Annual Compliance

Step by Step Analysis of Strike Off Under Companies Act

Once the name of the Company is registered, then it cannot be removed from the Register unless it is dissolved by the process of law, either as a result of its winding up or upon its amalgamation with another Company.

However, in case the Company is a Defunct Company, the Companies Act provides a short-cut to the winding up process, namely strike off under Companies Act, of the Company by the ROC (Registrar of Companies). Thus it is an alternative mode of dissolution to the winding-up of a Company.

What are the different ways of striking off a company?

Different Modes of Striking Off:

1. Strike Off by ROC Suo Moto.
2. Strike Off by way of Application by the Company.

What type of Companies can get strike off?

The companies that can get strike off are:

• Private Limited company;
• Public Company;
• One person Company.

It is noteworthy to mention here that even a dormant company can move an application for strike off.

What type of companies cannot get strike off?

Type of Companies which cannot be Strike Off:

1. Listed Companies;
2. Not-for-profit Companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Companies Act, 2013;
3. In a company have borrowed loan from bank / NBFC / Other and having charges which are pending for satisfaction for lenders.
4. Companies against which any prosecution for an offense is pending in any court;
5. Companies whose application for compounding is pending;
6. Companies that have been delisted due to non-compliance with listing regulations or listing agreement or any other statutory laws;
7. Vanishing companies;
8. In case a company’s affairs are under investigation or inspection is ordered and being carried out or actions on such order are yet to be taken up or were completed, but prosecutions arising out of such investigation or inspection are pending in the Court or NCLT.
9. Companies where the Registrar or Inspector have issued notices (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Companies Act, 2013 (new Act)and reply there too is pending;
10. A company which has accepted public deposits and defaulted in payment of deposits as and when due.

Strike off under Companies Act: Points to know

ROC may remove the name of a company from the register of companies if:

• A Company has failed to commence its business within 1 year of its incorporation; or
• A Company which is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company.
• ROC shall send a notice to the Company and all the directors of the Company, stating the intention to remove the name of the Company from the register of the Companies and requesting them to send their representations for further process of Strike Off.

Procedure to be Followed by ROC for Strike Off by Its Own Motion

The ROC has to follow the following procedures for strike off by its own initiative:

• Serving on Notice

ROC shall send notice in writing in Form STK – 1 to all the directors of the company at the addresses available on record, by registered post with acknowledgment due or by speed post.

Through the notice to company, the ROC will specify the reasons on which the name of the company is liable to be removed and shall seek response from company, if any, and the concerned company and its officer has to reply within 30 days from the date of receipt of notice.

• Representation of Company

The ROC shall consider the representation of the Company if it has received the same. If the ROC is not satisfied with the representation made by the company and its directors, it may proceed further for the strike off the name of the company.

• Publication of notice

The notice for removal of name shall be in Form STK 5 and the same be-

1. Placed on the official website of the MCA on a separate link established on such website in this regard;
2. Published in the Official Gazette;
3. ROC shall publish the notice in any leading English newspaper and at least once in the local language, both having wide circulation in the State where the registered office of the company is situated.

• Intimation to Regulatory Authorities

The concerned ROC shall simultaneously communicate to the concerned other regulatory authorities like the Income-tax, GST Department i.e. having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections, if any, to be furnished within 30 days of notice.

• Strike off the Name and Publish Notice of Dissolution of the Company

ROC may, at the expiry of the time mentioned in the notice, unless the company shows cause to the contrary, strike off its name from the register of companies, and publish notice thereof in the Official Gazette. The Company shall stand dissolved on the publication of this notice in the Official Gazette.

• Sufficient Provision has been Made for Realization of All Amounts Due

 ROC, before striking off, shall satisfy itself that adequate provision has been made for the recognition of all amounts due to the company and the payment or discharging of its liabilities.

By way of Application by the Company:

The Company can apply voluntarily with the Registrar of Companies for Striking off the name of the Company. The grounds that are applicable to the Company are as under:

• The Company has to pass a special resolution with the consent of seventy-five percent members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner and accordingly, a Company can file an application for Striking off its name with ROC.

