Strike off a company

Strike Off a Company - An Overview

Strike off Under Companies Act of 2013 is an official process for winding up a business. It involves the removal of its name from public records. Voluntary winding up of the company is done by filing a petition with the Registrar of Companies (ROC). Further, the company name is removed from the register by issuing a notice. The process is outlined in the Companies Act, 2013 allowing a straightforward dissolution.

Another effective method of dissolving a company is through removal from public records. Either the Registrar of Companies (ROC) may issue a notice requesting this or alternatively the business can ask themselves for this to occur directly with them. Section 248 to 252 of the Companies Act of 2013 describes this procedure.

Voluntary Application to Strike Off a Company

A corporation may submit a special resolution or get the consent of 75% of its members (as determined by the paid-up capital) to have its name removed from the Register of Companies. This method is called voluntary application to strike off a company. After paying off all of its obligations, the firm may request to strike off the company on any of the following grounds:

• Within a year of establishment, the company fails or does not start operating
• The firm has not applied to be designated as a dormant company under Section 455 of the Act for the two financial years prior, during which time it has been inactive or has not conducted any activity
• After receiving the business's request to have the company name removed, the ROC is required to issue a public notice as outlined by the Act.

Strike Off Company Name by ROC

• Valid Reasons for Removal: Failure to commence business within one year of incorporation or consecutive inactivity for two financial years
• Action by Registrar of Companies (ROC): Issues notice to company and directors for intention to remove/strike off company name
• Company's Opportunity to Respond: Thirty-day period given from notice date to submit representations and relevant documents to ROC.

Documents Required for Strike off Company

The following Draft documents of strike off company is required for striking off the company:

• Board and shareholder resolutions
• Financial statements
• Tax clearance evidence
• Asset and liability statement
• Proof of dissolution or winding up
• Consent of creditors
• Consent of regulatory authorities
• Other jurisdiction-specific documents may be required
• It is advisable to consult legal professionals or government authorities for accurate and specific requirements.

Benefits of Strike Off Company

Cost Savings: Striking off a company can eliminate ongoing compliance costs, such as annual fees, audits, and filing requirements. This can be beneficial for companies that are no longer operating or generating revenue but still incurring expenses

Simplified Administration: Once a company is struck off, the administrative burden of maintaining company records, filing annual returns, and complying with regulatory requirements is lifted. This can reduce the administrative workload for the company directors or owners

Closure of Business: Striking off a company is often used as a way to formally close a business that is no longer active or profitable. It provides a clean and legal way to cease operations and wind up the affairs of the company

Privacy and Confidentiality: For companies that value privacy, striking off can remove their information from public records and databases, reducing the visibility of their business activities. This may be beneficial in cases where the owners wish to maintain a low profile or protect their personal information.

Procedure for Strike Off Company Name

Vakilsearch follows this step-by-step procedure for striking off a company under the Companies Act of 2013:

Step 1: Convene a Board Meeting

After conducting a board meeting where the board of directors will approve crucial transactions. Our team can help in authorising a director to apply to the Registrar of Companies (ROC), approving the strike-off of the company, and issuing a notice for an extraordinary general meeting.

Step 2: Liabilities Extinguishment

Once the board resolution is passed, Vakilsearch will ensure that any existing liabilities of the company are properly extinguished. It is essential to close the company's financial obligations.

Step 3: Extraordinary General Meeting (EGM)

The EGM is a crucial step in obtaining shareholder approval for the closure of the company.

Step 4: Approval from Concerned Authorities

If any other regulatory authority oversees the company. Vakilsearch will help obtain the necessary approval from that authority. It ensures compliance with all regulatory requirements.

Step 5: Application to ROC

Vakilsearch will prepare and file the required forms with the ROC on behalf of the company. We will file Form MGT-14 within 30 days of passing the resolution, along with the prescribed fees. Additionally, we will file Form STK-2, which is necessary for strike-off.

Effect of Company Notified as Dissolved

Legal status of Strike off company has the following effects of firing a company:

• A corporation that has been dissolved in accordance with Section 248 of the Act ceases to exist as of the date stated in the notice published in the official gazette
• The ROC's certificate of incorporation is regarded as invalid as of the date of dissolution. For the purposes of paying off the business's debts, recovering unpaid sums owing to the firm, and carrying out its duties, the certificate of incorporation is still valid.

