on the Ministry of Corporate Affairs (MCA) website, Official Gazette, and two newspapers.
Objections and Response: If objections are raised by the public, the RoC will consider the objections and decide if the strike-off is to be carried out. In the event that there are no objections received within 30 days, the RoC will carry out the strike-off.
Strike-Off Confirmation: Upon lapse of notice period and on no receipt of objections, the RoC shall issue a final notice in E-form STK-7 in the Official Gazette, confirming strike-off of the company. The company shall be deemed to be dissolved and deleted from the Register of Companies from the date of publication.