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Strike Off Under Companies Act, 2013

January 20, 2017     by bsamrishindia.com

With notification of Section 248-252 by the MCA vide Notification No. 16/2016 on 26th December, 2016, the process of striking off the name of the Company from the Register of Companies through the Fast Track Exit often called FTE, stands revised. The “Fast Track Exit” mode and now “Strike Off” mode was introduced by the MCA to give opportunity to the defunct companies to get their names struck off from the Register of Companies.

There are two modes of Strike off:

  1. Suo moto by the Registrar of Companies (Section 248(1)):

For reasons that the company has failed to commence its business within one year or had not been doing business or operation for last two financial years.

  1. By way of Application by the Company (Section 248(2)):

The Company can file an application voluntarily with the Registrar of Companies for Striking off the name of the Company. The grounds for voluntarily making such an explanation by the company remains the same as is mentioned in the 1st mode, i.e. the company has failed to commence business or had not done any business for last two financial years.

Here in this blog, we have discussed this second mode.

As per the provisions of Section 248-252 of Companies Act, 2013 read with Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, a company may file an application for strike off as detailed herein below:-

  • A company may file an APPLICATION in the Form STK-2 (shall be accompanied by certain prescribed documents) along with the fee of Five Thousand Rupees for removing the name of the company from the Registerof Companies, after extinguishing all its liabilities.
  • The main ingredients for such an application are:
    1. Application in form STK-2
    2. Government filing fees: INR 5,000/-
    3. Copy of Board resolution authorizing the filing of this application;
    4. A statement of accounts showing the assets and liabilities of the Company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant
    5. Shareholder’s approval by way of Special Resolution
    6. In the case of a company regulated by any other authority, approval of such authority shall also be required.
    7. Indemnity bond [to be given individually or collectively by the director(s)] in Form No. STK-3;
    8. Affidavit in Form No. STK-4

Companies on whom Strike off under Section 248 is Not Applicable

The guidelines does not inter-alia cover

  1. Listed companies;
  2. Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
  3. Vanishing companies;
  4. 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;
  5. Companies where notices have been issued by the Registrar or Inspector (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Act)and reply thereto is pending;
  6. Companies against which any prosecution for an offence is pending in any court;
  7. Companies whose application for compounding is pending;
  8. Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
  9. Companies having charges which are pending for satisfaction; and
  10. Not-for-profit Companiesregistered under Section 25 of the Companies Act, 1956 or section 8 of the Act.

Some other facts to consider

  • If there is pending prosecution against the company and its directors: If the pending prosecutions are only for non-filing of Annual Returns under section 92 and Balance Sheet under section 137 of the Act, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application by the competent authority.
  • NOC from Tax Authorities: NOC is not required from Income Tax / Sales Tax / Central Excise / other Govt. authorities. But all directors need to confirm that there are no dues pending against Company with any such authorities. And MCA will send notice to the Income Tax / other authoritiesenquiring whether they haveany objection for striking off the name of the said Company.
  • Manner of notarisation, apostilled or consularisation of indemnity bond and declaration in case of foreign nationals or non-resident Indians: As provided under STK rules, if the Director of the Company applying for striking off, is a foreign national or non-resident Indian, the indemnity bond and declaration shall be notarised or apostilled or consularised in the country of the foreign national.
  • Stamp Duty: Stamp Duty is required to be paid on Affidavit and Indemnity Bond as per respective State Stamp laws.
  • Make sure that the company does not maintain any bank account as on the date of filing application and also does not have any assets and liabilities.

Brief procedure followed after filing of application for Strike off

  • Where a company has filed an application (e-form STK-2), a public notice shall be issued by ROC (Form STK-6) inviting objections to the proposed Strike off, if any. The objections are to be sent to the respective ROC within thirty days from the date of publication. The notice shall be placed on the website of Ministry of Corporate Affairs, published in the Official Gazette and published in a leading English newspaper and at least in one vernacular newspaper where the registered office of the company is situated. Application shall also be placed on the website of the company, if any.
  • Before striking off, ROC shall satisfy itself that sufficient provision has been made for realisation of all amounts due to the company and for the payment or discharging of its liabilities.
  • Notice of striking off and dissolution of company – After having followed and dealt with the above steps, the Registrar shall strike off the name and dissolve the Company. Notice of striking off and its dissolution to be published in the Official Gazette (Form STK 7). The published notice shall be to the effect that the company’s name has been struck off the register of companies and the said company dissolved with effect from the date (mentioned therein). The same shall also be placed on the official website of the Ministry of Corporate Affairs.

