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Pankaj Tyagi
| Updated: 05 Mar, 2022 | Category: Compliances

Strike Off Company: Provisions and Norms

Strike off

The process relating to striking off is an optional mechanism to wind up a company in India. The Companies Act provides two modes of strike-off: strike off by the RoC u/s Section 248(1) of the Companies Act 2013 & strike off by a company on its own accord u/s 248(2) of the Companies Act, 2013. The write-up discusses the notion of a strike off of a company relating to these provisions.

Conditions for Strike off under governing legislation

The norm about strike-off could be enacted based on the given conditions:

  • The company has not started its operation within one year of its incorporation.
  • The company has not performed any business undertakings for the preceding two FYs, for which it has not requested for the Dormant Company status u/s 455 of the Act.

What do you mean by the term Dormant Company?

The term dormant, the general, implies inoperative or inactive. Likewise, a company is tagged as dormant if it has been incorporated under the Companies Act for a future project or holds intellectual property or assets but is not executing any significant accounting transactions.

To gain the classification, though, the company should file a prescribed application to the Registrar. The notion of dormancy was appended to the corporate norms in the Companies Act of 2013.

Strike off by Registrar of Company

The Registrar of Companies, i.e. RoC, may roll out a notification to the Companies along with its key officials such as Director in form STK 1 if he has a viable reason as mentioned above.

Such a notice would inform the relevant entities of removing its name from the record and prompt it to send its officials with the standard documentation within 30 days of the issuance of such notification. This process is also known as Compulsory removal of name from the authority’s register.

Strike off on the Company’s Accord

A company may file an application to the ROC via form STK 2 post addressing all its liabilities. This could be performed via approving a special resolution, which must be validated by 75 % of its members.

Checklist for Striking off company’s name

Companies may opt for a strike-off by following the given procedures;

1: The Holding of Board Meeting

The passing of board resolutions has been mandated for key decisions in the corporate landscape. A resolution under this provision could be approved by the company via board meeting, after which any of its directors will be appointed to apply for strike off procedure.

2: Closing off Liabilities

A company seeking to strike off must have addressed all its liabilities.

3: Holding of General Meeting

A shareholders’ general meeting should be held for passing a resolution relating to striking off the name of the company.

This resolution must have the consent of 75 per cent of its members according to the company’s paid-up share capital.

Post this; the company would be required to file application MGT-14 within a time frame of thirty days.

Note – if the company falls under another governing authority, then the permission of such authority should be obtained for this purpose.

Furnishing of Application and Documentations

Companies aiming to strike off should apply for the RoC, i.e. Registrar of Companies. The said application must be attached with the given documentation:

  • Indemnity bond certified by all directors.
  • A statement of liabilities reflecting all the assets as well as liabilities. It must be certified by practising CA.
  • An affidavit by all the company’s directors in form STK 4.
  • CTC of special resolution enclosing the signature of every director.
  • A statement relating to any due legal proceeding w.r.t company

Implications of Dissolvement

If a company confirms its dissolvement, it will stop its operation from the date of such dissolvement, & the Incorporation certificate granted to it by the Roc shall be considered to be cancelled, except for the discharge of any prevailing obligations or liabilities.

Furthermore, any of the prevailing obligations of the directors, and officials who had administered it directly/indirectly & of every company’s member so dissolved, would continue to be enforced post dissolvement.

Limitations around Applications for Strike off

Companies are not permitted for filing applications relating to strike-off if at any instance during the last three months, it has:

  • Changed its registered name or altered its registered office to another state;
  • Made disposal for the property’s valuation or rights held by it (subject to conditions);
  • Involved with any other undertakings other than core operations for applying the governing provisions, and so on;
  • Applied to the Tribunal for the conferring of Arrangement or Compromise, and Tribunal has not yet forwarded an agreement for the same;
  • Been wound up as per Chapter XX, whether voluntarily as per Insolvency and Bankruptcy Code (IBC), 2016, or by the Tribunal;

Non-Qualifying Companies for Strike off

The companies mentioned below do not qualify for the strike off’s provisions:

  • Companies delisted owing to non-compliance with statutory laws, listing norms, listing agreements.
  • Companies listed for investigation or inspection – if such directive is being performed/due/completed but the prosecutions relating to such inspection are pending in the honorable court.
  • Companies that failed to reply to notices of select provisions
  • Companies that failed to facilitate the follow-up instructions on any report u/s 208 of the Act
  • If the prosecutions relating to the norms above are due in the honorable court.
  • Companies against which any case relating to prosecution is due in the honorable court.
  • Companies whose application relating to compounding is due before the concerned authority for compounding the felonies committee by it any of its officials in default.
  • Companies having any due public deposits.
  • Companies having any cases which remain to be satisfactory
  • Companies registered u/s 25 of the Companies Act, 1956[1] or Section 8 of the Act.

Conclusion

As you can see, the legalities around striking off a company in India is quite complicated and revolve around hefty paperwork. One must remain on point with the compliances mentioned above to avoid delays or errors in the striking off process.

Read our Article:Cost audit: Meaning, Applicability and Provisions

Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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