How to close a Company? | Bhavya Sharma & Associates

 

I.     INTRODUCTION

The provisions relating to strike-off provide an opportunity for the non-working companies to get their names struck off from the records of the ROC. There are many companies which are registered with ROC but due to various reasons, they are not operative. The strike-off gives an option to such companies to apply to ROC for removal of their name from the Register of Companies. A company which is undergoing the process of ‘Striking Off’ either voluntarily or by an action of the ROC is given the status of ‘Striking Off’ and the status of the company is changed to ‘Dissolved’ or ‘Liquidated’ when affairs of the company are completely wound-up by following the provision of winding-up of the company.

After dissolution or liquidation, the company ceases to exist. 

II. METHOD OF STRIKING OFF

A company can be struck off by any of the following modes: 

• Suo moto by the ROC under Section 248(1) of the Act; or

• An application by the company for removal of name/ strike off of company under Section 248(2) of the Act. 

III. STRIKE OFF BY ROC

In case of an existing company which has failed to commence its business within one year of its incorporation or is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 of the Act or the subscribers to the memorandum have not paid the subscription and a declaration to this effect has not been filed within 180 days of incorporation or it is revealed after a physical verification that the company is not carrying on any business or operations, the Registrar can suo moto after giving notice and opportunity of being heard, strike off the name of the company from the register of companies, and publish notice thereof of the striking off of the name of the company from the register of companies in the Official Gazette and on the publication of this notice in the Official Gazette, the company shall stand dissolved.

IV. STRIKE OFF BY THE COMPANY 

Subject to the provisions of section 248 (2) of the companies Act 2013 read with Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, the company can on its own file an application for removal of the name of the company from the Register of companies. 

V. Type of Companies which cannot be removed under these provisions, viz., Section 248(1) & (2) of the Act: 

(i) Listed Companies; 

(ii) Section 8 companies; 

(iii) Companies having charges which are pending for satisfaction; 

(iv) Companies whose application for compounding is pending for compounding of offences committed by the company or any of its officers in default; 

(v) Companies against which any prosecution for an offence is pending in any court;

(vi) Vanishing Companies;

(vii) Companies delisted due to non-compliance with listing regulations or listing agreements or any other statutory laws;

(viii) Companies where inspection or investigation is ordered and being carried out or actions or such order are yet to be taken up or were complete but prosecutions arising out of such inspection or investigation are pending in the court;

(ix) Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

(x) Companies where notices under section 234 of CA 1956 or 206 or 207 of the CA 2013 have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the court.

VI. GROUNDS FOR FILING APPLICATION BY COMPANY

(a) Where a company has failed to commence its business within one year of its incorporation; or 

(b) Where a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 of the Companies Act, 2013; or 

(c) 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 of its incorporation. This provision is applicable to companies incorporated after 02nd November 2018; or 

(d) the company is not carrying on any business or operations as revealed after the physical verification carried out under section 12(9).

VII. PROHIBITION ON STRIKING OFF APPLICATION 

The Company shall not make any application for the strike-off of the company if at any time in the previous 3 months, the company has done any of the below-mentioned activities: 

i. Has changed its name; or 

ii. Has shifted its registered office from one State to another; or

iii. has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business; or 

iv. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company or complying with any statutory requirement; or 

v. has made an application to the Tribunal for the sanctioning of a scheme of compromise or arrangement and the matter has not been finally concluded; or 

vi. is being wound up under Chapter XX of the Companies Act, 2013 or under the Insolvency and Bankruptcy Code, 2016.

VIII. PROCEDURE TO MAKE STRIKE OFF APPLICATION 

a. Call and hold Board Meeting to pass Board resolution.

b. Call an Extra-Ordinary General Meeting (EGM)

c. After passing of Board resolution, if there is any liability in the company, the company will set off / pay all its liabilities. 

d. Every director of the company should sign and execute an indemnity bond and Affidavit. In case the director is a foreign national or non-resident Indian, the documents should be notarized or apostilled or consularised. 

e. The company should get the statement of accounts containing the assets and liabilities of the company made up to a day, not more than thirty days before the date of application. Such a statement should be certified by a Chartered Accountant.

f. File MGT-14 within thirty days from the date of the passing of the special resolution or obtaining consent. 

g. Approval of concerned regulatory authorities is required in the case of a company regulated by any other authority.

h. Make an application for removal of the name in Form STK-2 along with the applicable fee.

Note-: 

i. It must be noted that Form STK-2 cannot be filed by a company unless it has filed its overdue returns in Form No. AOC-4 (Financial Statement) or AOC-4 XBRL, as the case may be, and Form No. MGT-7 (Annual Return), up to the end of the financial year in which the company ceased to carry out its business operations. 

ii. Form No STK-2 also cannot be filed once notice in Form No. STK-7 has been issued by the ROC pursuant to the action initiated under section 248(1).

Article By: Ms Shivangi Dhanuka, Legal Associate at Bhavya Sharma and Associates located in Delhi. In case you need any assistance for corporate law compliances or advisory related services, contact us at legal@bhavyasharmaandassociates.com or for more details you can visit: www.bhavyasharmaandassociates.com 

Disclaimer: Although due care and diligence have been taken in the preparation and uploading of this Article, Bhavya Sharma & Associate shall not be responsible for any loss or damage, resulting from any action taken on the basis of the contents of this Article. Anyone wishing to act on the basis of the material contained herein should do so after cross-checking with the circulars, notifications, applicable acts, and press releases issued by the concerned department or seek appropriate counsel for their situation.