Strike off of the Companies with new latest provisions

Strike off simply means close, Strike off a company simply means removal of name of the company from Register of Company. By the process of Strike off, business operation of a company comes to an end. Under Companies Act, 2013, there are provisions for strike off of a company.

1. Legal Framework

Provisions regarding strike off a company are prescribed under section 248 to 252 of Companies Act, 2013 (this Act) & Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 as amended time to time.

On April 17, 2023 MCA has amended the rules, inserted a new concept/authority Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE) having territorial jurisdiction all over India, for processing application of striking off a company.

(C-PACE) shall be the RoC for the purpose of exercising functional jurisdiction related to processing & disposal of application made in E-form STK-2 and all related matters thereto under section 248. Further, C-PACE is the only authority for striking off of companies.

2. Ways of striking off a company:

• By Registrar of Companies (RoC) /(C-PACE) suo-moto.
• By Company itself.

3. Strike off of companies by RoC (C-PACE):

If the RoC has reason to believe that–

• a company has failed to commence its business within 1 year from incorporation.
• a company is not carrying on any business or operation for a period of 2 last financial years and has not made any application within such period for obtaining the status of a Dormant company (Inactive Company).
• the subscribers to the memorandum have not paid the subscription which they had
  undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days from its incorporation.
• the company is not carrying on any business or operations, as revealed after the
  physical verification carried out.
  RoC shall send the notice in E-form STK-1 to the company for strike off, and informed them to send representation along with required documents within 30 days.
  If company doesn’t give any defense within 30 days, RoC shall give public notice for
  objection of public, in E-form STK-5.

Further, If RoC does not receive any objection; ROC will release a notification in the Official Gazette in E-form STK-7 about the Company’s strike-off and Dissolution.

4. Following Companies cannot be Removed Suo Moto By Registrar

• Listed companies;
• Companies that have been delisted
• Vanishing companies;
• Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
• Companies where notices under section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;
• Companies against which any prosecution for an offence is pending in any court;
• Companies whose application for compounding is pending before the competent authority.
• Companies, whose public deposits are outstanding or the company is in default in repayment of the same;
• Companies, whose charges are pending for satisfaction; and
• Section 8 Companies.

5. Voluntary Strike off by a Company

A company may make an application to Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE), after extinguishing all its liabilities, by a special resolution or consent of 75% members in terms of paid-up share capital, for removing the name of the
company from the register of companies on all or any of the grounds specified above.

Procedure for Strike off by company itself –

i. Convene a board meeting where board of directors will approve following items:

• Approval for strike off a company.
• Authorization for applying to Registrar, Centre for Processing Accelerated Corporate
  Exit (C-PACE).
• To issue notice for extra ordinary general meeting.

ii. After passing board resolution company will extinguish all its liabilities, if any liabilities exist.iii. Convene extra ordinary general meeting for passing of special resolution.

iii. Convene extra ordinary general meeting for passing of special resolution.

iv. If any other authority regulates such company then approval of such authority is required.

v. Application to ROC: File an E-form MGT-14 within 30 days of passing of the resolution with normal fees. Further, make an application in E- form STK-2 with (CPACE).

The prescribed challan for filing of this form is Rs 10000.

Attachments required for STK-2 are as follows:-

• Indemnity bond in STK-3 duly notarized (Collectively given by directors).
• Affidavit in STK 4 duly notarized (Individually).
• Copy of statement of account duly certified by chartered account in form STK
  8 (not earlier than 30 days from the date of making application).
• A no objection certificate (NOC).
• Copy of Board resolution.
• Copy of Special resolution.
• Any other optional attachment.

New Provision added recently
vi. The company shall not file an application unless

• it has filed overdue financial statements under section 137 and
• overdue annual returns under section 92,

(up to the end of the financial year in which the company ceased to carry its business operations).

vii. In case a company intends to file the application after the proceeding has been initiated by the Registrar, it shall file all pending financial statements under section 137 and all pending annual returns under section 92, before filing the application.

viii. Once the Registrar suo moto issued notice of strike off for publication pursuant to the action initiated by ROC and company fails to give representation, a company shall not be allowed to file the application for strike off.

ix. ROC shall publish notice of strike inviting objections from the public on MCA website, in the Official Gazette & in 2 newspapers in Form STK-5A, for the proposed strike off. The objections if any shall be sent to the respective ROC within 30 days of publication of notice.

x. ROC will release a notification in the Official Gazette & on MCA website in Form STK-7 about the Company’s strike-off and Dissolution.