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Strike Off of Company

Strike Off of Company

Strike Off of Company

The process of striking off is an alternative mechanism to the winding up of a company. The Companies Act facilitates two modes of strike-off – namely, strike off by the ROC (Registrar of Companies) under Section 248(1) of the Companies Act 2013, and strike off by a company on its own accord under Section 248(2) of the Companies Act, 2013. This article dwells into the concept of strike off of Company with respect to both of these provisions.

Grounds for Strike off

The provision of strike-off could be enacted on the basis of the following grounds:

  • The company hasn’t commenced its business within one year of its incorporation.
  • The company hasn’t been pursuing any business or activity for the preceding two financial years, for which it hasn’t sought the status of Dormant Company under Section 455 of the Act.

Dormant Company

The word dormant, in general terms, means inactive or inoperative. Similarly, a company is classified as dormant if it has been registered under the Companies Act for a future project or to hold an asset or intellectual property but isn’t pursuing any significant accounting transactions. To gain the classification though (which has its own benefits), the Company must file an application to the Registrar. The concept of dormancy was introduced to the corporate provisions in the Companies Act of 2013.

Strike Off by ROC

The Registrar of Companies may issue a notice to the Companies and its Directors in Form STK-1 (Removal of Names of Companies from the Registrar of Companies) if he/she holds a reasonable cause as specified above. Such a notice would inform the respective companies of the removal of its name from the record and request it to send its representatives with the requisite documents within thirty days of the issue of such notice. This process is also referred to as Compulsory removal of name from the Registrar of Companies.

Strike off on the Company’s Accord

A company may file an application to the Registrar of Companies in E-Form STK-2 after closing off its liabilities. This could be performed by passing a special resolution, which must be consented by seventy-five per cent of its members.

Checklist for Strike Off

Companies may pursue a strike off by following each of the following specified procedures:

The Holding of Board Meeting

The passing of Board Resolutions has been mandated for major enactments in the corporate sphere. A resolution for the purpose of this provision could be passed by a company through a Board Meeting, after which any of its directors would be designated to make an application to the Registrar of Companies (ROC) for strike off.

Closing off Liabilities

A company desirous of a strike off must have closed off all its liabilities.

Holding of General Meeting

A general meeting of shareholders should be held by the company by passing a resolution for striking off the name of the Company. This resolution must be backed by 75% of its members as per the paid-up share capital of the Company. After this stage, the Company would be necessitated to file E-form MGT-14 within a time-frame of thirty days.

Note – if the company is regulated by any other authority, then the consent of such authority must be obtained for this purpose.

Furnishing of Application and Documents

Companies on the pursuit of strike-off must file an application to the Registrar of Companies (ROC), accompanied by the following documents:

  • 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).
  • An affidavit in Form STK 4 (by all directors of the company).
  • CTC of Special Resolution  (duly signed by every director of the company).
  • A statement concerning any pending litigations with respect to the company.

Implications of Dissolvement

If a company confirms its dissolvement, it shall cease its operations as a company from the date of such dissolvement, and the Certificate of Incorporation issued to it by the ROC shall be deemed to have been cancelled, except for the discharge of any existing liabilities or obligations.  Moreover, any of the existing corporate liabilities of directors, and of officers who had managed it directly/indirectly, and of every member of the Company so dissolved, would continue to be enforced after its dissolvement.

Restrictions on Making Applications for Strike Off

Companies are restricted on filing applications for strike-off, if at any time during the last three months, it has:

  • Changed its name or relocated its registered office to another state.
  • Made a disposal for the value of property or rights held by it (subject to conditions).
  • Engaged in any other activity other than what is necessary or expedient for making an application under the concerned provision, and so and so forth.
  • Filed an application to the Tribunal for the granting of Compromise or Arrangement, and a consensus for the same hasn’t yet been arrived at.
  • Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.

Non-Qualifying Companies

The following companies do not qualify for the provision of strike off:

  • Listed companies.
  • Companies delisted on account of non-compliance of listing regulations, listing agreement or any other statutory laws.
  • Vanishing companies.
  • Companies which has been listed for inspection or investigation – if such directive is being carried out/pending/completed but the prosecutions concerning such inspection or investigation are pending in the Court of law.
  • Companies which hasn’t yet responded to notices of select provisions.
  • Companies which hasn’t furnished the follow-up instructions on any report under section 208 of the Act.
  • If the prosecutions related to the above two provisions are pending in a Court of law.
  • Companies against which any case for prosecution is pending in a Court of law.
  • Companies, whose application for compounding is pending before the competent authority for compounding the offences committed by it or any of its officers in default.
  • Companies accepting any public deposits which are outstanding.
  • Companies having any charges which remain to be satisfied.
  • Companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Act.

FAQs – Strike Off

What does company status strike off mean?
Company status strike off means that a company has been legally dissolved by the Ministry of Corporate Affairs (MCA). This is done when a company is no longer carrying on business or is not compliant with certain legal requirements or is not paying its dues to the government or creditors. The MCA may also strike off a company after a certain period of inactivity or when it has failed to file its annual returns or financial statements with the Registrar of Companies.
How do I apply for strike off?
Can strike off company sell property?