+91 7305 345 345Strike Off of a Company
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Strike off of a company is the legal process of removing a company’s name from the Register of Companies maintained by the ROC. It is typically chosen when a company becomes inactive or defunct. Under the Companies Act, 2013, companies can apply for voluntary strike off by fulfilling specific conditions and submitting the required documents. This helps in legally closing the company and avoiding future compliance obligations.
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Strike Off of a Company in India
A company registered under the Companies Act, 2013, in India is more than just a business; it is a distinct legal entity governed by statutory laws and the Ministry of Corporate Affairs (hereinafter referred to as the MCA). A company may be struck off either voluntarily or by the Registrar of Companies (ROC) due to prolonged non-operation or failure to comply with statutory filings such as annual returns and financial statements. Once struck off, the company ceases to exist as a legal person, meaning that it can no longer enter into contracts, own property, or initiate or defend legal proceedings.
The process for the voluntary strike-off of a company begins by passing a board resolution, a special resolution (or 75% written consent), and audited accounts showing nil assets and liabilities. This is followed by the execution of directors’ affidavits and indemnity bonds, and the electronic filing of Form STK-2. After public notice, the Registrar issues Form STK‑7, and the company is deemed dissolved from the date of Gazette publication.
What is the “Strike Off” of a Company?
“Strike off” refers to the removal of a company’s name from the official Register of Companies, which is maintained by the Registrar of Companies (ROC). Once the company name is struck off, it is no longer a legally operational entity. In simple terms, striking off a company is akin to “closing it down” on paper. It ceases to exist in the eyes of the law, although revival may be possible under certain conditions.
Definition:
Under Section 248 of the Companies Act, 2013, a company can be struck off if:
- It has failed to commence its business within one year of its incorporation, or
- It is not carrying on any business or operation for a period of two immediately preceding financial years. It has not made any application within such period for obtaining the status of a dormant company.
Reasons for Strike-Off
Strike-off of a company’s name from the Register of Companies can occur either voluntarily by the company itself or involuntarily through an action initiated by the Registrar of Companies (ROC):
1. Strike-Off by the ROC – Compulsory Strike-Off
Under Section 248(1), the Registrar of Companies is empowered to remove the name of a company from the register if:
- It has failed to commence its business within one year of its incorporation.
- It is not carrying on any business or operation for a period of two immediately preceding financial years, and it has not applied for the status of a dormant company under Section 455 of the Companies Act, 2013.
- The subscribers to the Memorandum of the Company have not paid the subscription amount which they had undertaken to pay at the time of incorporation of the company
They have not filed any declaration within 180 days as required under the Companies Act, 2013. - The ROC has reasonable cause to believe that the company is not carrying on any business or operations.
2. Strike-Off by the Company – Voluntary Strike-Off
Under Section 248(2) of the Companies Act, 2013, a company may also apply for the strike-off of its name:
- It has extinguished all its liabilities.
- It is not operational or intends to cease business operations.
- It has obtained approval from the shareholders by passing a special resolution or by taking the consent of at least 75% of shareholders (in case of private companies).
- The application for striking off the company is filed by the members of the company using Form STK-2 to the RoC along with the necessary documents.
However, the following types of companies are not eligible for voluntary strike-off:
- Companies registered under Section 8 of the Companies Act, 2013
- Companies listed on a stock exchange.
- Companies delisted due to regulatory non-compliance.
- Companies that have been converted into LLPs under the LLP Act, 2008
- Companies that have made an application for compromise or arrangement, and the matter is pending before the National Company Law Tribunal (NCLT).
- Companies that are being wound up or are in the process of winding up.
- Companies under inspection or investigation.
- Companies having pending prosecution under any law.
- Companies having outstanding loans, deposits, or charges (unless they have obtained a No Objection Certificate from the lender or creditor).
Consequences of Strike-Off
When a company is struck off, it loses its legal existence in the eyes of the law in India. The consequences affect not only the company but also its directors, stakeholders, and employees.
1. Loss of Legal Identity
Once struck off, a company is no longer recognized as a legal entity. Thus, it cannot:
- Own or manage property.
- Enter into contracts.
- Sue or be sued in court.
- Open or operate bank accounts.
- Issue or transfer shares.
- Conduct business transactions.
2. Asset Inaccessibility
Once struck off, the company has no legal capacity to deal with its movable or immovable assets. No person, including former directors or shareholders, can validly transfer or encumber such assets without first obtaining restoration under law.
