
Strike off company
In the world of business, companies may cease operations for various reasons. One of the legal processes to formalize the cessation of a company’s activities is known as "strike off." This article explains the concept of a strike off company, the process involved, and the consequences for business owners and stakeholders.What is strike an off-company?
Company strike-off refers to the legal process where a company is removed from the official register of companies by the Registrar of Companies. Once a company is struck off, it ceases to exist as a legal entity. The company’s name is erased from the register, and it no longer has any legal obligations or liabilities.Strike Off Under the Companies Act, 2013
The Companies Act of 2013 provides a streamlined mechanism for the closure of companies through striking off. Sections 248 to 252 of the Act, along with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, outline the procedure for striking off a company’s name. This can be initiated either by the Registrar of Companies (ROC) or by the company itself through a voluntary application. The process is designed to provide an efficient and time-saving alternative for dissolving defunct companies.Ways of Striking Off a Company
As mentioned, there are two ways a company can be struck off from the Registrar of Companies:- By Registrar of Companies (RoC): The Registrar of Companies (RoC) or the Centre for Processing Accelerated Corporate Exit (C-PACE) can initiate the process of striking off a company’s name on their own (suo-moto) under certain circumstances.
- Voluntary Application by the Company: A company can voluntarily apply to the RoC or C-PACE to have its name struck off the Register of Companies.
What is C-PACE for Company Strike-Off?
On April 17, 2023, the Ministry of Corporate Affairs (MCA) introduced a major update by amending the rules and establishing the Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE). C-PACE serves as the dedicated authority for processing and handling the strike-off applications of companies under the Companies Act 2013. Key Highlights of C-PACE:- Jurisdiction: C-PACE has territorial jurisdiction across India, overseeing all applications related to the striking off of companies.
- Function: It processes and disposes of applications submitted through E-form STK-2 under Section 248 of the Companies Act, 2013.
- Sole Authority: C-PACE is the exclusive authority responsible for handling the entire strike-off process, ensuring a streamlined and centralised approach for dissolving non-operational companies.
Voluntary Strike Off a Company
A company may apply to the Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE) to remove its name from the Register of Companies, provided it has settled all its liabilities. The company must pass a special resolution or obtain the consent of 75% of its members (based on paid-up share capital) to apply. This can be done on any grounds specified for striking off, such as non-operation, non-compliance, or other applicable conditions.Procedure for Strike Off by the Company Itself
Recent amendments have introduced new provisions for strike-off company procedures under the Companies Act 2013:- Overdue Financial Statements and Annual Returns: A company cannot apply for strike-off unless it has filed all overdue financial statements under Section 137 and overdue annual returns under Section 92 up to the end of the financial year in which the company ceased its business operations.
- Filing After Proceedings Initiation: If the Registrar has initiated strike-off proceedings, the company must file all pending financial statements under Section 137 and pending annual returns under Section 92 before filing its strike-off application.
Step 1: Board Resolution
The company’s Board of Directors must first pass a board resolution to approve the decision to strike off the company from the RoC.Step 2: Clearance of Liabilities
Before applying, the company must clear all its outstanding liabilities. This includes settling debts and liabilities and ensuring that the company is financially free of obligations. If there are no liabilities, a declaration must be made to this effect.Step 3: Extraordinary General Meeting (EGM)
The company must convene an Extraordinary General Meeting (EGM) to pass a special resolution. A special resolution is required to initiate the strike-off process, and this requires the consent of at least 75% of shareholders in terms of paid-up capital.Step 4: Filing of Form MGT-14
After passing the special resolution, the company must file E-form MGT-14 with the RoC. This form is to be filed within 30 days of passing the resolution and should include a copy of the special resolution passed in the EGM.Step 5: Filing of E-form STK-2:
The company must then file E-form STK-2 with the Registrar, which is the formal application for striking off the company name. The company must submit a few documents along with this form ( refer to below). The prescribed challan for filing of this form is Rs 10000.Step 6: Public Notice and Objections
After the application is processed, the RoC will publish a notice in the Official Gazette and in two newspapers, inviting objections from the public. This is done in Form STK-5A. If no objections are raised within 30 days, the process will move forward.Step 7: Final Strike-Off Notification
If there are no objections and the RoC is satisfied with the application, the company will be struck off from the register. A final notice of dissolution will be issued in Form STK-7, published in the Official Gazette and on the Ministry of Corporate Affairs (MCA) website. The company will then stand dissolved from the date of this publication.Documents Required for Voluntary Strike-Off Company
When applying for the voluntary strike-off of a company, the following documents must be attached to E-form STK-2:- Indemnity Bond in STK-3 (duly notarised) – This is a collective document given by all directors of the company.
- Affidavit in STK-4 (duly notarised) – This affidavit must be signed individually by each director.
- Statement of Accounts in STK-8 (certified by a Chartered Accountant) – The statement should not be older than 30 days from the date of application.
- No Objection Certificate (NOC) – If applicable, the company must provide an NOC from any concerned authority or third party.
- Copy of Board Resolution – A copy of the board resolution approving the strike-off request.
- Copy of Special Resolution – A copy of the special resolution passed by the company’s members for the strike-off.
- Any Other Optional Attachments – Additional documents, if required, depending on the company’s specific circumstances.
