Strike Off Company: Guide To Winding Up Your Business

At the time of incorporation, every company has a vision of running its business forever. But do all the companies succeed?

No, researches show that over 9.32 lakh businesses have been struck off till the FY 2023-24. 

This is because not all businesses can run successfully for a long period and as such businesses have to be shut down due to various circumstances. There are certain procedures that have to be followed for either incorporating a business or closing a business. To close a business, there are 2 ways. The first way is to strike off the company and the second is to wind up the company.

In this article, we will be going to discuss more in-depth the “striking off “of the company. Here, we will discuss what strike the company is, its procedure, and many more related to the same.

What does company strike-off mean?

A striking-off company means removing the name of the company from the register of the company, and the company also ceases to exist. There are two types of strike-off companies.

Voluntary strike off 

In this case, the company is struck off by the directors by dissolving it. Directors dissolve a company when they leave with no reason to run the company. There may be other reasons too for striking off a company, such as the retirement of directors, focus on another project, etc.

Compulsory strike-off 

In this case, a third party is involved. The third party will sign the petition for compulsory striking off a company. This can also be done by the registry house of companies when a company does not comply with the rules and regulations and does not file annual accounts and financial statements.

They have to notify all the related parties about the strike-off company by uploading a notice in the Gazette. Other parties have a period of 2 months for objecting to the notice. Once the period is up, then the name of the company will be removed, and the company will cease to exist.

Which companies can strike off?

Any type of company can go on strike such as:

• Private Company
• Public Company
• Section 8 Company
• One-person company

However, a dormant company cannot apply for a strike-off. In addition to that, Section 8 companies cannot go for voluntary strike-offs according to the Company Act, 2013.

Situations when a company cannot apply for strike-off

According to the Company Act, of 2013, a company cannot make an application for strike off when it has done the following actions in the previous three months: –

• It has changed its registered office from one state to another and its name.
• Immediately after ceasing trade or in the normal course of business, it has made a disposal for the value of its property or held it.
• It is conducting activities except for the one which is necessary for making an application for this.
• It has made an application to the tribunal for sanctioning compromise, and the matter has not been concluded yet.

Conditions that must be met before applying to strike off a company

The following conditions are needed to be fulfilled before making an application for a strike of the company: –

1. In case of voluntary strike-off

If a company goes for a voluntary strike-off, then it is required to pay off all the liabilities and also get approval from all the members by having a special resolution.

2. In case of compulsory strike-off

When a company is required to go for compulsory strike-off by the order of a tribunal or registrar of the company only in the following cases:

• If it fails to start its business within a year of incorporation.
• If it is not carrying any operations immediately preceding two previous years.
• If subscribers to the Memorandum do not pay the subscription amount and the declaration is also not filled within 180 days from its incorporation.
• If it is found during physical verification by the registrar of the company that this company is not carrying out any operations.

Required forms and fees for Strike off Company

For applying for strike-off, a company is required to file the following forms:

• E-form MGT-14
• E-form STK- 2

The fee to be paid at the time of filing the forms electronically is ₹10,000/-.

Documents required to strike off company

The following documents are required to be attached while filing these forms for applying for striking off a company: –

• An indemnity bond is notified by all directors in form STK-3.
• A statement that shows all the liabilities and assets of the company and should be certified by a practicing-chartered accountant.
• A copy of a special resolution signed by all the directors and certified.
• In form STK-4, an affidavit.
• A statement showing all the pending litigation of the company.
• Relevant orders copy for delisting of a company.
• A certificate of non-objection from the respective regulatory department.

Application for Company Strike-off

When a company applies for a strike-off, then it is mandatory to give a valid reason to the registrar of companies. Sections 248 to 252 of the Company Act, 2013 show the procedure of striking off the company.

If a company applies for strike-off voluntarily or compulsorily, they have to notify the public through an official gazette. After the expiry of the specific time, the ROC will remove the name of the company, but it has to mention a valid reason for the same.

The registrar of companies will also mention a dissolution notice of the striking off the company in the official Gazette once the company dissolves.

The ROC will make sure that the company has made sufficient provisions for paying off the liabilities of the company and realizing the number of assets before passing an order for dissolution or striking off. ROC is required to take necessary undertakings from the directors, managing directors, and other individuals responsible for the management of the company.

A company can use its assets to pay off its liabilities even after its name is removed from the Registrar of companies. It is also required to pay off all the liabilities of the directors, managing directors, and other responsible persons of management of the company.

