Explore the step-by-step process and financial aspects of striking off a company in India. This guide covers voluntary and Registrar-initiated procedures, fees, and FAQs.
Understanding the Costs of Striking Off a Company in India
Every company starts with a vision of running a successful business which stands the test of time. However, not all businesses thrive in the long run.
In India, the process of closing a company can be carried out through two main methods: striking off the company and winding up the company. This article focuses on the cost and procedure associated with striking off a company under the Companies Act, 2013.
What Does Striking Off a Company Mean?
Striking off a company refers to the process of closing a defunct company quickly and efficiently. It is the simplest way to close a company, making it an attractive option for companies that are no longer operational.
Which Companies Can Be Struck Off?
Any type of company, whether it’s a private company, one-person company, public company, or Section 8 company, can apply for striking off. Even dormant companies can initiate the process of striking off.
The Legal Framework
The Companies Act, 2013, governs the process of striking off a company in India, with Section 248 providing the legal provisions for striking off.
Methods of Striking Off a Company
There are two primary methods for striking off a company:
- A) Voluntary Striking Off by the Company Itself:
– This method allows a company to apply for striking off voluntarily after meeting specific conditions.
– Voluntary striking off under fast-track exit mode is not available for Section 8 companies.
- B) Registrar of Companies (ROC) Initiated Striking Off:
– The ROC can initiate striking-off proceedings if certain criteria are met, such as the company’s failure to commence business or its inactivity for two consecutive financial years.
Conditions for Voluntary Striking Off
A company can apply for voluntary striking off after satisfying certain conditions, including:
- Settling all liabilities.
- Obtaining approval from members byway of a special resolution.
When is a Company Ineligible to Apply for Voluntary Striking Off?
A company cannot apply for voluntary striking off if, within the previous three months, it has undergone any significant changes or activities, similar to those outlined during the registration of a company or company incorporation:
– Changed its name or shifted its registered office from one state to another.
– Made a disposal of property or rights for the purpose of gain in the normal course of trading or business.
– Engaged in activities other than those necessary for making the application or concluding the company’s affairs.
– Applied to the Tribunal for the sanctioning of a compromise or arrangement, which has not been finalized.
Forms and Fees for Striking Off
When applying for striking off a company, two essential forms are required:
- a) E-form MGT-14: This form has regular associated fees (Rs 200 per document if the Share Capital is below Rs 1 lakh).
- b) E-form STK-2: This form has a fee of INR 10,000/-
Consult our Compliance Experts to know the exact costs and fees associated with closing your company. Request a free callback from our experts today!
The Procedure for Voluntary Striking Off
The procedure for voluntary striking off is relatively straightforward and involves the following steps:
- Authorization of an officer or director to convene a board meeting.
- Sending a board meeting notice at least seven days before the meeting.
- Convening the board meeting and passing a board resolution.
- Sending notices for an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) as required.
- Convening the general meeting and passing a special resolution.
- Filing E-form MGT-14 with the required attachments.
- Filing E-form STK-2 with the necessary documents.
- The ROC reviews the application, and if all conditions are met, it will strike off the company after publishing a public notice.
Documents Required for Striking Off
The following documents need to be attached to the E-forms:
– Indemnity Bond duly notarized by all directors (in Form STK 3).
– A statement of liabilities certified by a Chartered Accountant.
– Certified true copy of the Special Resolution signed by every director
– A copy of the Board resolution authorizing the filing of the application.
– Indemnity bonds in Form No. STK-3.
– An affidavit in Form STK-4.
– A statement concerning any pending litigations related to the company.
– Copy of a relevant delisting order if applicable.
– No objection certificate from a relevant regulatory department if applicable.
Processing Time
Once an application for striking off of company is submitted via E-form STK-2, the concerned Registrar of Companies (ROC) will verify the documents. The normal processing time is around 3-4 months. However, if any objections are raised by the ROC, the process may take longer or the application may be rejected.
Registrar of Companies (ROC) Initiated Striking Off
If the ROC is satisfied that it is just and equitable to strike off a company’s name, it can initiate the process. This typically involves sending notices to the company, its directors, and publishing a public notice. If no response is received within the specified time frame, the ROC will proceed to strike off the company.
Frequently Asked Questions (FAQs):
How long does it take to strike off a company after applying voluntarily?
The normal processing time for voluntary striking off is approximately 3-4 months, but this may vary depending on the ROC's verification process and any objections raised.
Can a company apply for voluntary striking 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 voluntary striking off.
What is the role of the ROC in the striking-off process?
The ROC plays a crucial role in both voluntary and initiated striking-off processes. They review the application, verify documents, and decide whether it is just and equitable to strike off the company's name from the register of companies.