Restrictions for Filing a Voluntary Application to Strike Off a Company
A company cannot apply for striking off its name if, at any time in the last three months, it has:- Disposed of rights or property held by it immediately before ceasing trade for the purpose of gain in the normal course of business.
- Moved its registered office from one state to another or changed its name.
- Filed an application with the National Company Law Tribunal (NCLT) for approval of an arrangement or compromise, which has not yet been concluded.
- Engaged in activities beyond what is necessary for making the application, complying with statutory requirements, or concluding the company’s affairs.
- Been in the process of being wound up, whether voluntarily or under the Tribunal’s direction.
Strike off company by RoC
Striking off a company by the Registrar of Companies (RoC) is the process of removing a company’s name from the official Register of Companies. This action effectively dissolves the company and brings an end to its legal existence. It typically occurs when the company is no longer carrying out any business, has failed to comply with legal requirements, or has become defunct.Conditions for Striking Off a Company by RoC (C-PACE)
A company may be struck off by the Registrar of Companies (RoC) under the following conditions:- The company has failed to commence its business within one year of incorporation.
- The company has not carried out any business or operations for the last two financial years and has not applied for dormant status (inactive company) within that period.
- The subscribers to the memorandum have not paid the subscription they undertook to pay at the time of incorporation, and a declaration to this effect has not been filed within 180 days.
- The company is not engaged in any business or operations, as revealed during a physical verification.
Companies That Cannot Be Struck Off Suo Moto by the Registrar
The following types of companies cannot be removed from the Register of Companies by the Registrar of Companies (RoC) on their own initiative (suo-moto):- Listed Companies or those that have been delisted.
- Vanishing Companies.
- Companies under inspection or investigation, where actions are pending or prosecutions are ongoing in relation to the inspection or investigation.
- Companies where notices under Sections 206 or 207 of the Companies Act have been issued, and responses or reports are still pending.
- Companies against which any prosecution for an offence is pending in court.
- Companies with a pending application for compounding of offences before the competent authority.
- Companies with outstanding public deposits or those in default of repayment.
- Companies whose charges are pending satisfaction.
- Section 8 Companies (non-profit companies).
Procedure for Striking Off a Company by RoC
The process for striking off a company by the Registrar of Companies (RoC) involves several steps that ensure a company's name is officially removed from the Register, bringing its legal existence to an end.- Notice from RoC: The RoC will send a formal notice (E-form STK-1) to the company, indicating its intention to strike off the company’s name from the Register. The company is given 30 days to respond with any valid objections or supporting documents.
- Public Notice: If the company fails to respond within the specified time or provides no satisfactory explanation, the RoC will publish a public notice in E-form STK-5, inviting objections from the public. The notice is published on the Ministry of Corporate Affairs (MCA) website, in the Official Gazette, and in two newspapers.
- Objections and Response: If any objections are raised by the public, the RoC will review them and determine whether the strike-off should proceed. If no objections are received within 30 days, the RoC will proceed with the strike-off.
- Strike-Off Confirmation: After the expiration of the notice period and in the absence of objections, the RoC will issue a final notification in E-form STK-7 in the Official Gazette, confirming the strike-off of the company. From the date of publication, the company will be considered dissolved and removed from the Register of Companies.
Effect of Company After Strike-Off
- Once a company is struck off from the Register of Companies, it ceases to exist as a legal entity and can no longer carry out any business operations. Its name is removed from the official records, and it is dissolved. However, the company's liabilities and obligations are not extinguished.
- Even after the strike-off, the company’s assets remain available for settling any outstanding liabilities. The directors, officers, and members of the dissolved company remain liable for any unresolved obligations as if the company had not been struck off.
Restoration of a Company After Strike-Off
A company that has been struck off from the Register of Companies can be restored if any individual is aggrieved by the ROC's order of dissolution under Section 248 of the Companies Act. The individual can file an appeal with the Tribunal within three years from the date of the ROC's strike-off order.- If the Tribunal determines that the company was unjustly struck off due to the absence of valid grounds, it may order the restoration of the company's name to the Register of Companies.
- The Tribunal will provide an opportunity for the ROC, the company, and any concerned parties to present their representations.
- Once the Tribunal passes the order for restoration, the company must submit a copy of the order to the ROC within thirty days.
- Upon receipt of the Tribunal's order, the ROC will restore the company's name in the register and issue a new Certificate of Incorporation.
Conclusion
The strike-off process is a formal way of closing down a company when it is no longer needed or when it fails to meet regulatory requirements. While it offers a clean exit for businesses, it is essential to follow the proper legal steps to ensure that all debts are cleared and no obligations are left unresolved. Directors should seek legal advice before initiating the strike-off process to avoid potential complications, such as personal liability or issues with creditors. If your company is struck off and you wish to revive it, legal options are available through the National Company Law Tribunal, but these should be pursued within a reasonable time frame.Need to Revive Your Struck-Off Company?
If your company has been struck off the Register of Companies and you want to bring it back into operation, IndiaFilings can help you with the company revival process. Our experts will guide you through filing an appeal with the Tribunal and work to restore your company’s name. Get Started!About the Author
RENU SURESHRenu Suresh is a proficient writer with a knack for turning intricate legal concepts into clear, actionable advice. Her articles empower entrepreneurs by providing the knowledge they need to navigate the complexities of business laws, ensuring they can start and manage their businesses effectively.
Updated on: January 8th, 2025
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