What happens when a company is officially dissolved?

As per section 248 of the Company Act, 2013, a company is notified to be dissolved in the official Gazette then it ceases to operate from the date mentioned.

The certificate of incorporation, which was issued by the registrar of companies at the time of incorporation, will be canceled by them from the date of dissolution. However, the certificate of incorporation is valid for paying all liabilities and redeeming all assets.

Procedure to terminate a firm in the event of a voluntary termination

The following steps are required to follow for voluntary striking off the company: –

Organize a board meeting

Organize a board meeting to cover the following issues:

• Provide their consent for strike off of the corporation
• Permission for any business director to apply for the ROC
• Announcement of the extraordinary general meeting
• Notice for the board meeting should be given 7 days before the meeting.

Organize the extra-ordinary general meeting 

Organize the extraordinary general meeting to approve a special resolution.

Elimination of obligations

If any obligations remain after the board’s decision, the corporation will discharge them altogether.

Consent from the relevant authority

If the corporation is governed by another authority, that authority’s consent is necessary.

File the forms to the ROC

30 days after the resolution is passed, submit E-form MGT-14 and E-form STK-2 with the ROC along with their associated charges. The required challan of Rs 10,000 must be submitted with this application.

After checking all the documents and fees, the registrar of companies will publish a public notice in the Official Gazette after fulfilling all the required conditions.

Also Read: How to wind up a company in Australia?

Procedure for Revival of Strike-off Company

The process of restoring a company’s status after being delisted by the tribunal is extensively explained in Section 87A of the National Company Law Tribunal (Amendment) Rules. Below is a comprehensive explanation of the entire process for reviving a struck-off company.

• NCLT Order has to be Filed with ROC: During the timeframe designated by the Tribunal, the company must fulfill its responsibility to submit the pending financial statements and annual reports to the Registrar, by the provisions of the Companies Act, 2013, and the relevant rules.
• Listening to the Petition:  Upon reviewing the appeal, the application, or any subsequent adjourned hearing, the tribunal possesses the authority to issue suitable orders as deemed necessary.
• Serving the Respondents With the Petition: Under specific circumstances, the Registrar must receive a copy of the draft petition for the revival of the struck-off company, ensuring it is submitted no later than 14 days before the designated hearing date. 
• Petition Submission: The tribunal requires a draft petition to revive the company that has been struck off. The appropriate form for submitting the petition is NCLT-9.

Consequences of Strike off Company

Amid extensive deliberations regarding the surgical strike against shell companies, a ray of hope emerges for the strike-off companies that can demonstrate their integrity. Undoubtedly, this development might influence the current government’s reputation in its battle against corruption.

Within 30 days of the order’s approval, the applicant must ensure the certified copy’s delivery to the ROC. 

Additionally, all expenses related to the proceedings are the responsibility of the applicant.

The official gazette shall publish the order, bearing the name and seal of the ROC.

The period required for striking off a company from the registrar of companies

Once the application is made to the registrar of companies by file, e-forms MGT-14 and STK-2 with required fees, then ROC will verify all the documents then it will remove the name of the company. This whole procedure will take 3-4 months, but sometimes it takes more time to complete that procedure.

Read More: DS01 Form

What assistance can OnDemand International provide you with the strike-off business?

1. Complete the form: For the strike-off company, Odint Consulting can assist you with completing the MGT-14 and STK-2 forms, as well as assisting you with document collection.
2. Verification of documents: Odint consulting professionals may assist in verifying that the provided documents are genuine and original once the necessary paperwork has been acquired.
3. Application of strike-off: Odint Consulting will apply for the company’s strike-off after the paperwork has been verified by submitting the application and the relevant documentation.
4. Processing of application: Once the application is filed, the application along with the necessary papers will be processed by the appropriate authorities, which will take some time.
5. Company is under the strike-off procedure: Your company will be under the strike-off procedure, and if your application is accepted, your company will be struck off and its name will be deleted from the ROC.

Conclusion

When a firm is “struck off,” it is closed, and after its closure, it can no longer conduct any business operations. However, it is best to seek assistance from a professional expert in this domain to bring back your firm from this status.

OnDemand International works on providing the necessary information relating to every workaround of a company’s functions and helping you conduct legal business operations as well.

If you are looking to register your business globally in countries like Poland, Spain, the Netherlands, Singapore, UAE, Canada & Australia, you can get in touch with our business formation experts from OnDemand International today. We will assist you through the registration process of your business.