Procedure of Voluntary Strike Off a Company under Companies Act, 2013

Applicable Sections

Sections 117, 248, 249, 250, 251, 252 and 403 of the Companies Act 2013.

Applicable Rules

Rules 3, 4, 5, 6, 7, 8, 9 and 10 of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016, and Rules 7, 8 and 12 the Companies (Registration Offices and Fees) Rules, 2014

Every company is started with a vision to run its business forever, but not all business are successful in long run. As we already are aware, that there is certain procedure to incorporate a company, run a company, likewise there is specific procedure to close a company. As on date, there are two ways to close a company.

1. Strike off company
2. Winding up of company

There is difference between the above methods

What is meant by striking off of company name?

Striking off of company simply means closing of a defunct company, in fast way. It is simplest way to close a company.

Which company can get strike off?

Any company can get strike off whether it’s a

1. Private company
2. One-person company
3. Public company

Note that even a dormant company can apply for striking of company.

What section governs Striking of company name from the register of companies?

The companies are governed by the companies Act, 2013 and its section 248 governs the striking off of company. What are ways to strike off a company? A company can get strike off in two ways:-

A) By company itself as Voluntary Striking off
B) By Registrar of Companies

Note that section 8 company cannot get strike off voluntary, however it has to be noted there is no restriction with respect to conversion of section 8 company into private or public company and the same can apply for strike off after the conversion into any other type of Company.

When a company cannot make application for voluntary striking off?

An application on behalf of a company shall not be made if, at any time in the previous three months, the company—

• has changed its name or shifted its registered office from one State to another;
• has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
• has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
• has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

What are the conditions before applying for striking of a company?

As discussed above the pre-conditions are given as follows in both the cases.

A) A company can get apply for striking off voluntary after satisfying the below given conditions

1. Extinguishing all its liabilities and
2. Taking approval from Members by special resolution.

B) By Registrar of companies on finding of any of below given grounds

1. a company has failed to commence its business within one year of its incorporation or
2. a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company or
3. the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation
4. The company is not carrying on any business or operations, as revealed after the physical verification after registered office of company is found by Registrar of Companies.

What are the forms required to be filed?

While applying for striking off of company, two forms are required: -

1. E-form MGT-14
2. E-form STK-2

What are the fees associated with E-forms?

While E-form MGT-14 has normal associated fees.

E-form STK-2 has fees of INR 10,000/-

What is the procedure to strike of company in case of voluntary striking off of company?

The procedure is very simple and is done step wise:-

1. Authorize officer or any director of company to convene a Board Meeting
2. Sending of Board Meeting Notice at least seven (7) days prior to board meeting along with detailed agenda.
3. Convene Board Meeting and passing of Board resolution.
4. Sending of Annual General Meeting / Extra-Ordinary General Meeting as the case may be
5. Convene General meeting and passing of Special Resolution.
6. Filing of MGT-14 along with required attachments.
7. Filing of STK-2 along with required documents.
8. Registrar of companies after finding that all the attachments are fine and all the conditions are fulfilled and it is just and equitable to strike off the company, will strike off the company after publishing a public notice.

What are the documents which are required to attach with the forms?

The following documents are attached with the E-forms:-

1. Indemnity Bond duly notarized by all directors (in Form STK 3).
2. A statement of liabilities (Statement of Affairs) comprising of all assets and liabilities of the companies (certified by a Chartered Accountant).
3. Certified true copy of Special Resolution (duly signed by every director of the company).
4. Copy of Board resolution authorizing the filing of this application.
5. An affidavit in Form STK-4
6. A statement concerning any pending litigations with respect to the company.
7. Copy of relevant order of delisting, if any, from the concerned stock exchange.
8. No objection certificate from relevant regulatory department in case company is governed by such department.

How long it takes to strike of company name from the register of companies?

Once an application is made for striking off of company by filing E-form STK-2, the concerned Registrar of Companies (ROC) after verifying the documents will strike off the name of company and this procedure normally takes 3-4 month. However, if any objection is received from Registrar of Companies (ROC) this process might take extra time or even reject the application.

What is the procedure to strike of company in case registrar strike off company (ROC)?

If, as discussed in above point, ROC is satisfied that it is just and equitable to strike off company, after giving Public notice and sending notice to company and its directors and if no response is received within the time period stated in notice, strike off company.

PROCEDURAL REQUIREMENTS

1. Board meeting: Convene a board meeting where board of directors will approve following transactions: Approval of strike off a company Authorization of any director of the company to apply to ROC Issuance of notice for extra ordinary general meeting.
2. Extinguishment of liabilities: After passing board resolution, if any liabilities exist company will extinguish all its liabilities.
3. Extra-ordinary General meeting: Convene extra ordinary general meeting for passing of special resolution.
4. Approval of Concerned Authority: In case any other authority regulates such company then approval of such authority is required.
5. Application to ROC: File E-form MGT-14 within 30 days of passing of the resolution with normal fees and E- form STK-2 with ROC. The prescribed challan for filing of this form is Rs 10000.

Attachments required for STK-2

• Copy of statement of account duly certified by chartered account in form STK 8(not earlier than 30 days from the date of making application)
• Copy of Board resolution
• Copy of Special resolution
• Indemnity bond in STK-3 duly notarized(Collectively given by directors)
• Affidavit in STK 4 duly notarized(Individually)
• ID proof of directors
• Bank Account closer statement

1. Acknowledgement of last ITR filed. Publication of notice by ROC; ROC shall publish notice in STK 6 inviting any objections from the public for the proposed strike off. The objections if any are sent to the respective ROC within 30 days of publication of notice.
2. Approval by ROC for strike off: ROC will release a notification in the Official Gazette in Form STK-7 about the Company’s strike-off and Dissolution.

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.

Disclaimer: The above article is prepared keeping in mind all the important and basic question which comes in mind of a professional or other stakeholder while applying for striking off of company. The author has tried to cover all the important and basic question. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.