Unravel the intricacies of striking off a company in India. Explore the legal framework, eligibility criteria, and step-by-step procedures for both voluntary and ROC-initiated strike-offs.
The process of striking off a company involves intricate steps and adherence to legal provisions laid down by the Companies Act, 2013. In this comprehensive guide, we will delve into the detailed framework for striking off a company, covering both voluntary and Registrar of Companies (RoC)-initiated procedures.
Understanding the Legal Framework: Rules for Striking off a Company
- Provisions of the Companies Act, 2013: Sections 248 to 252 of the Companies Act, 2013, along with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, govern the process of striking off a company.
- Introduction of C-PACE: As of April 17, 2023, the Ministry of Corporate Affairs (MCA) introduced the concept of the Centre for Processing Accelerated Corporate Exit (C-PACE) to oversee the application process for striking off a company. C-PACE is the designated authority with territorial jurisdiction across India for this purpose.
Methods of Striking Off a Company
- By Registrar of Companies (RoC) / (C-PACE) suo-moto
- By the Company Itself
ROC (C-PACE) Initiated Strike Off
If the RoC has valid reasons to believe that a company falls under any of the following criteria:
– The company has not commenced its business within one year from incorporation.
– The company has not conducted any business or operations for the last two financial years and hasn’t applied for Dormant company status.
– The subscribers to the memorandum have not paid their subscription within 180 days of incorporation.
– The company is inactive after physical verification.
The RoC will send a notice (E-form STK-1) to the company, providing an opportunity for defense within 30 days. If no response is received, a public notice (E-form STK-5) will be issued for objections. In the absence of objections, the RoC will publish a notification in the Official Gazette (E-form STK-7) confirming the company’s strike off and dissolution.
Companies Ineligible for ROC Initiated Strike Off
Certain types of companies cannot be removed suo-moto by the Registrar. These include listed companies, vanishing companies, those under inspection or investigation, companies with pending notices or reports, companies facing pending prosecutions, and others as specified, similar to the restrictions observed during online company registration in India.
Voluntary Strike Off by a Company
A company may apply to C-PACE for striking off after settling all liabilities, with a special resolution or consent of 75% members. The process involves:
– Convening a board meeting to approve strike off and authorize an application to C-PACE
– Extinguishing any remaining liabilities
– Holding an extraordinary general meeting for passing a special resolution
– Obtaining necessary approvals from other authorities if applicable
Procedure for Strike Off by the Company
– File E-form MGT-14 within 30 days of passing the resolution.
– Submit E-form STK-2 with C-PACE, along with necessary attachments and prescribed fees.
– Ensure all overdue financial statements and annual returns are filed.
– Respond to objections within 30 days if initiated by the Registrar.
Eligibility Criteria for Application
Companies that have changed their name or registered office within the last three months, engaged in activities other than necessary for application, disposed of property for gain, or are in the process of winding up, among other conditions, are ineligible for strike off.
The Bottom Line
In conclusion, understanding the rules and procedures for striking off a company is crucial for businesses in India. Whether initiated by the RoC (C-PACE) or voluntarily by the company itself, compliance with legal provisions and thorough documentation are essential.
Vakilsearch experts equip businesses with the knowledge needed to navigate the striking-off process effectively. For expert advice, request a free callback today!
Frequently Asked Questions (FAQs):
Can a company apply for strike off if it has pending financial statements and annual returns?
No, a company must first file all overdue financial statements and annual returns under sections 137 and 92, respectively, before applying for strike off.
What types of companies are ineligible for Registrar-initiated strike off?
Listed companies, vanishing companies, companies under inspection or investigation, those with pending notices or reports, and those facing pending prosecutions are ineligible for Registrar-initiated strike off.
What are the key steps for a company to initiate voluntary strike off?
The process involves convening a board meeting, extinguishing liabilities, holding an extraordinary general meeting, obtaining necessary approvals, filing required forms, and responding to objections if raised.