3. Application of the Doctrine of Bona Vacantia
Section 248(6) of the Companies Act, 2013 mandates that the RoC, before passing the order for removal of a company’s name under Section 248(5) of the Companies Act, 2013, must ensure that sufficient provision has been made for the realisation of all amounts due to the company.
4. Liability of Directors and Officers Continues
The dissolution of the company does not relieve its directors, officers, or members from liability. Under Section 248(7) of the Companies Act, 2013, they remain personally liable for any debts or obligations incurred while the company was active.
5. Director Disqualification and DIN Deactivation
Suppose a company is struck off due to non-filing of returns for three consecutive years. In that case, the directors become disqualified under Section 164(2) of the Companies Act, 2013. Their DIN (Director Identification Number) may also be deactivated, which prevents them from being appointed as a director of other companies for a period of five years.
6. Reputational and Financial Damage
Banks, suppliers, investors, and customers may lose trust in a company that is struck off. Securing future funding, forming partnerships, or restarting the business becomes difficult unless the company is legally reinstated and its compliance is restored.
7. Impact on Stakeholders and Operations
Strike-off has a negative impact on creditors, employees, and contractual parties. They cannot enforce their claims unless the company is reinstated. It is pertinent to note that when a company is struck off, all the pending litigation by or against the company is paused until its revival.
Steps for Voluntary Strike Off of the Company
Step 1: Hold a Board Meeting
The first step is to convene a meeting of the company's Board of Directors. In the Board Meeting:
- A resolution is passed to approve the proposal for strike-off.
- The Board fixes the date, time, and venue for convening a General Meeting of shareholders to obtain their approval.
- The Board authorises one or more directors to sign and file the necessary documents on behalf of the company with the ROC.
Step 2: Settle All Liabilities
The company must ensure that:
- All outstanding dues, debts, loans, and statutory liabilities are cleared.
- There are no litigations, disputes, or claims pending against the company.
- No Objection Certificates (NOC) are obtained from secured creditors, if any, or regulatory bodies such as the RBI (in case of NBFCs), SEBI (in case of intermediaries), or any government department, wherever applicable.
Step 3: Conduct General Meeting and Pass Special Resolution
A General Meeting of shareholders is convened as per the notice issued by the Board.
At the meeting, a Special Resolution is passed to approve the application for strike-off.
- For a private limited company, written consent of 75% of shareholders in terms of paid-up share capital is also sufficient in place of a formal General Meeting.
The resolution shall be filed with the ROC in Form MGT-14 within 30 days.
Step 4: Prepare Final Financial Statement
The company must prepare a Statement of Accounts, showing nil assets and nil liabilities.
- The financial statement must be dated no earlier than 30 days prior to the filing date of Form STK-2.
- It must be duly certified by a Chartered Accountant in practice.
- It must reflect that the company has no pending dues or operational activity.
Step 5: Affidavit and Indemnity Bond by Directors
Each director of the company must individually execute:
- Affidavit (Form STK-4) in which it is declared that the company has no liabilities and that the application is being made with complete understanding and consent.
- Indemnity Bond (Form STK-3) – undertakes to indemnify any person who suffers loss due to the strike-off and to protect the ROC against any future claims or liabilities.
Step 6: File the Form STK-2 with the ROC
The company shall submit an application for removal of its name in e-Form STK-2 on the MCA portal along with the following attachments:
- Copy of Board Resolution.
- Copy of Special Resolution or 75% shareholder consent.
- Statement of Accounts (not older than 30 days).
- Affidavit in Form STK-4 from all directors.
- Indemnity Bond in Form STK-3 from all directors.
- Self-certified copies of PAN and Aadhaar of directors.
- No Objection Certificates (NOCs) from relevant authorities (if applicable).
- Bank Account Closure Letter (if applicable)
After attaching the documents, attach the flat filing fees of ₹10,000/-
Step 7: Examination by ROC and Publication of Notice
After verifying the documents, the ROC may:
- Issue a notice to the company and its directors under Section 248(1) in Form STK-1 for seeking objections, if required.
- Publish a public notice in Form STK-5 in:
- An English daily newspaper and a vernacular newspaper with wide circulation in the state where the company’s registered office is situated.
- The Official Gazette of India.
- On the MCA website
Any objections from stakeholders (creditors, employees, authorities) must be submitted within 30 days from the date of the notice.
Step 8: Final Strike-Off Order
After checking and verifying all the details, the ROC passes the final strike-off order in Form STK-7, stating that:
"The name of the company has been removed from the register of companies, and the company shall stand dissolved from the date of publication in the Official Gazette."
