Company Strike Off: Understanding Voluntary Closure
Company strike off is the process of removing a company's name from the Register of Companies maintained by the Registrar of Companies (ROC). This is the simplest and most cost-effective method for closing a defunct company that has no assets, no liabilities, and no operational activity. Under Section 248 of the Companies Act 2013, companies can apply for voluntary strike off, or the ROC can initiate suo moto strike off for inactive companies.
This comprehensive guide covers everything you need to know about company strike off in India, including eligibility criteria, procedural requirements, documentation, timeline, costs, and post-strike off implications. Whether you're looking to close a dormant startup or wind down a business that never took off, understanding the strike off process is essential for a clean and legal exit.
When to Apply for Strike Off
Strike off is appropriate only for companies that are truly defunct. Consider applying for strike off when:
✓ Appropriate for Strike Off
- • Company has been inactive for over 1 year
- • No assets or liabilities remaining
- • Bank accounts closed or nil balance
- • No pending litigations or disputes
- • All statutory filings are up to date
- • No creditors or employees to settle
- • Business never commenced operations
- • Shareholders agree to closure
✗ Not Appropriate - Consider Winding Up
- • Company has significant assets
- • Outstanding debts or liabilities
- • Pending court cases or litigations
- • Active business operations
- • Creditors need to be paid
- • Employees need settlement
- • Complex shareholder disputes
- • Tax disputes pending
Important: Strike off is an administrative process, not a substitute for proper winding up. If your company has assets or liabilities, you must go through the formal winding up process under the Companies Act or IBC. Improper strike off of companies with liabilities can lead to restoration and personal liability of directors.
Eligibility Criteria for Strike Off
To be eligible for voluntary strike off under Section 248, a company must meet all of the following conditions:
1. Inactivity Period
The company must have been inactive for at least 1 year immediately preceding the application. This means no business operations, no transactions (except those incidental to closure), and no active bank account operations.
2. No Assets and Liabilities
The company must have nil assets and nil liabilities. All assets must have been properly disposed of, and all dues to creditors, employees, and government must have been settled.
3. Compliance Status
All pending statutory filings must be completed before applying. This includes annual returns (MGT-7), financial statements (AOC-4), income tax returns, and GST returns if applicable.
4. No Legal Proceedings
There should be no pending litigations, disputes, or legal proceedings against the company. This includes tax disputes, creditor claims, or regulatory actions.
Types of Strike Off
1. Voluntary Strike Off (Section 248(2))
This is initiated by the company itself when it meets the eligibility criteria. The process involves:
- • Board resolution approving strike off
- • Special resolution by shareholders (or unanimous written consent)
- • Filing Form STK-2 with required attachments
- • ROC review and public notice
- • Strike off order if no objections received
2. Suo Moto Strike Off by ROC (Section 248(1))
The Registrar can remove a company from the register on its own if:
- • Company has not commenced business within 1 year of incorporation
- • Company is not carrying on business for 2 preceding financial years
- • Subscribers have not paid subscription money
- • Physical verification shows company is not operating
3. Fast Track Exit (FTE) - Now Integrated
The earlier Fast Track Exit scheme has been integrated into the regular strike off process. Current Form STK-2 process itself is relatively fast (3-6 months).
Detailed Strike Off Process
Internal Decision Making
Convene a Board Meeting to approve strike off and authorize a director to file application. Hold General Meeting to pass special resolution (75% majority) or obtain consent from 100% members if voting by circulation.
Financial Settlement
Close all bank accounts and obtain closure certificates. Settle all dues with creditors, employees, and vendors. Dispose of all assets (if any). Ensure nil balance in all accounts.
File Pending Returns
File all pending annual returns (MGT-7) and financial statements (AOC-4). File pending income tax returns. Clear any compliance defaults showing on MCA portal.
Obtain NOCs
Obtain No Objection Certificates from secured creditors, unsecured creditors, employees/labor authorities, and regulatory bodies (GST, Income Tax, PF, ESI, etc.).
Prepare Legal Documents
Draft indemnity bonds (Form STK-3) on stamp paper, notarized. Prepare affidavits (Form STK-4) from all directors. Prepare statement of accounts certified by Chartered Accountant.
File Form STK-2
File application on MCA portal with all attachments. Pay government fee of ₹10,000. Digital signature of director required. Professional certification recommended.
Public Notice Period
ROC issues public notice inviting objections for 30 days. Notice published on MCA website and Official Gazette. Stakeholders can raise objections with supporting documents.
ROC Review and Order
ROC reviews objections if any. Physical verification may be conducted. If satisfied, ROC issues strike off order. Company name removed from register.
Gazette Notification
Strike off published in Official Gazette. Company ceases to exist as legal entity from date of Gazette notification. Keep records for future reference.
Document Preparation Guide
Form STK-3: Indemnity Bond
Must be executed by all directors on non-judicial stamp paper (value varies by state, typically ₹100-500).
- • On non-judicial stamp paper
- • Notarized by public notary
- • Signed by all directors
- • Company name and CIN
- • Indemnity against future claims
Form STK-4: Affidavit
Individual affidavits from all directors affirming the company's defunct status and compliance.
- • On non-judicial stamp paper
- • Notarized
- • One per director
- • Declaration of no assets/liabilities
- • Declaration of no pending litigations
Statement of Accounts Requirements
Must be prepared after the last filing date and certified by a Chartered Accountant. Should show:
- • Nil assets and nil liabilities
- • Closing balances as of date not more than 30 days before application
- • No transactions since last filing
- • CA certification with UDIN
Handling Objections to Strike Off
Objections can be raised by stakeholders during the 30-day public notice period. Common objection sources include:
Creditor Objections
If creditors claim unpaid dues, the ROC will typically reject the application. The company must either settle the dues or withdraw the application and consider winding up.
Employee Claims
Unpaid salary, PF, or gratuity claims can lead to objections. Clear all employee dues and obtain NOCs before applying.
Tax Authority Objections
Pending tax demands or assessments can trigger objections from Income Tax or GST departments. File all returns and obtain tax clearance where possible.
Shareholder Disputes
If shareholders object claiming oppression or mismanagement, the ROC may reject the application or direct parties to NCLT.
Post Strike Off: Important Considerations
Continued Director Liability
Strike off does not absolve directors of:
- • Personal guarantees given for company debts
- • Fraudulent conduct or misrepresentation discovered later
- • Tax liabilities (TDS, GST in certain cases)
- • Environmental liabilities
- • Criminal liabilities for offenses committed
Revival of Struck Off Company
Under Section 252, any aggrieved person can apply to NCLT for revival within 20 years. Common grounds include:
- • Assets not properly distributed before strike off
- • Pending litigation discovered after strike off
- • Fraud in obtaining strike off
- • Company was actively trading when struck off
Key Takeaways
Strike Off is Ideal For
- ✓ Defunct companies with no operations
- ✓ Companies that never started business
- ✓ Dormant companies with nil assets/liabilities
- ✓ Cost-effective closure (₹50,000-2,00,000)
Strike Off is NOT For
- ✗ Companies with assets or liabilities
- ✗ Companies with pending litigations
- ✗ Active businesses wanting to close
- ✗ Cases with creditor disputes
Timeline: 3-6 months | Cost: ₹50,000-2,00,000 | Revival Window: 20 years