Before Applying

Check for Eligibility: Ensure your company meets the eligibility criteria for strike off, which includes:

• No ongoing legal proceedings or winding-up petitions
• All debts and liabilities settled
• No unresolved disputes or claims
• Fulfilled tax obligations and filed necessary returns
• No trading or stock sales in the last three months
• No name change in the last three months
• No liquidation threat or receivership proceedings
• No existing creditor arrangements

Gather Required Documents: Collect the necessary documents for strike off, including:

• Board resolution authorizing strike-off
• Statement of assets and liabilities
• Newspaper advertisement announcing strike-off intention
• Indemnity bond to protect ROC from liabilities
• Statutory declaration by the director confirming compliance
• No objection certificate from income tax authority

Choose Strike-Off Mode: Decide whether to proceed through an informal strike-off (if eligible) or the traditional method.

Application Process

• File Strike Off Form (Form STK2): Submit the completed form electronically through the MCA21 portal.
• Attach Supporting Documents: Upload the required documents along with the form.
• Pay Application Fees: Make the prescribed fee payment online through the portal.
• Verify and Submit: Verify the information thoroughly and submit the application.
• Receive Acknowledgement: Upon successful submission, you will receive an acknowledgement from the ROC.

Post-Application Procedures

• Publish Notice in Newspaper: Publish the strike-off notice in a national newspaper and a local newspaper in the company's registered language.
• File Affidavit of Publication: File an affidavit with the ROC confirming the publication of the notice.
• Await ROC Approval: The ROC will review the application and supporting documents and, if satisfied, issue an order approving the strike-off.
• Receive Strike-Off Certificate: Upon ROC approval, you will receive the strike-off certificate, officially dissolving your company.
• Strike-off Company Status
• Restrictions on Making Applications for Strike-Off

The Companies Act 2013 has laid down certain restrictions on making applications for strike-offs to ensure that companies are not wound up in an improper or fraudulent manner. These restrictions aim to protect the interests of creditors, shareholders, and other stakeholders.

General Restrictions

• Ongoing Legal Proceedings: A company cannot apply for strike-off if it is involved in any ongoing legal proceedings, including winding-up petitions, insolvency proceedings, or litigation. This is because the strike-off process would effectively dissolve the company, making it difficult or impossible to pursue any legal claims against it.
• Outstanding Debts: A company must have settled all its debts and liabilities before applying for strike-off. This includes taxes, employee dues, and payments to creditors. If the company has outstanding debts, it cannot be considered solvent and should not be allowed to dissolve.
• Unresolved Disputes: A company cannot apply for a strike-off if it has any unresolved disputes or claims pending against it. This is because the strike-off process could prejudice the rights of the parties involved in the disputes.
• Tax Compliance: A company must have fulfilled all its tax obligations and filed all necessary tax returns before applying for strike-off. This is essential to ensure that the government collects all its due taxes from the company before it is dissolved.

Additional Restrictions for Informal Strike-Off

In addition to the general restrictions mentioned above, there are also some additional restrictions for companies that wish to apply for a strike off under the informal procedure. These restrictions are intended to prevent abuse of the informal process.

• Trading Cessation: A company must not have traded or sold any stock in the last three months prior to applying for strike-off. This is to prevent companies from using the informal strike-off process to avoid their obligations to creditors or shareholders.
• Name Change Restriction: A company must not have changed its name in the last three months before initiating the strike-off process. This is to prevent companies from using the informal strike-off process to conceal their identity or avoid their responsibilities.
• Liquidation Threat: A company must not be under any threat of liquidation or receivership proceedings. This is to ensure that the company is not dissolved while it is still potentially viable.
• Creditor Arrangements: A company must not have any existing agreements with creditors, such as a Company Voluntary Arrangement (CVA). This is because a CVA is a form of insolvency procedure, and companies involved in insolvency proceedings are not eligible for strike-off.

Exceptions to Restrictions

In some cases, exceptions to these restrictions may be allowed. For instance, if the company is involved in ongoing legal proceedings but has sufficiently provided for its potential liabilities, it may still be eligible for strike-off. However, these exceptions are generally granted on a case-by-case basis and require approval from the Registrar of Companies (ROC).

Strike-off Company Status

The strike-off company status refers to the state of a company that has undergone the process of striking off or dissolution. A company's legal existence ends when it is struck off, which removes it from the official register of companies. Depending on the jurisdiction, the particular steps and language may change, but the overall idea stays the same. | Once a company is struck off, it is considered inactive and no longer legally operational. The strike-off status indicates that the company has ceased its business activities, and its assets, liabilities, and affairs are generally dealt with according to the laws and regulations of the jurisdiction.

Why Vakilsearch?

Vakilsearch offers top-notch legal services and specialises in assisting with the revival of companies under the Companies Act, 2013. Our team of highly skilled lawyers can provide comprehensive guidance throughout the entire process. Simply provide us with all the necessary information, and within a few days, we will prepare a document for the striking off of your company. We will also assist you in filing the petition.