Explore the latest changes in company strike-off regulations, including the option to strike off without annual filing. Learn about its impact and important considerations.
In the ever-evolving landscape of corporate regulations, changes and amendments can have significant implications for businesses. One such recent amendment has brought considerable relief to companies in India – the ability to strike off of company without the mandatory requirement of annual filing.
In this article, we will dive into this game-changing development, its legal provisions, and what it means for businesses.
Understanding the Evolution: A Brief History
Before we dive into the latest amendment, it’s essential to understand the evolution of company strike-off provisions in India. This journey can be divided into four distinct phases:
Phase I: Companies Act, 1956
Under the Companies Act of 1956, the closure of a company was governed by Section 560. To initiate the strike-off process, a company had to apply to the Registrar of Companies (RoC) using e-form 61. Importantly, all pending statutory returns had to be filed along with this application.
Phase II: Fast Track Exit Scheme (FTE)
In 2011, the Ministry of Corporate Affairs (MCA) introduced the Fast Track Exit Scheme (FTE). This scheme provided defunct companies with a streamlined route to strike off their names from the register of companies. Notably, FTE did not require the completion of pending statutory returns.
Phase III: Companies Act, 2013
With the introduction of the Companies Act, 2013, the provisions related to the strike-off of companies were included under Section 248. The language and requirements were largely similar to those in Section 560 of the Companies Act, of 1956. However, FTE was omitted from the legal framework after the effective date of Section 248 on December 26, 2016.
Phase IV: Recent Amendment in 2023
The most significant change in the landscape of company strike-off occurred in May 2023. The MCA issued a notification creating a new Centralized Department known as C-Pace for handling the strike-off of companies. This development came with an override of e-forms by a web form on the MCA V-3 portal.
Legal Provisions: Latest Amendment of Strike off of Company
The key turning point in this evolution is the recent amendment, which raised a crucial question: Is completion of annual filing mandatory for the strike-off of a company through filing Form No. STK-2?
As per the amendment made in May 2019 and further amendments in May 2023, the answer is clear. No application in Form No. STK-2 shall be filed by a company unless it has filed overdue returns in Form No. AOC-4 (Financial Statement) or AOC-4 XBRL and Form No. MGT-7 (Annual Return) up to the end of the financial year in which the company ceased to carry out its business operations.
In simpler terms, a company must file AOC-4 and MGT-7 until the financial year in which it ceases its business operations. This requirement ensures that companies remain compliant with annual filing obligations until the point of closure.
Implications of the Recent Amendment
The recent amendment has several noteworthy implications for businesses and professionals:
- Enhanced Compliance: Companies are required to stay compliant with annual filing obligations until the end of the financial year in which they cease operations. This ensures that all financial and operational records are up to date.
- Streamlined Closure: While annual filing remains mandatory, the strike-off process itself has become more streamlined and efficient, thanks to the introduction of C-Pace and web forms.
- Legal Clarity: The amendment provides legal clarity on the requirement for annual filing before strike-off, resolving the ambiguity that previously existed.
- Regulatory Oversight: The MCA’s move to centralize strike-off procedures through C-Pace allows for better regulatory oversight and faster processing of strike-off applications.
FAQs of Strike off of Company
Can a company apply for strike-off without completing annual filing obligations?
No, as per the recent amendment, a company must file overdue returns in Form No. AOC-4 and Form No. MGT-7 up to the end of the financial year in which it ceases business operations before applying for strike-off.
Are there any exceptions to this rule?
The requirement for annual filing before strike-off applies to all companies, with no exceptions mentioned in the amendment.
How does the C-Pace department contribute to the strike-off process?
C-Pace is a centralized department that handles the strike-off of companies, making the process more efficient and streamlined. It allows for quicker processing and regulatory oversight.
Conclusion: A Step Forward in Company Closure
The recent amendment allowing strike-off of companies without annual filing has undoubtedly brought significant relief to businesses looking to wind up their operations. While annual filing remains mandatory until the end of the financial year in which a company ceases business activities, the process itself has become more efficient and regulated.
This development marks a step forward in the journey of company closure regulations in India, providing clarity and a streamlined approach. As businesses adapt to these changes, they can navigate the strike-off process with greater ease, ensuring compliance and a smooth transition to closure.
For expert guidance on company strike-off procedures and compliance, consider consulting with Vakilsearch, ensuring a seamless and well-informed journey in the world of corporate regulations.
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