Closure of Private Limited Company

1.What does strike off of a company mean?

Strike Off means removing the name of the Company from the Register of Companies maintained by the Registrar of Companies.

It is more like a Closure of the Company and the Company will not be in existence after being Struck Off and cannot perform any operation thereafter

2. What are the Modes of Strike Off of a company by ROC?

There are two modes of Strike off:

1. Suo moto by the Registrar of Companies (Section 248(1)):

For reasons that the company has failed to commence its business within one year or had not been doing business or operation for last two financial years.

1. By way of Application by the Company (Section 248(2)):

The Company can file an application voluntarily with the Registrar of Companies for Striking off the name of the Company. The grounds for voluntarily making such an explanation by the company remains the same as is mentioned in the 1st mode, i.e. the company has failed to commence business or had not done any business for last two financial years.

3. Which Companies can apply for voluntary striking off its name

Following companies can apply for Strike of their name from records

• Companies which are not operating or not carrying on any business since last two year from the date of application or,
• Companies which are not operating or not carrying on any business within one year of incorporation and,
• Company having Nil assets & liability.
• Companies whose no Litigation Pending
• Companies having no dispute among the shareholders/directors of the company

4. Which Companies allowed to file STK-2 but still cannot file STK-2 for voluntary strike-off?

Following Companies are restricted on filing applications for strike-off, if at any time during the last three months, it has:

• Changed its name or relocated its registered office to another state.
• Made a disposal for the value of property or rights held by it (subject to conditions).
• Engaged in any other activity other than what is necessary or expedient for making an application under the concerned provision, and so and so forth.
• Filed an application to the Tribunal for the granting of Compromise or Arrangement, and a consensus for the same hasn’t yet been arrived at.
• Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.

5. Which Type of Companies cannot file Strike off Application

The following companies can not apply for Strike of Company by filing STK-2:

• Listed companies.
• Companies delisted on account of non-compliance of listing regulations, listing agreement or any other statutory laws.
• Vanishing companies.
• Companies  which has been listed for inspection or investigation – if such directive is being carried out/pending/completed but the prosecutions concerning such inspection or investigation are pending in the Court of law.
• Companies  which hasn’t yet responded to notices of select provisions.
• Companies which hasn’t furnished the follow-up instructions on any report under section 208 of the Act.
• If the prosecutions related to the above two provisions are pending in a Court of law.
• Companies against which any case for prosecution is pending in a Court of law.
• Companies, whose application for compounding is pending before the competent authority for compounding the offences committed by it or any of its officers in default.
• Companies accepting any public deposits which are outstanding.
• Companies having any charges which remain to be satisfied.
• Companies registered under Section 25 of the Companies Act 1956 or Section 8 of the Companies Act 2013.

6. Is it necessary to file ROC Returns and the ITR of the Company before its winding up?

• Our advice is to file all pending annual returns and balance sheets as non-filing the same is a criminal act with serious consequences.
• Although there is no requirement to attach or provide information on past annual compliance at the time of filing of the STK-2 Form for winding-up,
• however, if the company is wound up, you would lose any opportunity to file the outstanding forms.
• As far as ITR is concerned, like any other tax assessor, you must pay the taxes due and file ITR before proceeding to close.
• However, in the event that a business can not begin or that no bank account has ever been opened, it may be avoided at your own expense and consequence.

7. What is the Process Of Closing a Company under STK-2:-

Step 1: Holding of Board Meeting- A resolution for the purpose of this provision must be passed by a company through a Board of Directors, in which each of its directors would be appointed to make an application to the Registrar of Companies (ROC) for a strike.

Step 2: Closing of liabilities- A company desirous of a strike off must have realized all its assets & closed or paid off all its liabilities.

Step 3: Holding of General Meeting- The company will hold a general meeting of shareholders by passing a resolution to delete the name of the company. This resolution must be approved by 75% of its members as part of the company's paid-up share capital. At this point, the Company will have to file an E-form MGT-14 within a period of thirty days.

Step 4: Furnishing of Applications and documents- Companies on the pursuit of strike-off must file an application to the Registrar of Companies (ROC), accompanied by the following documents:

• Indemnity Bond duly notarized by all directors (in Form STK 3).
• A statement of liabilities comprising of all assets and liabilities of the companies (certified by a Chartered Accountant).
• An affidavit in Form STK 4 (by all directors of the company).
• CTC of Special Resolution  (duly signed by every director of the company).
• A statement concerning any pending litigations with respect to the company.

Step 5: Implications of dissolvement.- As soon as the name of the company is removed from Register, from the date mentioned in the notice under sub-section (5) of section 248 cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been canceled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company

8. How long does it take to Strike off of a company?

It usually takes at least 3 months for a company to be officially dissolved, but the length of time may vary considerably if the process is complex. Generally, however, a company will cease to exist no less than 3 months after the notice of termination is published in the Gazette.

9. What happens after the registrar strikes off the name of the Company?

• There are serious consequences for Directors of companies which are involuntarily struck off, particularly if the company is still trading.
• The company ceases to exist as a legal entity from the date of dissolution
• The assets of the company become vested in the state
• Where the company ceases to exist, banks will be unwilling to provide finance and future contracts with customers/ suppliers may be jeopardised
• Directors of companies that are involuntary struck off may be disqualified from acting as a Director or in the management of any company for a period of up to 12 years on application of the Director of Corporate Enforcement, as was seen in a recent court ruling.
• The company’s Shareholders and Officers are trading without the protection of limited liability and can be held personally liable for the debts of the company.

10. What can be done in case the company director has been disqualified?

The disqualification of the director makes him ineligible even for a second to hold the office of director. Each company must operate with at least two directors at all times. In the event that the disqualification of any director sets the statutory limit of two directors, the ideal way is to call an EGM and appoint a new director instead of a disqualified director. The Companies Act provides a six-month period for the company to fill the vacancy created by the directorate. Once the board of directors has been regularized, the company can close itself in the usual way.

11. Can a struck off company can do business or activity?

When a company is struck off, the name would be removed from the company register and it can not do any business, trade, sell its assets or make payments or even it can not get involved in any other business activities. Even The name of the company will also be not the property of the Promoters.

12. How do i revive or restore a stroked off Company?

Step by Step procedure for Revival of Company:

• Draft an appeal under section 252, in Form No. NCLT 9, with such modifications as may be necessary.
• Serve a copy of the appeal, to the Concerned ROC and Income Tax department.
• Submit the original appeal to NCLT.
• On the date of the hearing notified by NCLT appear before NCLT and present the case producing sufficient grounds for revival of Company and repudiate the claim of ROC that Company is not carrying on the business or ceased to be in business for the past two years.
• After hearing both the parties NCLT shall pass the order restoring the name of a company in the register of companies.
• File the copy of order with Registrar of Companies within a period of 30 days from the date of the order.
• File pending financial statements and annual returns with the Registrar within such time as may be directed by the Tribunal.
• The Registrar of Companies will change the status of Company from ‘Strike- off’ to ‘Active’.

13. What will happen, if there is pending prosecution against the company and its directors?

If the pending prosecutions are only for non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Act, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application by the competent authority

14. What I can do if another director/shareholders are not cooperating or not found?

A company may be closed by a majority decision of 75% of the company's shareholding. If the dissident has a stake of more than 25%, the company cannot be closed by filing the STK-2 method, which is also referred to as the voluntary method of winding up the company. In order to close a company with dissident members, an applic