Difference between FTE under Section 560 of Companies Act, 1956 and under Section 448-452 of Companies Act, 2013 (Strike Off)

S. No. Basis FTE under Section 560 Strike Off under Section 448-452
1.         Board Resolution / Special Resolution One could proceed for FTE by passing just a Board Resolution. It is required to pass Special Resolution or need consent of 3/4thmembers to proceed for Strike Off.
2.         Period for which the Company has not carried on any business To proceed for FTE there was a condition that the Company shall not carry business for a period of preceding 1 year. To proceed for Strike Off there is a condition that the Company shall not carry business for a period of preceding 2 financial years.

67 thoughts on “Strike Off Under Companies Act, 2013

  1. need advice how order has been passed u/s 248(5) without considering section 248(6) non filing of return can not be a base to strike off companies.

    1. Kindly read 248(1) where 2 conditions have been specified for strike off. Non filing of financial statement and annual returns can be read as Company not carrying any business or operations, therefore fulfilling the second condition of Strike Off. Besides, the companies should have represented before the concerned RoC when it received notice u/s 248(1).

    1. The Property stands registered in the name of the Company which has been struck off and can’t be sold off since the Company is no longer in existence. In such cases, the struck off Company seeks to revive its name by filing an application with the Tribunal. If you are following the news, the corporate affairs ministry has asked states to complete identification of properties owned by de-registered companies at the earliest and ensure district administrations prevent transactions in those assets. The ministry has also urged the states to initiate disciplinary action against the officials concerned in case such transactions go through

  2. Dear Sir,
    One of my Company’s registered office in karnataka and two Directors from Karnataka and other two directors from Kolkata .

    So please guide me the indemnity bond of two states is required and what will be the stamp duty if the Company’s Authorished Capital Rs. 25 Lakhs and paid up Rs. 10. lakhs

  3. What accounting treatment can be passed for the pending cash balance if a company wants to be strike off?
    also if it has unsecured loan from director, can it be strike off?

    1. The balance sheet shall be NIL while filing for strike off, reflecting your share capital account to be squared up with your P&L debit balance (Loss). You can set off the same toward loan payable or professional fees. The process of strike off cannot proceed while you have unsecured creditors. Kindly ask your auditor to make necessary adjustment for the same.

    1. As per provisions of the section 164(2) of the Companies Act read with rule 14 of companies (Appointment and Qualification of Directors)Rules ,2014 default can be made good only after serving cooling off period of 5 years . Further Clarification from MCA is awaited on this point.

  4. My Private Ltd company has not filed its annual return/balance sheet for three years since it is not carrying on any business.
    Now,ROC has strike off. What are the consequences of the directors.

    1. Where the company has failed to file annual returns for continuous three years then as per the provisions of section 164 (2) of Companies Act, 2013 , directors of such company shall be disqualified for period of 5 years from being appointed as directors in any company. Once ROC has passed order for strike off, the liability of every director, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved.

  5. Dear Sir,
    We have incorporated LLP in 2014 , But due to some personal reasons , the company did not do any operation . We have not filed any return during these period (2014-2017). Sir now i want to close or may be i want to do operation in this year . Please guide me that which option is beneficial either close it or re-start operation. And the procedure or the liability for non filling of return.

  6. ,
    ROC has suo moto removed name of my company since annual filings were not done for a long period of time. We didn’t receive any notice for struck off from ROC office. Yesterday, we came to know about the list (through news). I am willing to close the company. Please enlighten us upon the path for realisation of assets of the company and settling the liabilities, along with the liabilities of director. Please note that the company had very few transactions and were genuine. Nothing malafide was done at any time ! Please help.

    1. Once the ROC has struck off the name of the Company from its records, the Company stands dissolved as per Section 248(2). For realisation of assets and settling of liabilities, you need to proceed for the revival of the company. Please go through this link for more information. http://www.bsamrishindia.com/restoration-of-name-of-a-struck-off-company-under-companies-act-2013/

      You may also note that as per Section 248(7), liabilities of the Director, who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.

  7. We didn’t file for 4 yrs and we didn’t receive any SCN also. The company is in strike off status. This company didn’t do business for 3 yrs
    we have money in the name of the company can we use that money or what are the consequences arises if i use that money?

    1. There is not much clarity but once a company is striked off, it doesn’t remain a perpetual entity and all the assets and liabilities becomes personal assets and liabilities of shareholders and directors.

  8. Sir due to non filing of balance sheet our company striked off by roc we have not done any business and company not needed also is there any penalty on directors

    1. If the director of the company has not filed financial statements or annual returns for any continuous period of three financial years, then they fall under the disqualification of Director and they are not eligible for re-appointment and appointment in any other company for a period of five years from the date, the company fails to do so.

  9. A Pvt. Co. is Strike off by the ROC and the Director of this Co. is applied for conversion of Partnership firm to LLP, Can a disqualified Director become a designated partner in LLP?

    1. No, a disqualified director cannot act as designated partner. In accordance to the MCA clarifications any person disqualified under section 164(2) of the Companies Act, 2013 is advised not to act as director during the period of the disqualification and not to file any document or application with MCA as the same shall be summarily rejected.

