Striking off the Company in India is a legal process through which a company’s name is removed from the official register maintained by the Registrar of Companies (RoC). It is considered one of the simplest ways to close a business that is no longer active or operational. Many entrepreneurs opt for this method when their company has not commenced business or has ceased operations and they want to avoid ongoing compliance burdens.

In this article, we will explore the concept of Striking off the Company in India, its eligibility criteria, rules, procedure, and important considerations.

What is Striking Off a Company?

Striking off refers to the removal of a company’s name from the register of companies under the Companies Act, 2013. Once the process is completed, the company ceases to exist as a legal entity. This method is commonly used for companies that are dormant or inactive and do not have any liabilities.

Striking off the Company in India can be initiated either by the company itself (voluntary strike-off) or by the Registrar of Companies (mandatory strike-off).

Types of Strike Off

Voluntary Strike Off

A company may apply for strike off on its own by filing an application with the RoC. This is usually done when:

  • The company has not started business since incorporation, or
  • The company has not carried out any business activity for the last two financial years

Compulsory Strike Off

The RoC may strike off a company on its own if:

  • The company has failed to commence business within one year
  • The company is not carrying on any business for two consecutive years
  • The company has not filed financial statements or annual returns

Striking off the Company in India through compulsory action is done after issuing a notice to the company.

Eligibility Criteria for Strike Off

Before applying for Striking off the Company in India, certain conditions must be fulfilled:

Basic Eligibility

  • The company should have no active business operations
  • It should not have any outstanding liabilities
  • Consent of shareholders must be obtained
  • All statutory compliances should be up to date

Conditions to be Fulfilled

  • The company must close all bank accounts
  • All assets must be disposed of
  • Liabilities must be settled
  • No litigation should be pending

Companies Not Eligible for Strike Off

Certain companies are not allowed to apply for strike off:

  • Listed companies
  • Companies under investigation
  • Companies with pending prosecutions
  • Companies that have accepted public deposits
  • Companies with secured loans

Understanding these criteria is essential before initiating Striking off the Company in India.

Legal Provisions

The process of strike off is governed under Section 248 of the Companies Act, 2013. It provides the authority to the RoC to remove the name of a company from its register under specific circumstances.

Additionally, Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 lays down the procedure and documentation requirements.

These provisions ensure that Striking off the Company in India is carried out in a transparent and lawful manner.

Procedure for Strike Off

Step 1: Board Resolution

The company must pass a board resolution approving the strike-off process.

Step 2: Shareholder Approval

A special resolution must be passed by shareholders or consent from at least 75% of members in terms of paid-up share capital.

Step 3: Settlement of Liabilities

Before filing the application, the company must:

  • Clear all debts
  • Close bank accounts
  • Dispose of assets

Step 4: Filing of Application

The company must file Form STK-2 with the RoC along with:

  • Indemnity bond
  • Affidavit from directors
  • Statement of accounts
  • Copy of special resolution

Step 5: Publication of Notice

The RoC will publish a public notice and invite objections, if any.

Step 6: Strike Off and Dissolution

If no objections are received, the RoC will strike off the name and publish a notice in the Official Gazette.

This completes the process of Striking off the Company in India.

Documents Required

The following documents are required for strike off:

  • Form STK-2
  • Indemnity bond (Form STK-3)
  • Affidavit (Form STK-4)
  • Statement of accounts certified by a Chartered Accountant
  • Copy of board and special resolutions
  • Consent of shareholders

Proper documentation ensures a smooth process for Striking off the Company in India.

Advantages of Strike Off

Cost-Effective

Strike off is cheaper compared to winding up or liquidation.

Simple Process

The procedure is straightforward and less time-consuming.

Reduced Compliance Burden

Once the company is struck off, there are no compliance requirements.

Quick Closure

The company can be dissolved within a few months.

These benefits make Striking off the Company in India a preferred option for inactive businesses.

Consequences of Strike Off

While strike off is beneficial, it also has certain implications:

  • The company ceases to exist legally
  • Directors may still be liable for past actions
  • Assets, if any, may vest with the government
  • Business name cannot be reused immediately

It is important to evaluate these consequences before proceeding with Striking off the Company in India.

Restoration of Company

A company that has been struck off can be restored by applying to the National Company Law Tribunal (NCLT) within a prescribed time limit.

Restoration is possible if:

  • The company was carrying on business
  • It was struck off erroneously
  • It is just and equitable to restore it

This provision acts as a safeguard in the process of Striking off the Company in India.

Common Mistakes to Avoid

  • Applying without clearing liabilities
  • Incomplete documentation
  • Non-filing of pending returns
  • Ignoring legal notices

Avoiding these mistakes can ensure a hassle-free experience when Striking off the Company in India.

Final Thoughts

Striking off the Company in India is an efficient and legally recognized method for closing inactive or non-operational businesses. It helps entrepreneurs avoid unnecessary compliance costs and administrative burdens. However, the process must be carried out carefully by adhering to all eligibility criteria, legal provisions, and procedural requirements.

Before initiating the strike-off process, it is advisable to ensure that the company has no liabilities, all filings are complete, and proper approvals have been obtained. With the right approach, Striking off the Company in India can be a smooth and beneficial step toward formally ending a business journey.