Strike Off of a Company under the Companies Act, 2013: Voluntary and Regulatory Process Explained
In the evolving business landscape, not every company continues operations indefinitely. When a company becomes inactive or no longer carries on business, it is often advisable to formally close its legal existence to avoid future compliance requirements and liabilities. The Companies Act, 2013 provides a provision for removing the name of a company from the register of companies, commonly known as strike off.
This article provides a detailed overview of the strike off process, covering both voluntary and regulatory strike offs, the applicable provisions, procedures, forms involved, and important considerations.
Legal Provisions Governing Strike Off
The provisions related to strike off are governed by Section 248 to 252 of the Companies Act, 2013, read with Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.
A company’s name can be removed from the register of companies through two routes:
- Voluntary strike off by the company itself (Section 248(2))
- Strike off initiated by the Registrar of Companies (ROC) (Section 248(1))
Voluntary Strike Off (Section 248(2))
A company can apply for its name to be struck off if:
- It has not commenced business since incorporation, or
- It is not carrying on any business or operations for the last two financial years, and
- It has no outstanding liabilities.
Companies Not Eligible for Voluntary Strike Off:
Certain companies cannot apply for voluntary strike off, including:
- Listed companies
- Companies registered under Section 8 (Non-Profit Companies)
- Companies having charges pending for satisfaction
- Companies under inspection, investigation, or facing legal proceedings
Procedure for Voluntary Strike Off:
- Hold a Board Meeting:
Approve the proposal for strike off and authorize filing of necessary forms. - Clear Outstanding Liabilities:
Settle all pending liabilities, if any, and prepare a statement of accounts (certified by a Chartered Accountant) showing no assets or liabilities. - Obtain Shareholders’ Approval:
Pass a special resolution with the consent of at least 75% of the shareholders in terms of paid-up share capital. - Filing of Application (Form STK-2):
Submit an application for strike off in Form STK-2 along with:- Indemnity bond from every director (in Form STK-3)
- Affidavit from every director (in Form STK-4)
- Statement of accounts not older than 30 days
- Board resolution and special resolution copy
- Relevant tax clearances, if applicable
- Publication of Notice and Objection Period:
The ROC will publish a notice on its website and official gazette inviting objections from the public, stakeholders, and regulatory authorities within 30 days. - Order for Strike Off:
If no objection is received, the ROC may strike off the name of the company and dissolve it. The notice of dissolution is published in the official gazette.
Strike Off by Registrar of Companies (Section 248(1))
The ROC may initiate strike off proceedings if it has reasonable cause to believe that a company:
- Has failed to commence its business within one year of incorporation, or
- Is not carrying on any business or operations for the last two financial years and has not applied for the status of a dormant company.
Before proceeding, the ROC will send a notice to the company and its directors, asking them to respond within thirty days. If no satisfactory response is received, the ROC may strike off the company’s name.
Consequences of Strike Off
Once a company’s name is struck off:
- It ceases to exist as a legal entity.
- It cannot carry on business or operations.
- The liability of directors, officers, and members continues for any acts done before dissolution.
- Assets, if any, are subject to legal disposal as per applicable laws.
Forms Required
| Form | Purpose |
|---|---|
| STK-2 | Application for voluntary strike off |
| STK-3 | Indemnity bond by directors |
| STK-4 | Affidavit by directors |
| MGT-14 | Filing special resolution (if applicable) |
Key Considerations
- All statutory dues, liabilities, and pending filings must be cleared before applying for strike off.
- A company under inspection, investigation, or facing pending prosecutions cannot apply for strike off.
- Strike off does not affect liabilities incurred before the date of dissolution.
- It is advisable to obtain professional assistance to ensure proper compliance and avoid complications.
Conclusion
The strike off procedure under the Companies Act, 2013 offers an effective mechanism for companies that are inactive or no longer carrying on business to formally close their legal existence and reduce future compliance obligations. Whether initiated voluntarily by the company or by the ROC, the process requires careful attention to procedural requirements and statutory obligations.
