What is Company Strike Off?
Company strike off is the process of dissolving a company’s legal existence by removing its name from the Register of Companies maintained by the RoC.
Once strike off is completed:
- The company loses its legal identity.
- It cannot carry on business or sign contracts.
- Any remaining assets vest with the Central Government.
The strike off process can be:
- Voluntary Strike Off: Initiated by the company itself when it is not carrying out business activities.
- Compulsory Strike Off: Initiated by the RoC when a company fails to comply with statutory requirements or remains inactive for a specified period.
This mechanism ensures that dormant or defunct companies are not maintained unnecessarily on government records.
Legal Provisions Governing Company Strike Off
The process of company strike off is governed by the Companies Act, 2013 under Section 248 and Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.
Key provisions include:
- The RoC has the power to remove the name of a company that is inactive for more than 2 years.
- A company can apply voluntarily if it has not commenced business within one year of incorporation or is not carrying on any business activity.
- Strike off does not absolve directors from liability for offences committed prior to dissolution.
Reasons for Company Strike Off
Businesses may opt for strike off due to several reasons:
- Dormant Status - The company has not been active for a long time.
- Business Closure - The promoters no longer wish to operate.
- Unprofitable Business Model - Business operations are no longer financially viable.
- No Business Commencement - Company was incorporated but never started its operations.
- Compliance Burden - To avoid mandatory filings and compliance costs when there is no business activity.
By opting for company strike off, business owners save themselves from continuous compliance obligations such as filing annual returns, maintaining statutory records, or conducting board meetings.
Eligibility Criteria for Company Strike Off
A company can apply for strike off only if it satisfies certain conditions.
Eligible Companies:
- Companies that have not started business since incorporation.
- Companies that are not carrying out any operations for the last two financial years.
- Companies that have not made an application for obtaining “Dormant Status.”
Non-Eligible Companies:
Certain companies cannot apply for company strike off, such as:
- Listed companies.
- Section 8 (non-profit) companies.
- Companies against which inspection, investigation, or prosecution is pending.
- Companies that have pending charges (secured loans).
Process of Voluntary Company Strike Off
When the promoters themselves want to close the company, they can file an application with the RoC. Here is the step-by-step process in detail:-
Convene Board Meeting
- Call a board meeting by giving notice to all directors.
- Pass a Board Resolution approving the proposal to strike off the company.
- Authorize one director to sign and submit the application to the RoC.
- Draft the Notice of General Meeting for shareholder approval.
Settle Liabilities
- The company must clear all outstanding dues (loans, statutory payments, employee salaries, taxes).
- Close all bank accounts in the company’s name.
- Prepare a Statement of Accounts (not older than 15 days before filing) certified by a Chartered Accountant.
Obtain Consent of Shareholders
Call a general meeting and pass a special resolution with approval of 75% shareholders (in terms of paid-up share capital).
File Form STK-2
File Form STK-2 with the MCA, along with the prescribed fee.
Attach the following documents:
- Indemnity bond (Form STK-3).
- Affidavit by directors (Form STK-4).
- Statement of accounts (STK-8).
- Copy of board resolution and shareholder resolution.
- Other Necessary affidavits and declarations from directors
Scrutiny by RoC
- RoC examines the application and documents.
- If documents are in order, RoC proceeds further.
- If discrepancies are found, RoC issues a notice of defect for rectification.
Public Notice
- RoC issues a notice of proposed strike off in:
- Official Gazette
- MCA website
- Gives 30 days time for objections from stakeholders (creditors, tax authorities, public).
Company Strike Off Order
- If no objections are received within the notice period, RoC approves the application.
- RoC strikes off the company’s name from its register.
- A final notice is published in the Official Gazette, confirming dissolution.
- From this date, the company ceases to exist legally.
Process for Compulsory Company Strike Off
Under Section 248(1) of the Companies Act, 2013, the RoC has the power to strike off the name of a company from its register if it has reasonable cause to believe that the company is not carrying on any business.
Grounds for Compulsory Strike Off
A company may face compulsory strike off if:
- It has failed to commence business within one year of incorporation.
- It has not carried on any business or operation for the last two consecutive financial years.
- It has not applied for the status of a “Dormant Company.”
- It is not maintaining its statutory records or registered office.
- It has defaulted in filing Annual Returns (Form MGT-7) and Financial Statements (Form AOC-4) with the RoC.
Here is the detailed step-by-step process:
Identification by RoC
- RoC monitors companies that default in filing statutory returns or remain inactive.
- Non-filing for two consecutive years is a major trigger.
Issuance of Notice (Form STK-1)
- RoC issues a notice to the company and all its directors.
- The notice specifies the grounds for strike off.
- It gives the company an opportunity to show cause why its name should not be struck off.
Opportunity to Reply
- The company/directors can reply to RoC within 30 days, providing reasons or proof of operations.
- If the company is active, it must file all pending returns and request continuation.
Publication of Public Notice (Form STK-5)
- If the company does not respond satisfactorily, RoC publishes a notice of proposed strike off in:
- Official Gazette
- MCA website
- Leading English and vernacular newspapers
- This allows stakeholders, creditors, or the public to raise objections.
Intimation to Regulatory Authorities
RoC sends intimation to relevant regulatory authorities (like Income Tax, GST, PF, ESI departments) seeking objections, if any.