  10. A company was incorporated in the year 2013 but has not filed Roc returns yet. It has planned to file returns now but the status of company appears as strike off. Now 1. Will the directors of that company are disqualified?If yes, for how many years
    2. What we can do to make company status as active other than going to tribunal u/s 252.

    1. 1. As per Section 164(2), Directors shall be disqualifed for a period of five years from the date on which the said company fails to do so.
      2. As per Section 252 of the Companies Act, 2013, there is only one option to revive the name of the company , you have to approach NCLT for obtaining a active status. NCLT may pass an order for restoration of name of the Company, subject to its satisfaction. You have to do the filing of annual returns of previous year to ROC.

  11. We didn’t file for 4 yrs and we didn’t receive any SCN also. The company is in strike off status. This company didn’t do business for 3 yrs. The issue is I am also a Director of another company and we are doing active business in this company. Will this strike off in any case affect the other company’s operations. Also, we had intentions to close the previous company, but it was too late now. Any suggestions?

    1. As per Section 164(2) of the Companies Act, 2013, any person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall not be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so. You will be disqualified from being Director of any Company and you have to vacate office of Director in other Company immediately.

  12. Dear sir ,
    We have not filed any returns in roc for past 7 years due to negligence . But the company has been doing business. We have an outstanding loan also . We recieved a notice from roc to show the proof that company has been working . So we started filling the forms but the name of the company has been struck off . Now how do we revive the company and how does ot effect our running business and bank accounts

    1. If the name of the Company is struck off, you can go for restoration of name of the Company by making application to the Tribunal u/s 252(1) of the Companies Act, 2013. The application is to be made within a period of three years from the date of the order of the Registrar. If the Tribunal is satisfied, it will order for restoration of the name of the company.

    2. Do we have to go through high court ot directly in roc . Can a director approach the roc or donwe have to take a ca along?

      1. For the purpose of applying for strike off of a company, there is no specific mentioned requirement of a Charted Accountant. The directors themselves can apply for strike off. But for making an application under section 248 (strike off), there is a basic condition of extinguishment of all the liabilities and assets of the company, and a statement of the same shall be certified by any professional (not specifically required to be a charted accountant).

  13. Dear Sir,

    If a subsidiary of Listed company wants to be a strke off then whats a compliance to be done ?
    any resolution to be pass by listed company or not?

    1. Subsidiary of a listed Co. can undergo the process of striking off by filing Form STK-2 with MCA on satisfying the basic requirements as per Sec. 248 of the Companies Act, 2013. As per Regulation 24(6) of SEBI [LODR] and Section 180 of the Companies Act 2013, prior approval of shareholders of the Listed Entity is required by way of Special resolution before any sale/dispose/lease of assets in the subsidiary Co. (where more than 20% of the assets are disposed in a Financial year).

  14. Hello sir,
    Rules specify that the company shall have no assets and liabilities
    Can a company having rs.100000/- share capital, loss of 60000 and cash balance of 40000 apply for strike off???
    Requesting you to reply back for the query..

    1. In basic accounting there is no concept of NIL balance sheet, therefore, for FTE or Strike Off, we prepare a balance sheet whereby the Capital on liabilities side is set off by loss incurred by the Company under the head Profit and Loss (Debit Balance). Meaning all the liabilities have been extinguished by the Company before proceeding with the strike off.
      In your case, Rs. 40,000/- cash balance is asset. Till this cash balance is exhausted, you can not file for strike off.

    1. According to Rule 4(3)(ii) read with Rule – 7(2) of the Companies (Removal of Name of Companies from the Register of the Companies) Rules, 2016, Every application in Form STK 2 shall be accompanied by a statement of accounts containing assets and liabilities of the company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant. ROC shall, simultaneously intimate the Income-tax authorities and other tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies. So if there is any issue related to non-payment of Tax or any income escaping or any previous defaults relating to Income Tax Provisions, IT department may raise objections on it and ask the assessee to file the return and other required documents before passing the order of Strike-off.

  15. How can the Company have a nil balance sheet when share capital is sitting on the liabilities side? Does this mean the shareholders have to be returned their capital before making an application for striking off the name of the Company from the Register of Companies?

    1. In basic accounting there is no concept of NIL balance sheet, therefore, for FTE or Strike Off, we prepare a balance sheet whereby the Capital on liabilities side is set off by loss incurred by the Company under the head Profit and Loss (Debit Balance). Meaning all the liabilities have been extinguished by the Company before proceeding with the strike off.

  16. If Special Resolution is passed us 248(2), is it mandatory to file MGT-14 for registration of this SR before filing STK-2? And what will be the situation if consent of 75% holder of Paid up Capital is obtained?

