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There are multiple ways a company can cease to exist, one of which is striking off its name from the register of companies. A company that is inactive and wants to remove its name from the registrar’s records may opt for this method.

Before diving into this topic further, it is essential to understand two key terms: striking off and liquidation. When a company is in the process of being struck off, it is referred to as striking off. On the other hand, liquidation or dissolution is the final stage where the process is completed, and the company is officially liquidated after its name is removed from the records.

This process can be initiated either by the Registrar of Companies (ROC) or by the company itself.

Grounds for Striking Off by ROC

The Registrar of Companies can initiate the process of striking off a company’s name on any of the following grounds:

• The company has failed to commence business within one year of its incorporation.
• The company has not carried out any business operations for the last two financial years and has not applied for dormant company status.
• A physical verification by the ROC confirms that the company is not operating.
• The company’s subscribers have not paid the subscription money, and the company has not filed a declaration regarding the commencement of business within 180 days of incorporation.

If the ROC identifies any of these conditions, he sends a notice to the company and its directors, giving them 30 days to respond. If the company provides satisfactory reasons explaining why its name should not be struck off, the ROC may halt the process. Otherwise, the process continues. To inform the public, the ROC publishes a notice on its website and in newspapers and notifies relevant regulatory authorities to raise objections if necessary.

Before striking off a company’s name, the registrar ensures that all outstanding debts of the company are settled. Once all objections are reviewed and addressed, the company’s name is removed from the register.

Voluntary Company Closure Process

Companies that are not actively functioning can opt for striking off to avoid unnecessary compliance obligations. This method is a more efficient way to dissolve a company.

A company can voluntarily apply for closure on the same grounds as those on which the ROC has the power to remove its name. The procedure for voluntary closure is as follows:

• The Board of Directors holds a meeting to:
  1. Appoint an authorized director to oversee the filing process.
  2. Schedule an Extraordinary General Meeting (EGM).
• Before proceeding, all liabilities must be cleared. Directors are required to sign an indemnity bond and affidavit in Forms STK-3 and STK-4.
• A statement of accounts must be prepared and certified by a practicing Chartered Accountant (not older than 30 days from the application date).
• A special resolution is passed during the EGM to approve the closure. If the company is regulated by an authority such as RBI, SEBI, or IRDAI, their approval is mandatory.
• Form STK-2 is then filed with a closure fee of ₹10,000, along with the following attachments:
  • No Objection Certificate (NOC) from the regulatory authority.
  • Indemnity bond and affidavit signed by directors.
  • Statement of accounts in Form STK-8.
  • Copy of the resolution passed in the EGM.

This form is certified by a Chartered Accountant, Company Secretary, or Cost Accountant in practice.

Upon submission, the ROC invites objections from the public and regulatory authorities. Once all dues are settled and objections addressed, the company is officially liquidated.

Restoration of a Struck-Off Company

A company may receive a notice from the ROC and fail to respond, leading to its name being struck off, even if it was actively conducting business. In such cases, the ROC or the company itself can appeal to the National Company Law Tribunal (NCLT) for restoration within three years from the date of the final order. If the ROC finds that incorrect information was provided, he can also appeal for restoration.

Forms Involved in the Striking Off Process

• Form STK-1: Notice by the ROC to inform a company of his intention to strike off its name.
• Form STK-2: Application by a company for voluntary striking off.
• Form STK-3: Indemnity Bond by directors.
• Form STK-4: Affidavit by directors.
• Form STK-5, 5A, 6: Public notices.
• Form STK-7: Final notice of striking off by the ROC.
• Form STK-8: Company’s statement of accounts.

Companies sometimes close down to evade obligations to government departments, members, employees, creditors, and other stakeholders. If a company’s name is struck off fraudulently, the affected party has the right to appeal to the NCLT within 20 years of removal.

However, certain companies cannot opt for this process, such as:

• Section 8 companies, listed companies, or vanishing companies.
• Companies with pending charges for satisfaction.
• Companies with pending applications for compounding.
• Companies facing pending prosecution.
• Delisted companies removed due to non-compliance with laws.
• Companies that, in the last three months, have:
  1. Changed their name or registered office location.
  2. Entered into transactions that may delay the closure process.
  3. Undertaken any compromise or arrangement.
  4. Are currently under winding-up proceedings.

LLP Closure Process

The process for closing a Limited Liability Partnership (LLP) is similar to that of a company’s striking-off procedure, with fewer documentation requirements. LLPs can be closed by filing LLP Form-24. Just like companies, an LLP can be closed either by the ROC or by applying for voluntary closure.

If the ROC initiates the process, it follows the same procedure as for companies. When an LLP applies for voluntary closure, the process is as follows:

1. The designated partners meet and authorize a partner to file LLP Form-24.
2. Before filing, all pending statutory forms (Form-8 and Form-11) must be submitted. If the LLP falls under any regulatory authority, prior approval must be obtained.
3. LLP Form-24 is then filed with required attachments.
4. The ROC publishes a public notice on the MCA website for one month to invite objections.
5. If no valid objections are received and the ROC deems it appropriate, the LLP’s debts are settled.
6. The registrar publishes a notice of dissolution in the official gazette, and the LLP stands dissolved.

Restoration of LLPs

Unlike companies, LLPs do not have the option of appealing to the NCLT for restoration. If an LLP wishes to contest its name being struck off, the only available remedy is to file a writ petition in the High Court.

Professional Assistance for Company and LLP Closure

Closing a company in India is a straightforward process, but it is advisable to seek assistance from a company strike-off consultant. Naveen Pandey & Associates provides expert services for private limited company closure, ensuring a hassle-free process with minimal fees.

Naveen Pandey & Associates also specializes in LLP closures in India, offering cost-effective solutions. If you need assistance with striking off your company or LLP, you can contact [email protected] for professional guidance.