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Strike Off of Private Limited Company

Under the Companies Act, 2013 of India, strike off refers to the process of removing a company from the Register of Companies (RoC) maintained by the Ministry of Corporate Affairs (MCA). This action effectively dissolves the company and removes its legal existence. The strike-off process is used when a company has ceased operations, has failed to comply with statutory requirements, or is no longer needed.

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    Grounds for Striking Off a Private Company

    A company can be struck off the register under various circumstances:

    1. Non-commencement of Business: If a company has been incorporated but has never started its business, the RoC may strike it off after a certain period.
    2. Inactivity: If a company has not carried on any business for two or more years, it may be struck off for being inactive.
    3. Failure to File Returns: Companies that fail to file annual financial statements or returns for an extended period may face strike-off by the RoC.
    4. Voluntary Strike-Off: A company that no longer needs to continue its operations and has no assets or liabilities can voluntarily apply for strike-off.
    5. Failure to Maintain a Registered Office: A company may be struck off if it fails to maintain a registered office or update its address with the RoC.

    Process for Striking Off a Private Company

    Voluntary Strike-Off:

    If a private company wishes to be struck off, it can apply voluntarily, provided it meets the criteria of inactivity, and has no outstanding liabilities or assets.

    1. Board Resolution: The company’s board of directors must pass a special resolution agreeing to the strike-off. The resolution should state that the company is no longer operating, has no liabilities, and is no longer required for business purposes.
    2. Director’s Declaration: The directors must provide a declaration confirming the company has no outstanding liabilities, has no ongoing legal matters, and has cleared all statutory dues, including taxes.
    3. File Form STK-2: To initiate the strike-off process, the company must file an application in Form STK-2 with the MCA. Along with the application, the following documents are required:
      • A certified special resolution (or a board resolution for small companies or one-person companies).
      • A statement of accounts showing that the company has no liabilities.
      • A declaration by directors that the company is free from liabilities and legal proceedings.
      • A no-objection certificate (NOC) from creditors, if required.
      • A copy of the last filed Income Tax return (if applicable).
    4. MCA Notice: After reviewing the application, the MCA will publish a notice on its website and in the Official Gazette to inform the public about the company’s intent to strike-off. Creditors or other stakeholders are given a 30-day window to object.
    5. Objection Period: If no objections are raised within 30 days, the RoC will proceed with striking off the company from the register.
    6. Final Order: Once the objection period has passed, and if no objections are received, the RoC will issue a strike-off order, officially removing the company from the register.
    7. Public Notice: A final public notice will be issued by the RoC, and the company will be officially dissolved.

    Strike-Off by RoC for Non-Compliance:

    In cases where a company fails to file its annual returns or financial statements for a prolonged period, the RoC can initiate the strike-off process. The procedure is as follows:

    1. Notice from RoC: The RoC will send a notice to the company and its directors, indicating that it has failed to comply with mandatory filing requirements and is at risk of being struck off.
    2. Rectification Period: The company will be given an opportunity to rectify its defaults by filing overdue documents, such as annual returns and financial statements, within a specified period.
    3. Final Action: If the company fails to respond or comply with the notice, the RoC may proceed to strike the company off the register.

    Conclusion

    Striking off a private company under the Companies Act, 2013 provides an easier alternative to formal liquidation when the company is no longer required for business. However, it is essential that companies comply with all statutory requirements, including filing returns and clearing dues, before initiating the strike-off process. If the RoC initiates strike-off proceedings for non-compliance, the company must take immediate action to avoid dissolution.