Every company is established with the intention of running its operations indefinitely, but not all businesses are successful in the long run. As we are previously aware, there is a certain method for incorporating a company, running a firm, and closing a corporation. 

There are now two ways to close a business.

1. Strike off Company 

2. Winding up of Company

Meaning of Strike off

Strike Off involves deleting the Company's name from the Registrar of Companies' Register of Companies. It is more like a company closure, as the company will no longer exist after being struck off & will be unable to execute any operations.

Companies Eligible for Strike off

• Private Company
• One-Person Company
• Public Company
• Section 8 Company

Application for Strike off of a Company

A company's name being struck off is an alternate option for terminating the business. For certain situations, the Registrar of Companies ('ROC') may issue a notice to strike the company name from the Register of Companies. The corporation might also request that the ROC remove its name from the Register of Companies.

Sections 248 to Section 252 of the Companies Act govern the procedure for the ROC or the business to strike out company names. A strike off of a private company name implies that a defunct corporation is closed down faster. It is the simplest method of dissolving a business.

Voluntary Application to Strike Off a Private Company

A private company can strike off its name from the Register of Companies by providing a special resolution or acquiring the permission of 75% of its members (in terms of paid-up capital). 

The private company may request the ROC for the removal of its name once it has discharged all of its liabilities on any or all of the following basis:

• Within one year after establishment, the company collapses or does not begin operations.
• The firm has been inactive or has not carried out any activity for the two prior fiscal years & hasn't filed an application for dormant company status under Section 455 of the Act within that time period.

The ROC shall make a public notification in the manner provided by the Act upon receipt of the private company's application for the strike off of the business name.

Procedure

The method is straightforward and is carried out in steps

i) Delegate authority to any officer or director of the firm to call a Board Meeting.

ii) Sending a board meeting notice at least seven (7) days in advance, along with a comprehensive agenda.

iii) Call a Board meeting and vote on a Board resolution.

iv) Notice of Annual General Meeting  (AGM)/ Extra-Ordinary General Meeting, if applicable

v) Call a general meeting and vote on a special resolution.

vi) Submission of MGT-14 and any relevant attachments.

vii) Submission of STK-2 together with all relevant documentation.

viii) If the registrar of companies determines that all attachments are in order, all requirements are met, and it is reasonable and equitable to strike off the company, the company will be struck off after the publication of the notice.

Restriction for the Voluntary Application Filing by a Private Company to Strike off
 

The private company cannot request to have the name struck off if, within the last 3 months, the company:

• Has completed disposal for value of property or rights possessed by it immediately before the suspension of commerce for the objective of disposal for gain in the ordinary course of carrying on business or trading
• Has changed its name or transferred its registered office from one state to another
• Has applied to the National Company Law Tribunal for sanction of an agreement or compromise, and the subject has not yet been resolved.
• Has participated in actions other than those required or suitable for making an application, complying with a legislative obligation, or ending the company's affairs
• Is being ended up under Chapter XX of the Act, either voluntarily or by the Tribunal

If a corporation seeks for its name to be struck off in violation of the foregoing rules, it may face a punishment of up to Rs.1 lakh.

Striking Off a Private Company’s Name by ROC

If the ROC has reasonable grounds to believe:

• Within one year after establishment, the company collapses or does not begin operations.
• The private company has been inactive or has not carried on any activity for the two prior fiscal years and has not submitted any application for inactive company status under Section 455 of the Act during that time.

The ROC will require that the firm deliver its submissions together with copies of the necessary documents within thirty days of the notification of striking off the private company name being issued.

Process of Strike Off a Private Company’s Name
 

A notification issued by the ROC for the removal of a company's name or an application filed by a company for the removal of its name shall be issued to notify the general public. The ROC will strike off the business name from the Register of Companies (ROC) when the period stated in the notification for striking off expires unless the firm provides a contrary cause within the required time.

After striking out the firm name from the Register of Companies, the ROC will issue the dissolution notification in the Official Gazette. The corporation will be dissolved upon issuance of the notification in the Official Gazette.

Before passing an order of company dissolution & striking off the company name, the ROC will ensure that sufficient condition is made for the payment or release of company liabilities, the realisation of the total amount due to the company, and the fulfilment of its obligations within a reasonable time frame.

The ROC will also acquire the requisite assurance in this respect from the director, managing director, or other people in charge of the company's management.

However, even after the date of the order removing the firm name from the Register of Companies, the company's assets will be accessible for the release or payment of its liabilities and obligations.

Every director,  manager, or other official wielding any power of management and every member of the dissolved company shall retain their liability, which can be enforced as if the business had not been dissolved.

Forms To Be Filed
 

Two forms are necessary when applying for a private company's strike-off:

a) MGT-14 E-form

b) STK-2 E-form

Documents Required to be Attached with the Forms
 

The following documents accompany the E-forms:

• All directors have signed an indemnity bond that has been notarized (in Form STK 3).
• A statement of liabilities that includes all of the company's assets & responsibilities (certified by a CA or Chartered Accountant).
• Special Resolution certified genuine copy (duly signed by all company directors).
• A copy of the Board resolution permitting the submission of this application is attached. 
• Form No.  STK-3 indemnity bonds
• An affidavit on Form STK-4 A statement about any pending litigation involving the firm.
• Copy of appropriate delisting order from the relevant stock market, if any.
• If the private company is regulated by a regulatory agency, a certificate of no objection from that department is required.

Appeal to the Tribunal Against the Strike Off of a Private Company
 

Any individual who is dissatisfied with the ROC order announcing a company's dissolution under Section 248 of the said Act may submit an appeal to the Tribunal within 3 years of the ROC order date.

Suppose the Tribunal believes that the removal of the business name is not justified owing to the absence of the reasons on which the ROC granted the judgment. In that case, it may issue an order restoring the company name in the Registrar of Companies. The Tribunal should provide the ROC, the corporation, and any other parties involved with a reasonable chance to make submissions and be heard.

The corporation must file a copy of the Tribunal's order with the ROC within 30 days of the Tribunal's order date. The ROC shall reinstate the private company name in the Register of Companies & issue a new Certificate of Incorporation upon receipt of the order.

If the ROC is convinced that the company name was struck off the Register of Companies due to false information provided by the directors or firm or mistakenly, the ROC might petition the Tribunal for restoration. The ROC may apply to the Tribunal to have the company name restored on the Register of Companies within 3 years of the date of the dissolution order.

Conclusion
 

When a private company is struck off under Section 248 of the Act and a notice is published in the Official Gazette, it stops acting on the date specified in the notice. The ROC's Certificate of Incorporation shall be declared cancelled as of the date of such dissolution. The Certificate of Incorporation, on the other hand, will be valid for the payment or discharge of the company's liabilities, the realisation of the sum due to the firm, and the discharge of corporate obligations.
 

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