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Procedure for Striking Off of Companies under Companies Act 2013
An alternative to winding up of a Company is striking off of the Company and which this is subject to statutory conditionsmentioned in the section 248 of Companies Act, 2013.
Methods of Strike Off of a Company as per Companies Act 2013
There are two modes of strike off as per the provisions mentioned in the Companies Act, 2013 and they are:
- Striking Off of the Company by Registrar of Company under Section 248(1) of the Companies Act 2013:
The ROC can send a notice in Form STK-1 if he finds a reasonable cause for striking off a company as per Companies Rules, 2016 to the Company as well as the Directors of the Company. The ROC will inform the company about the reasons why the Company is being striked by his office and ask for representatives of the striked off company to be present within 30 days of notice along with required documents. This procedure is also known as “Compulsory removal of name from registrar of Company”.
Course of action of Striking off of a Company by ROC:
- ROC shall publish a notice STK-6 after receiving the application to find out if there are any objections regarding strike off and the same shall be sent within 30 days of notice being published.
- Notice of strike will be published on the website of Ministry of Corporate affairs, a leading Newspaper, Official Gazette and one local newspaper where the company has its registered office.
- Authorities like the Income Tax, Central Excise and Service Tax shall be intimated by the ROC about the strike off of the company in order to seek any objections from their side.
- Once the above processes are completed the ROC shall strike off the name of the company by sending a notice in official gazette as Form STK-7.
- The company shall stand dissolved after the notice has been published in the official gazette and the same shall be made public on MCA’s official website.
- Striking Off of the Company by itself as per Section 248(2) of the Companies Act 2013.
Once the Company has cleared off all its liabilities by a special resolution or with consent of 75% of members in terms of paid up capital, it can submit an application as per E-form STK-2 with the ROC suo-motto for eliminating the Company name on all or any of the mentioned grounds.
Course of action of Striking off of a Company by itself under Section 248(2) of the Companies Act 2013:
- Board Meeting- A board meeting will be held to pass a resolution for Striking Off the name of the Company and appointing any one of the director to apply for the same with the ROC.
- Clearing of remaining Liabilities- Once the board resolution has been passed; the company shall clear all the remaining liabilities, if any.
- General Meeting- General meeting has to be held consisting of the share holders of the company to pass a resolution for striking off of the company by taking approval from 75% members as per the paid up share capital of the Company. After this approval the company shall file E-form MGT-14 inside 30 days of such resolution being passed.
- Taking concerned authority’s approval- Approval from concerned authority is required in case any other authority is regulating the company which is to be striked off.
- Submit application to the ROC- The Company shall submit an application in Form STK-2 along with prescribed fees of Rs.5000 to the ROC. Following documents will also have to be submitted:
- Each director has to give duly notarized indemnity bond in Form STK 3.
- CA certified account statements depicting profits and losses of the company for the past 30 days from the day when the application has been submitted.
- Each director of the company has to give an affirmation in Form STK 4.
- CTC of the special resolution being passed with signatures of every director of the company.
- Approval by any authority regulating the company.
- Statement of awaiting litigations with regards to the company.
Annual filing is necessary before applying for strike off but ROC may approve forms without annual filing if ROC finds that there have been no transactions and bank account is not operational.
It is mandatory for the company to post a copy of strike off application on its website as per Provision R.7 (1).
Basis of Striking Off of a Company under Companies Act 2013
- If the company has not commenced its business within one year of its incorporation then it can be striked off.
- If the company has not sought the status of a dormant company as per Section 455 of the Companies within 2 years of not carrying out any business activity then it can be striked off.
- The company shall cease to operate as a Company once it is confirmed as dissolved and its certificate of incorporation issued by ROC shall stand cancelled and would remain valid only for realizing the due amount and paying legal obligations on the company.
- Liability on all directors, officers holding power in company’s management indirectly or directly and members of the company being dissolved shall continue to exist even after company’s strike off.
Limitations on making application for strike off [S. 249(1)]
Company can be restricted to apply for strike off inthe past 3 months if the company:-
- Has moved its registered office to a different state or/and has changed its name.
- Rights or disposed rate of property is being held by the company just before stopping the trade or while continuing with business for purpose of gain in normal trading or carrying out the business otherwise.
- Has affianced in some other activity apart from the one that is obligatory or maneuvered for the reason of applying under the particular section, or making a decisionto do the same or closing the company’s activities or conformingwith any legislative requirement.
- Has applied with the Tribunal to sanction arrangement or compromise and the matter is yet to be completed.
- Has been wrapped up according to Chapter XX, be it voluntarily or as per the IBC,2016 or by Tribunal.
Class of Companies which cannot be Strike Off as per Provision R.3(1)
- Listed companies.
- Companies which have been removed from the list on the basis of not complying with listing agreement or listing regulations or any other constitutional laws.
- Vanishing companies.
- Companies where Investigation or inspection is going on or action on such inspection are still to take place or have concluded but prosecutions resulting by investigation or inspection are waiting in the Court.
- Companies who have been given notices as per section 234 of the Companies Act, 1956 (1 of 1956) or section 207 or section 206 of the Act have been given by the Inspector or Registrar and its report have still not been submitted or reply is awaited or report as per section 208 is awaited or any legal action as a result of such scrutiny or enquiry it still pending.
- Companies on which any trial for a criminal act is awaited in any court.
- Companies whose compounding application is awaited before the concerned authority for compounding the offences done by any of its officers or the company.
- Companies who have taken up public deposits and either the company isdefaulting in re paying of the same or they are outstanding.
- Companies holding charges and they are awaited to be cleared off.
- Companies registered under section 8 or section 25 of the Companies Act, 1956.
Penalty of Not adhering with the requirement as mentioned in The Companies Act, 2013
In case a company fails to abide by the requirement of Section 455 of Companies Act, 2013 and Companies (Miscellaneous) Rules, 2014 which states the provisions of filing of Annual Return within 30 Days from the end of financial year theROC will strike off the name of such company from Register.
Also every officer in default and the company who does not comply with the provision and rules under Companies Act, 2013 will be reprimanded under Section 450 of Companies Act, 2013.
Frequently Asked Questions (FAQ)
Who can apply for Strike off of the company?
Majority of directors of the company along with approval from 75% of the shareholders of the paid up capital can apply for company strike off.
Is it possible to wound up a company which is striken off?
A company when striken off gets its name deleted from the ROC and ceases to exist as a legal entity hence it has already wounded up.
What about the share capital of a striken off company?
The share capital of the company will be distributed among creditors and share holders respectively.
Is it possible to strike off a company with debts?
It can be considered to strike off a company if it cannot liquidate its debts. In this case the debts shall be written off as bad debts which can never be claimed by creditors.
Is it possible for a single director to strike off a company?
It is mandatory to submit for DS01 for company’s strike which has to be signed by majority directors hence a single director cannot strike off the company.
Can a dormant company be striken off?
A dormant company can be voluntarily be striken off by the directors as long as the company has not changed its name done any trading and is still solvent.
Can a striken off company be revived?
An order from National Company Law Tribunal is required to revive a striken off company. Workman, company members and creditors can apply to revive a striken off company.
What is FTE?
Companies get their names striken off faster as per section 560 of the Companies Act 1956 are known to adopt the Fast Track Exit(FTE) process.
What does a defunct company mean?
As per Section 455 of the Companies Act a defunct company can also be called a dormant company which has not made any business transactions for past 2 financial years.
Which company is termed as vanishing company?
Companies who have not filed statements after raising funds and whereabouts of office and directors of the company are not known are known as vanishing companies.