The company ceases to exist legally from the date mentioned in the Gazette notification.
Why Choose Kanakkupillai for the Strike Off of a Company?
Striking off a company is a regulatory process that requires careful compliance with the provisions of the Companies Act, 2013. At Kanakkupillai, we provide expert assistance to ensure your company's exit is legally, hassle-free, and efficient.
- End-to-End Assistance: We are here to handle the entire strike-off procedure, from Board and shareholder resolutions to the preparation and filing of STK-2, including obtaining No Objection Certificates, drafting affidavits and indemnity bonds, and liaising with the Registrar of Companies (ROC) and C-PACE.
- Compliance: Our experts are thoroughly familiar with the legal framework outlined in Section 248 of the Companies Act, 2013, and ensure that every requirement from financial statements to statutory declarations is met with precision.
- Timely and Correct Filing: We guarantee timely preparation and submission of all documents, ensuring your application is not delayed or rejected due to technical errors or incomplete submissions.
- Transparent and Reasonable Fees: Our pricing is fair and all-inclusive, with clear details on government charges and professional fees - no hidden costs.
- Clear Communication: We keep you informed at every stage, address your questions promptly, and ensure the process remains stress-free.
Frequently Asked Questions
How is a strike-off different from winding up or liquidation?
Strike-off under Section 248 of the Companies Act, 2013, is an administrative act by the Registrar to remove a debt-free, inactive company from the register. No liquidator is appointed, and no court process is involved. Winding up or liquidation, on the other hand, is a tribunal-supervised procedure designed for insolvent or indebted companies, in which a liquidator realises assets, pays creditors, and distributes any surplus before the company is dissolved.What is CPACE, and why does it matter?
The Centre for Processing Accelerated Corporate Exit (CPACE), operational since April 2023, is the MCA’s central hub that examines every STK-2 application and issues the final strike-off order. Its single-window scrutiny has reduced the average processing time to about 30 to 45 days, provided that all the documents are complete and accurate.Can a company that has been struck off be revived?
Yes. Under Section 252 of the Companies Act, 2013, the company itself, any member, creditor, workman, or even the ROC can ask the National Company Law Tribunal (NCLT) to restore the name to the register. The usual time limit is three years from the date of dissolution, but creditors and workers may apply within twenty years if they can demonstrate a bona fide reason.Is the ₹10,000 STK 2 filing fee the total cost of the strike off?
No. Additional expenses include professional certifications, newspaper publication of the STK 5 notice, stamp duty on affidavits and indemnity bonds, closure of bank accounts, and payment of any outstanding MCA late filing fees for past returns.Do directors automatically lose their DINs once the company is struck off?
Not necessarily. DINs are deactivated only when a strike off follows a three-year default in filing annual returns, triggering disqualification under Section 164(2) of the Companies Act, 2013.What happens to ongoing tax proceedings after dissolution?
Income tax or GST assessments are abated when a company is struck off, but the tax authorities can petition the NCLT to restore the company if significant revenue is involved. Directors may still be personally liable for pre-strike off tax arrears under Section 179 of the Income Tax Act and Section 89 of the CGST Act.Do patents and trademarks owned by a struck-off company remain valid?
Registered intellectual property rights technically subsist, but the dissolved company can neither renew nor enforce them. To preserve valuable IP, it should be assigned to another entity before filing STK 2, or the company should be restored before any enforcement action.How can employees or creditors oppose a proposed strike off?
Any stakeholder may file a written objection with the ROC within thirty days of the public notice (Form STK 5), attaching evidence of unpaid dues or pending claims. The ROC must consider such objections and may refuse the application or require the settlement of liabilities before proceeding.Are GST, Import Export Code, and other registrations cancelled automatically on strike off?
Yes. Once the name is removed from the register and the dissolution notice appears in the Official Gazette, ancillary registrations such as GSTIN, IEC, Professional Tax, and Shops and Establishments licences become liable to cancellation by their respective authorities.Can a company with partly paid shares apply for voluntary strike off?
Only if those shares are made fully paid prior to filing STK 2, or if the audited statement of accounts shows no unpaid share capital or contingent liability toward members.What are the consequences of filing false information in Form STK 2?
Submitting a false affidavit or statement attracts a penalty under Section 448 of the Companies Act, 2013 (punishment for false statements), which can lead to imprisonment up to two years and a fine up to ₹10 lakh. In severe cases, fraud under Section 447 of the Companies Act, 2013 may be invoked.What makes Us Different
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