Restriction on Making Application by the Company for Strike Off

If, any time in the previous 3 months, the Company has done any of the below-mentioned activities, then the Company shall not make any application for its strike off:

1. Has Changed its name;
2. Has Shifted its registered office from one State to another;
3. Has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of the business, for disposal for any profit earned in the ordinary course of business;
4. Has engaged in any other business activity except the one expedient for the purpose of making an application under that companies act, or deciding whether to do so or achieve the affairs of the company or necessary for the statutory compliance of the company;
5. Has made an application to the Tribunal for the sanctioning of a Compromise Or Arrangement and the matter has not been finally concluded; or
6. The Company is being wound up under Chapter XX by the Tribunal.

Process to be Followed for Strike Off under Companies Act on Application of the Company

• Holding of Board Meeting

The Company will hold Board Meeting for passing a Board resolution for the purpose of Striking off the name of the Company and to authorize any director of the Company to apply to Registrar of Companies.

• Extinguishment of all the Liabilities

After passing of Board resolution if there are any liabilities then the Company will extinguish all the liabilities before the next step.

• Holding of General Meeting

The Company will hold the general meeting of shareholders by passing a resolution for striking off the name of the Company with the approval of 75% of members as per paid up share capital of the Company and after passing of Special resolution Company will file E-form MGT-14 within 30 days.

• Approval of Concerned Authorities

In case if any other authority regulates the company, then the approval of such authority shall also be required.

• Application to ROC by Company

Application in Form STK- 2 to be filed by the Company (Government filing fees of INR 5000) along with following documents:

1. Indemnity Bond duly notarized by every director in Form STK 3;
2. An affidavit in Form STK 4 by every director of the company;
3. A statement of accounts containing assets and liabilities of the company made up for a day, not more than 30 days before the date of application and certified by a Chartered Accountant;
4. CTC of Special Resolution duly signed by each Director
5. In the case of a Company regulated by any other authority, approval of such authority shall also be required;
6. A statement with respect to any pending litigations, involving the Company.

• Certification in E-Form STK-2

1. E-form STK-2 shall be signed (Affixation of DSC) by a Director. Director should be authorized by the majority of Board for such purpose. The e-form STK-2 shall be certified by Company Secretary in Whole Time Practice or Chartered Accountant or Cost Accountant in full-time practice, and the Company shall publish the copy of the application on its official website till the disposal of the application by the NCLT.

• Public notice by ROC

1. After applying strike off by the Company, the ROC shall publish a public notice in Form STK-6 inviting objections to the proposed Strike off, if any.
2. The objections are to be sent to the respective ROC within 30 days from the date of publication.
3. The notice shall be placed on the website of Ministry of Corporate Affairs, published in the Official Gazette and published in a leading English newspaper and at least in one vernacular newspaper where the registered office of the company is situated.

• Intimation to Regulatory Authorities 

1. ROC shall simultaneously intimate the concerned regulatory authorities regulating the company, i.e. the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections if any.

• Publication of notice of dissolution 

1. ROC, after having followed and dealt with the above steps, shall strike off the name and dissolve the Company and a Notice of striking off and its dissolution to be published in the Official Gazette in Form STK 7.
2. On the publication in the Official Gazette of this notice, the Company shall stand dissolved in effect from the date mentioned therein. The same shall also be placed on the official website of the MCA^[1].

• Other Provisions 

1. Effect of company notified as dissolved 

If a company confirms as dissolved, it shall cease to operate as a Company from the date of dissolution and the Certificate of Incorporation issued by the ROC to it shall be deemed to have been cancelled except for the purpose of realizing the amount due to the company and for the payment or discharge of the legal liabilities or other obligations of the Company.

• Liability of directors, managers, officers, and members to continue 

The Corporate liability, if any, of every directors and officer who was exercising any power of management directly or indirectly, and of every member of the Company dissolved, shall continue and may be enforced as if the Company had not been dissolved.

Conclusion

Every time business is run it is started with a vision to last long but in some cases businesses may not be successful in the long run therefore there may arise a need to strike off the company. You are advised to consult professionals before arriving at a decision regarding strike off under Companies Act.

Read our article:Provisions Related to Registration of Charges under Companies Act 2013