The Complete Legal Process Involved in Striking-Off an Indian Company
Every entrepreneur dreams of being successful in his business, but some ventures fail due to certain unexpected reasons. If a business is unsuccessful, and the members have decided to close the company, they have to follow specific rules. There are two procedures for closing the firm in India. Among them are the striking-off an Indian Company and winding up.
Striking off of a company is the easiest way to close a non-functioning company. We explain in great detail the striking-off an Indian Company process.
Companies Which Can Apply for Striking-Off
The Companies Act, 2013 governs Indian companies, and Section 248 deals with the striking off of a company. The following companies can apply for strike off:
- Private Company
- Public company
- One-person company
- Section 8 company
- Dormant companies also can apply
A company can strike off either by voluntary striking off by the company itself or by the Registrar of Companies. However, voluntary strike-off is not possible for a section 8 company.
Conditions Under which a Company Can Apply for Striking-Off
These are the conditions under which a company is eligible for strike off voluntarily and by Registrar of Companies:
A company can apply for striking off voluntarily if it satisfies these conditions:
- If it extinguishes all its liabilities
- It can also strike-off if it gets approval by members by a special resolution
By Registrar of Companies under these conditions:
- Even after one year of incorporation, a company has not started its business.
- If a company has not conducted any business during the two preceding financial years. Furthermore, no application filed during such period for a dormant company status.
- No subscription is paid by the subscribers to the memorandum, which is required to be paid during incorporation. Moreover, there is no declaration regarding this filed within one hundred and eighty days of the firm’s incorporation.
- Striking-off also happens if physical verification by the Registrar of Companies shows that no business transactions or operations are being carried out at the registered office.
Conditions Under Which a Firm Cannot Apply for Voluntary Striking-Off
An application for striking off cannot be made if in the preceding three months these conditions happen:
- The firm changed its name or shifted its registered office to another state.
- The company has made a disposal for the rights or property it holds, just before stopping its business operations with the intent of profits from the disposal.
- It has carried on an activity other than that essential for applying under the section or deciding whether to do so on stopping the business operations.
- The firm has applied to the tribunal for effecting a compromise and the matter is pending.
Forms to be Filled
- E-form MGT–14
- E–form STK–2
E-form STK-2 has fees of Rs. 10,000, while E-form MGT-14 has normal related fees.
Procedure to Voluntarily Strike-Off an Indian Company
This is the step by step procedure for voluntary striking off of a company:
- The firm organizes a board meeting after authorizing an officer or director of a company
- Board meeting notice with detailed agenda is sent seven days before the board meeting
- Organizing a board meeting and passing a board resolution
- Sending a notice of an Annual General Meeting or Extraordinary General meeting as required
- Organizing a general meeting and passing a special resolution
- Filing E-form MGT-14, together with required documents
- Filing E-form STK-2, along with essential attachments
- After verifying that the documents are appropriate and all fulfilment of the requirements, the Registrar of Companies will issue a public notice and strike off the company if it feels it is fair to strike off the company
Documents are required to be attached to forms.
Along with the E-forms, the following documents are essential:
- A statement of liabilities (attested by a chartered accountant), which includes all assets and liabilities of the firm
- Indemnity Bond (notarized by directors) – in form STK-3
- A true copy of the Special resolution (attested by all directors)
- An affidavit (in Form STK-4)
- A Board resolution copy authorizing this filed application
- A statement mentioning any pending litigations related to the firm
- A duplicate of the relevant order of delisting, if present, by the stock exchange concerned
- NOC (No Objection Certificate) from the appropriate governing department – if the firm is regulated by the department
Time Taken to Strike-Off a Company Name from the Registrar of Companies
After filling form STK-2 and an application for striking off a company, the Registrar of Companies verifies the documents and strikes off the company. The process is complete in about three to four months. Sometimes, the procedure may delay because of objections. In other cases, the registrar may reject the application.
The Procedure to Strike off Company by Registrar of Companies
If the Registrar of Companies feels that it is fair to strike off the company, it will do so. Furthermore, this happens even if there is no response even after sending a notice to the company within the notice period.
As can be seen, there is an appropriate legal procedure while striking off an Indian company. 3E Accounting has great experience in secretarial services and has helped several businesspersons in striking off their non-functional companies in India. You can contact us for professional Company Strike-Off Services in India.