    1. Yes, MGT-14 is required to be filed if SR is passed. However, if consent of 75% holders of paid up capital is obtained, then no need to pass SR. MGT-14 will not be filed in this case.

    2. I’ve filed an STK-2 (without filing MGT-14) two days back and its status is pending for approval . Can I file MGT-14 now?
      Another STK-2 was filed around 45 days back and right now form is under the process of striking off, what can be done in that case? Will it attract penalty as per section 117 (2)??

  17. Dear Team,

    Company not in operation for 2 years. Filed STK-2. Now recd letter from mca for resubmission mentioning rule 7 of Companies(regn off and fees) rules.
    do we need to file all pending balance sheets and annual returns before filing stk-2?

    1. As per the provision of section 248 sub section 2 read with 4 of the (Removal Of Names Of Companies From The Register Of Companies) rules, 2016, a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent members in terms of paid-up share capital, file an application for striking-off the name of the Company. There is no condition for filling the pending balance sheet and annual returns, however if ROC states any defects in the strike-off application already made, then the same needs to be rectified accordingly.

    2. Hi what was the conclusion on this? Is a Company necessarily required to file Annual Returns and Balance Sheet before applying for suo moto strike off.

      1. As per the Fast track exit scheme, there was no as such requirement to file pending statutory returns before applying for strike off. However, Under the Companies Act, 2013, pursuant to section 248 and chapter XXIV of Companies Act Rules “No request for recording any event based information or changes shall be accepted by the Registrar from such defaulting companies, unless they file their updated Balance Sheet and Profit and Loss Account and Annual Return with the Registrar of Companies “ . Thus, we can conclude that a company needs to file it’s annual return and balance sheet before applying for suo moto strike off.

  18. Hi, how to show share capital as nil..which matches the asset side with cash..can we distribute the cash to shareholders… what happens to share capital..is there any other provision which needs to be complied to make share capital nil. Please reply

    1. In basic accounting there is no concept of NIL balance sheet, therefore, for FTE or Strike Off, we prepare a balance sheet whereby the Capital on liabilities side is set off by loss incurred by the Company under the head Profit and Loss (Debit Balance). Meaning all the liabilities have been extinguished by the Company before proceeding with the strike off.

  19. Dear Sir/Madamm,
    I have registered a pvt ltd company on 2015. I have not made any business transaction, no current account, not filled return filling since its incorporation. What are the option I have now for closing the firm – 1) If in future govt itself closes my company by issuing STK-1 notice to me, do I need to pay any fine or penalty for the same. 2) I should go for Fast Track Exit to close firm. 3) Any other inexpensive option with less legal hassles

    1. 1. No you don’t need to pay any fine or penalty if the ROC sends you a notice for strike off.
      2. If the Company is falling within the criteria prescribed on whom the provisions of strike off are applicable, the Company can suo moto approach ROC to strike off the company.
      3. Strike off is the least expensive option as compared to going for the winding up of the Company. And if the Company has nil Assets and Liabilities, it is advised to proceed with Strike off only.

  20. If the company incorporated in year 2011 has not filed its annual return/balance sheet can it file stk-2 without filing the annual return. Its status is still active in ROC but has received notice for removal of name since it is not carrying on any business

    1. There is no need to file STK-2 as the ROC will strike off the name suo moto u/s 248(1) . You may at best reply to the notice issued by the RoC for removal of name that your company has not carried any business since incorporation / past 2 years and therefore, the name of the company be striked off.

    1. There is no prescribed format for consent obtained in lieu of special Resolution under Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. However, company may obtain the same from the shareholders by mentioning the reason for striking off and obtaining authorization for making the application.

  21. a company applying for removal of name under sec 248 of the Companies Act ,2013 has a surpus bank balance in the bank. can the surplus be paid to the Holding Company on the date the aplication for removal of name is filed with ROC

      1. this is not under FTE but Sec 248 which requires a statement of account containing assets and liabilities made up to a day not more than 30 days before the date of application.

  22. Dear Team,

    According to my view term “vanishing company” means a company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its directors are traceable.

    I read your article wherein its mentioned that “If there is pending prosecution against the company and its directors: If the pending prosecutions are only for non-filing of Annual Returns under section 92 and Balance Sheet under section 137 of the Act, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application by the competent authority”.

    Can you please clarify under which section or rule the above criteria is mentioned, since Vanishing Company definition starts with Company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange, so basically only listed entities will be falling due of not applying for strike off for non-compliance of filing of annual returns and financial statements

    Thanks in advance

    1. As per the FAQs given by MCA, this criteria has been mentioned about prosecution against the company and its directors and as per the explanation to rules of Strike off, “vanishing company” means a company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its directors are traceable.

      1. Hi Team,
        Thanks for your clarification.
        But according to me the word “and” listed in stock exchange is represented, so according to my interpretation its applicable only if listed companies have failed to file Annual statements.

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