Closure of Company

Overview

There are two modes of strike off Company, it can be By ROC itself on suo moto under Section 248(1) of the Act or By way of filing application by the Company under Section 248(2).

• Registrar may suo moto remove the name of company as per sec 248(1) in the following cases -
  (a) a company has failed to commence its business within one year of its Incorporation.
  (b) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.
• Whereas company can apply to registrar for closure/ strike off company in section 248(2), if no liability exist and 75% of members agree (in terms of paid up share capital).

The Process of closing down of company by ROC on it’s own motion u/s 248(1) of Companies act.

• Intimation to or by Registrar - The Registrar of Company may send notice to the company in form STK-1 failed to commence business within 1 year of its incorporation or which is not carrying on any business for period of 2 immediate financial years has not opted for status of Dormant Company.
  The Registrar shall intimate to the company and all the directors by a notice in form STK-1, with intention to remove the name of the company from the register of companies and requesting them to provide their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.
  Normally, ROC strike of the company based on the non-filing of Financial Statements and Annual Return.
• Representation by Directors / Company - Directors of the company are required to make their representation along with relevant documents, on the notice of Registrar within a period of 30 days from the date of notice. In case ROC is not satisfied with the reply made by the company and its directors then ROC may proceed further for the strike off the name of company from it's record.
  
  POINTS TO BE CONSIDERED BEFORE REPLYING TO NOTICE OF STRIKE OFF
  
  1. Whether the company has an existing business operation and wants to continue the same?
  In this case , the company has to file financial statement , annual return, Director’s report in the prescribed forms for all the years in default with additional fees till the financial year company carry its business operations. Once the pending filings get completed, then ROC will not strike of company.
  2.Whether the company to be dormant (i.e. Company has not started the business operation yet but having future business plans and will be continue to do operations later on)?
  In this case, the company has to file “NIL” financial statement , annual return, Director’s report in the prescribed forms for all the years in default with additional fees till the financial year company carry its business operations. Once the pending filings get completed, then ROC will not strike of company.
  3. Whether the Company wants to discontinue business and shut down it?
  In this case, the company has to file application in STK-2 for voluntarily closure of company and before making application in STK-2, The company has to file financial statement, annual return, Director’s report in the prescribed forms for all the years in default with additional fees till the financial year company carry its business operations.
  Note:-
  It is required for annual filing before making an application for strike off. But there are many cases where ROC approves such form without annual filing if ROC satisfied with facts that no transactions are there and no bank account is under operation till date, then in such case company can make application for strike off even without annual filing
• Publication of Notice - The notice for removal of name of Company under sub-section (1) of section 248 shall be published in form STK-5 on official website of MCA, official gazette, English and vernacular newspaper.
• Intimation to regulatory authorities - The ROC shall give Intimation to concerned authorities who are regulating the Company i.e. Income tax, Sebi, Excise, etc. about the proposed action of removal or striking off the names of such companies and obtain any objection, if any by them.
• Strike off - The ROC may at the expiry of the time mentioned in the notice, unless cause to the contrary is mentioned by the Company, The last step is ROC shall strike off the name of company and dissolve the it by sending notice in the official gazette in form STK-7.

The Process of closing down of company on application made by Company voluntarily u/s 248(2) of Companies act.

• Holding a Board Meeting: The Board meeting is required to be held to pass Board Resolution for strike off the company and approve the notice of EGM and authorizing any Director for filing of application with the ROC.
• Holding a General meeting: The Company will hold the general meeting of shareholders for passing a special resolution to obtain Shareholder's approval of 75% of members as per paid up share capital of the Company.
• Approval of concern authorities: If a company is regulated by any other authority, approval of such concern authorities will be also be required.
• Filing of Form STK-2: Application will be filed by Company / Directors in Form STK- 2 to ROC along with following documents:
  (i) Indemnity Bond duly notarized by every director in Form STK 3 ;
  (ii) An affidavit in Form STK 4 by every director of the company individually;
  (iii) a statement of accounts containing assets and liabilities of the company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
  (iv) a copy of the special resolution duly certified by each of the directors of the company or consent of seventy five per cent of the members of the company in terms of paid up share capital as on the date of application;
  (v) a statement regarding pending litigations, if any, involving the company. (vi) Board Resolution authorising filing of this application.
  (vii) Copy of order of concerned regulatory authority, approving the filing of this application (if any)
  (viii) Optional attachments(s), if any
• Publication of Notice - The notice for removal of name of Company under sub-section (2) of section 248 shall be published in form STK-6 on official website of MCA, official gazette, English and vernacular newspaper.
• Intimation to regulatory authorities - The ROC shall give Intimation to concerned authorities who are regulating the Company i.e. Income tax, Sebi, Excise, etc. about the proposed action of removal or striking off the names of such companies and obtain any objection, if any by them.
• Strike off - The last step is ROC shall strike off the name of company and dissolve the it by sending notice in the official gazette in form STK-7.

Companies which cannot voluntarily remove its name from Register of Companies u/s 248(2)

Following companies cannot remove its name from the register of companies:

• Listed companies.
• Vanishing companies.
• Companies delisted due to non-compliance of listing regulation or other
statutory laws.
• Company having charges which are pending for satisfaction.
• Companies register u/s 8 of companies act, 2013 or u/s 25 of companies act, 1956.
• Companies which have accepted public deposits which are either outstanding or there are default in its repayment.
• Companies against which any prosecution for an offence is pending in any court.
• Companies where inspection or investigation is ordered and being carried out or actions still pending or were completed but prosecution is still pending in the court.
• Companies whose application for compounding of offences is pending before competent authority.
• Companies where notices under section 234 of the Companies Act, 1956 or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court.

Government Fees

Application by company to ROC for removal of its name from Register of Companies is made in STK-2 form and normal fees for filing this form is Rs. 10,000.

Consequences for not replying on the Strike Off Notice

In case, the Directors or Company fails to filed the reply for strike off notice and ROC has strike off the company then ROC can take below mentioned action:
Disqualification of Directors: The Directors will be disqualified for the period of five years.
De-activation of DIN: The DIN would be deactivated for all Directors due to disqualification and once it becomes deactivated then it will lead to non filing in other companies also in which same person is Director and the Director holds deactivated DIN cannot register a new company or be a director, in any other company.

Various Forms for Strike off

Effect of Company Struck Off

if a company stands dissolved under section 248, it shall from the date provided in the notice of dissolution ceased to operate as a company and the Certificate of Incorporation issued deemed to have been cancelled 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. The liability, if any, of every director, manager or other officers of the Company shall continue and may be enforced as if the company had not been dissolved.

In addition, the company which has been struck off can get a chance to restore its name in the register within 20 years of being struck off with the permission of Tribunal.