Final Order of Strike Off (Form STK-7)
- If no objections are received within the notice period (generally 30 days), RoC strikes off the company’s name from its register.
- A notice of dissolution is published in the Official Gazette.
Effect of Strike Off
- The company stands dissolved and ceases to exist as a legal entity.
- Assets, if any, vest with the Government.
- Directors remain personally liable for offenses or liabilities incurred prior to strike off.
Timeline: Usually 6-12 months, depending on objections and pending filings.
Key Difference: In compulsory strike off, RoC initiates the process, whereas in voluntary strike off, the company applies through Form STK-2.
Consequences of Company Strike Off
While strike off relieves promoters from compliance, it also carries certain consequences:
- Loss of Legal Identity - The company ceases to exist as a legal person.
- Asset Disposal - Any remaining assets of the company become the property of the Government.
- Director Liabilities - Directors remain personally liable for any fraud, liability, or non-compliance committed before strike off.
- Contracts and Agreements End - The company cannot enter into new contracts or enforce existing ones.
- Revival Possible - The company can be restored through the National Company Law Tribunal (NCLT) within 20 years if required.
Documents Required for Company Strike Off
To apply for company strike off, the following documents are generally needed:
Certified copy of Board and Shareholders’ resolution.
Indemnity bond in Form STK-3.
Affidavit in Form STK-4 by directors.
Statement of accounts not older than 30 days (STK-8)
PAN card and Aadhaar card of directors.
Consent letters from creditors (if any).
Difference Between Winding Up and Company Strike Off
Many people confuse winding up with strike off, but they are distinct processes
| Basis of Difference | Company Strike Off | Winding Up |
|---|---|---|
| Meaning | Removal of the company’s name from the Register of Companies, making it legally non-existent. | Formal liquidation process where assets are sold, liabilities settled, and the company is dissolved. |
| Governing Law | Section 248 of Companies Act, 2013 & Companies (Removal of Name of Companies) Rules, 2016. | Sections 270-365 of Companies Act, 2013 and Insolvency & Bankruptcy Code (IBC), 2016. |
| Authority Involved | Registrar of Companies (RoC). | National Company Law Tribunal (NCLT) along with liquidator. |
| Applicability | For dormant/inactive companies with no business operations and no liabilities. | For companies with debts, assets, disputes, or insolvency issues. |
| Initiated By | Company (voluntary) or RoC (compulsory). | Creditors, Tribunal, or company itself. |
| Procedure | Filing of Form STK-2 with MCA along with resolutions, indemnity bond, affidavit, and statement of accounts. | Filing petition with NCLT, appointment of liquidator, sale of assets, settlement of creditors, final dissolution. |
| Timeframe | Usually 3-4 months. | Usually 1-2 years (sometimes longer). |
| Cost | Low - Government fees (₹10,000) + professional charges. | High - Tribunal fees, liquidator fees, professional charges. |
| Complexity | Simple, less documentation, less supervision. | Complex, requires legal proceedings, multiple stakeholders. |
| Effect on Assets | Remaining assets (if any) vest with the Government. | Assets are liquidated and proceeds distributed among creditors and shareholders. |
| Liabilities | Directors remain personally liable for past liabilities, fraud, or pending dues. | Liabilities are settled during liquidation; balance, if any, is written off. |
| Public Notice | Issued by RoC in the Official Gazette. | Issued by NCLT/Liquidator as part of winding up proceedings. |
| Revival Possibility | Company can be restored within 20 years by NCLT on application. | Revival is rare; possible only in limited circumstances through Tribunal. |
| Suitability | Best for small businesses, startups, or companies that never commenced operations. | Best for companies with significant debts, disputes, or assets to liquidate. |
Restoration of Struck-Off Company
Even after company strike off, a company can be revived under certain conditions:
- By NCLT order - An application can be made by company members, creditors, or workmen within 20 years.
- If RoC struck off wrongly or without proper notice.
- If the company had assets or ongoing business at the time of strike off.
FAQs on Company Strike Off
What is the difference between voluntary and compulsory company strike off?
Voluntary strike off is initiated by the company, while compulsory strike off is initiated by the RoC when a company fails to comply with legal requirements.
Can liabilities remain after company strike off?
Yes, directors are personally liable for any liabilities or fraudulent activities committed before strike off.
Is strike off possible if the company has bank loans?
No, the company must first clear loans or obtain NOC from creditors before applying.
Can a struck-off company be revived?
Yes, revival is possible through an application to NCLT within 20 years.
How long does it take to complete company strike off?
On average, the process takes around 3-6 months.
Can a company be struck off if there are pending litigations?
No, a company facing ongoing legal proceedings cannot apply for strike off until all cases are resolved.
Is it necessary to close the bank account before company strike off?
Yes, the company must close its bank accounts and provide proof, since an active account indicates business activity.
Can creditors object to the company strike off?
Yes, creditors, stakeholders, or government authorities can file objections during the public notice period if their dues remain unpaid.
Does company strike off affect directors’ DIN status?
No, directors’ DIN (Director Identification Number) remains active. However, if they are disqualified under Section 164 due to non-compliances, restrictions may apply.
What happens if a company continues business after being struck off?
If a struck-off company continues operations, its directors and officers are personally liable, and the company can face penalties upon revival.