Strike Off

What it means

Strike off is the removal of a company’s name from the Register of Companies maintained by the Registrar of Companies (ROC). Once the name is struck off and published in the Official Gazette, the company is dissolved and ceases to exist. It is a simpler and cheaper way to close a company that has no business, assets or liabilities, compared with formal winding up.

How it works

There are two routes under the Companies Act, 2013.

• Voluntary strike off (by the company): the company files form STK-2 with a fee of ₹10,000. It must have no business for the last two financial years (or never started business within one year of incorporation), and must clear all liabilities first. The application needs a special resolution or consent of 75% of shareholders (by paid-up capital), indemnity bonds and affidavits from directors (STK-3 and STK-4), a statement of accounts certified by a CA not older than 30 days (STK-8), and any overdue financial statements and annual returns up to the year it stopped business.

• Strike off by the Registrar: the ROC can issue a notice in STK-1 to a company that has not started business or has stopped operating, often identified by years of non-filing. If no satisfactory reply is received, the name is struck off.

• After a public notice (STK-6) and a period for objections, the Registrar publishes the strike off notice (STK-7) in the Gazette.

Example

A private company was incorporated in 2022 for a project that never took off. It has no bank balance, no loans and no business. Compare two choices:

1. Keep it alive and stay non-compliant: annual forms AOC-4 and MGT-7 (or MGT-7A) each attract an additional fee of ₹100 per day of delay. One year’s delay on both is roughly 365 x ₹100 x 2 = ₹73,000, and this keeps growing every year.

2. Close it: file pending annual returns, close the bank account, then file STK-2 with a ₹10,000 fee plus professional charges.

Closing early clearly costs far less than letting the penalties pile up.

Key points to remember

• Directors of a company that does not file financial statements or annual returns for three continuous years can be disqualified for five years, which affects their other companies too.

• Strike off does not end directors’ liability. Any liability of the company continues and can be enforced as if it had not been dissolved.

• Close the bank account and surrender GST and other registrations before filing STK-2.

• A struck-off company can be restored through the NCLT, but the process is costly. Shareholders, creditors or workmen can apply within 20 years.

• A company under investigation, with pending prosecution or with a pending scheme cannot use the voluntary route.