Striking Off Companies: A Comprehensive Guide

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Striking Off Companies

Striking off is a crucial process in companies from the official registry to Corporate governance and regulatory compliance. It includes the removal of inactive and defunct companies from the records, making sure about the transparency in the market as well as streamlining the business. The article will help you know about the provisions and the process of striking off of companies, which is essential to understanding seasonal businessmen and aspiring entrepreneurs.

Table of Content

Overview of Strike off of Companies

Strike off of Companies means removing a company’s name from the official register, which is managed by the regulatory authority of a specific jurisdiction. The legal recognition of the company is completely dissolved, which means it no longer exists as per the Companies Act, 2013 or the business’s aims.

Types of Striking off of Company

There are two ways of strike off of companies:

  • By the Company itself;

Legal Structure on the Strike of the Companies

Here are provisions aboutthe Strike off of companies, which are explained as per sections 248 to 252 of the Companies Act, 2013 and Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 as amended from time to time. Recently, the Ministry of Corporate Affairs (MCA) has amended rules and introduced a new concept/ authority i.e. Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE) having jurisdiction in India, for procedure for the Company’s strike-off application.

C-PACE shall be the RoC for the aim is to perform the functional jurisdiction about the processing and disposal of Applications made in e-form STK-2 and all about matters as per section 248 of the Companies Act, 2013. In addition, C-SPACE is the only way of striking off companies.

Strike off of Companies by Registrar of Companies

There must be certain reasons to be believed by the RoC for strike off of companies:

  • A company has not worked for the past two financial years and has not created any application in between such time for obtaining the Dormant Company Status;
  • The Company does not have any business functions, as revealed after the physical verification was fulfilled. The RoC must send a notice in e-form STK-1 to the company for strike-off and askthem to send representation along with needed documents within 30 days. In case, the company doesn’t provide any defense within 30 days, RoC must provide public notice for the objection of the public, in e-form STK-5.
  • A company has failed to start its business within a year from incorporation.
  • The subscribers of the memorandum have not paid the subscription amount, which had undertaken to pay during the company’s incorporation and a declaration to the effect has not been filed within 180 days from its commencement.

In addition, in case ROC does not receive any objection, then they will release the official gazette notification in e-form STK-7 regarding thestrike-off of companiesand dissolution.

Step-by-step process for Striking off by the Company itself

The step-by-step procedure for striking off by the Company itself:

  • Inform a board meeting where all directors will permit the following items:
  • Passing board resolution of the company will extinguish all its liabilities, in any case any liabilities have;
  • Inform extraordinary general meeting for passing of special resolution;
  • In case any other authority manages such companies then the permission of such authority is a must.
  • To fill an application to RoC, file an e-form MGT-14 within 30 days of resolution has been passed with normal fees. In addition, create an application via e-form STK-2 with (CPACE).
  • The 10,000, is the prescribed challan fee for filing the form.
  • Necessary documents needed for STK-2 are as:
    • Copy of board resolution and special resolution.
    • No objection Certificate (NOC).
    • All directors need to provide an indemnity bond in STK-3, which is duly notarized.
    • Individually provided the affidavit in STK 4, which is also duly notarized.
    • Statement of account copy duly certified by chartered account in form STK-8 (not earlier than 30 days from the date of creating application).
  • Recently, new amendments as well as provisions added that the company must not apply unless:

(till the end of the financial year that the company ceased to carry its business performances).

  • If a company wants to apply for permission is granted by the RoC. The Company shall file all pending annual returns under section 92, and pending the financial statements as per provisions 137, before applying.
  • Once the RoC issues notice of strike-off for publication under the action beginning with the ROC and the company fails to provide representation, a company shall not be permitted to file strike-offapplications.
  • ROC must issue a notice of strike for inviting objections from the public on the MCA website, in the Official Gazette, and in two new papers in form STK-5A, for the proposed strike-off. In case any objections shall be sent to the RoC within 30 days of publication of the notice.
  • In the official gazette, the ROC will release a notification on the MCA website in form STK-7 regarding the Company’s dissolution and strike-off.

Certain Companies, which cannot be removed from Suo Moto by the Registrar

Here are some companies that are not removed by the RoC by the Suo Moto power:

  • Delisted Companies;
  • Vanishing Companies;
  • Listed Companies’;
  • Section 8 Companies’
  • Companies against any prosecution for an offense is pending in any court;
  • Companies, whose charges are pending;
  • Companies, which are in default of repayment of the outstanding amount or whose public deposits are outstanding;
  • Companies whose application is pending for compounding before the relevant department.

Final Thoughts

In conclusion, we can say that navigating the process and provisions of strike-offs of companies is a fundamental way of regulatory compliance and corporate management. The article has mentioned the critical mechanism for managing the integrity of the business by removing inactive enterprises and taking surety about transparency in the market. As we know how quickly markets evolve and the dynamic changes of the markets, which leads to a great understanding of these processes becomes increasingly significant for investors, regulatory authorities, and entrepreneurs. Stickto the mentioned provisions and step-by-step guidance helps stakeholders to contribute to a healthier, more efficient business environment conducive to sustainable growth and enhancement.

CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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