Strike off of Companies – Voluntary Removal

Striking off a company name is another way to shut down a company’s operations. The Registrar of Companies (‘ROC’) may issue a notice to strike off a company in the Companies Register for certain reasons. The Company may also apply for the ROC to strike off its name from the Companies Register. This article provides an insight into the voluntary strike off company.

Strike off of Companies Voluntary Removal Application

The Company may approve a special decision or obtain the approval of 75% of members (in terms of paid-up capital) to apply to the ROC to remove its name from the Companies Register. A company may apply to the ROC by having its name removed after having written off all its debts or for all of the following reasons:

• The company fails or does not start a business within one year of incorporation.
• The company is unemployed or in business for the past two years and has not applied for a while to obtain the status of an inactive company under Section 455 of the Act.

Upon receipt of a company request to strike off a company, the ROC will issue a public notice in the manner prescribed by the Act.

Restriction on Voluntary Strike off Company

A company may not apply for voluntary strike off company name if, at any time during the past three months, the company:

• Commit the revocation of several rights or assets held by it, immediately before termination of trade, for disposal for the benefit of the normal course of business or trade.
• changed its registered office from one state to another or changed its name
• Applies to the National Company Law Tribunal for approval of an arrangement or agreement, and the matter has not yet been finalized.
• Perform other duties other than those necessary or expedient for the application or compliance with legal requirements, or the conclusion of company matters.
• Is terminated under Chapter XX of the Act, either by a Court or voluntarily.

If a company applies to have its name revoked in violation of the above conditions, it can be penalized with a fine of up to Rs.1 lakh.

When a company approaches for voluntary strike off company

Voluntary removal of a company name alone under section 248 (2) read with rule 4 (removal of company names from register of companies) rules, 2016. Without prejudice to provisions of subsection (1), a company, after having written off all its liabilities, by special resolution or seventy-five percent approval; members in terms of paid shares, apply in the prescribed manner to the Registrar to remove the company name from the company register for any of the reasons specified in subsection (1) and the Registrar upon receipt of such application, cause the public notice to be issued in the prescribed manner:

Provided that in the case of a corporate entity under the Special Act, the approval of a regulatory body established or constituted under that Act will also be obtained and applied.

Documents required applying for strike-off

Companies pursuing a strike-off must apply to the Registrar of Companies (ROC), accompanied by the following documents: 

• Indemnity Bond duly certified by all directors (Form STK 3).  
• Affidavit of Form STK 4 (by all directors of the company). 
• Credit Statement comprising all assets and liabilities of companies (in STK-8 not older than 30 days certified Chartered Accountant). 
• CTC Copy of Special Resolution (duly signed by every company director). 
• If the decision has not been passed the shareholders’ approval is required to attach. 
• Statement relating to any pending claims regarding the company. 
• Bank Closure Certificate

Striking off Company Name by ROC

The ROC will send a notice to the company and its directors to remove the company name that is struck off from the Companies Register if there is a valid reason to believe that:

• the company fails or does not start a business within one year of consolidation
• the company is dormant or in business for the past two years and has not applied for a while to obtain the status of a dormant company under Section 455 of the Act.

The ROC will request the company to submit its representations and copies of the relevant documents within 30 days of issuing the notification of the revocation of the company name.

Procedure of Company Name Strike-off

• An application issued by the ROC of the striking off of a company name filed by a company must be published in the Official Gazette for public notice. The ROC will remove a company name from the Companies Register at the end of the period specified in the withdrawal notice unless the company indicates the opposite reason for that period within the specified period.
• The ROC will publish a notice of dismissal in the Official Gazette after striking off the company name from the Companies Register. Following the publication of the notice in the Official Gazette, the company will be dissolved.
• Before approving the dissolution of the company and the liquidation of the company’s name, the ROC shall satisfy itself that sufficient provision has been made for the payment of the company’s debts, the fulfillment of the company’s liability, and its obligations on time.
• The ROC will also receive the necessary accountability from the director, managing director, or other responsible persons of the company’s management in this regard.
• However, the company’s assets will be available for removal or payment of its obligations and liabilities even after the date of order to remove the company name from the Companies Register.
• The liability of all managers, directors, or other officers exercising any executive power and each member of a dissolved company shall continue, and may not be enforced as if the company had not been dissolved.

Final words

As the Indian government introduces a new era of ease of doing business and at the same time introduces an existing simple way for the company to be free of the burden of compliance and costs in the absence of business, the company can enter at will. In the same way, a company can voluntarily approach to concern the ROC with a voluntary strike-off. As the company grows the profit also grows but if the company does not have a business and does not perform any financial activity during its tenure it is advisable to close the company to save costs during the financial period. In this regard the Companies Act, 2013 introduces section 248-252 which is studied with companies (Striking off of Company Names in the Companies Register), The 2016 Laws on the removal of company names from the Companies Register. This company name removal center is very expensive compared to closing and is an easy and hassle-free way to close a business.