In the realm of company closures, striking off a company refers to the process of removing its name from the Register of Companies, effectively bringing an end to its business operations. The Companies Act of 2013 provides provisions for the strike off of a company, offering a legal framework for this procedure. To streamline the process and handle applications for striking off, the Ministry of Corporate Affairs (MCA) introduced a new authority called the Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE), with jurisdiction across India.
Under the Companies Act, there are two ways a company can be struck off:
- By the Registrar of Companies (RoC) or C-PACE: The RoC can initiate the strike off process if certain conditions are met. These conditions include a company’s failure to commence business within one year of incorporation, not carrying on any business or operation for the past two financial years without obtaining dormant company status, non-payment of subscription by the subscribers to the memorandum, or confirmation of non-business operations after a physical verification.
In such cases, the RoC issues a notice in E-form STK-1 to the company, providing them with an opportunity to present their defense within 30 days. If the company fails to respond, the RoC publishes a public notice in E-form STK-5, inviting objections from the public. If no objections are received, the RoC releases a notification in the Official Gazette (E-form STK-7), officially striking off and dissolving the company.
- Voluntary Strike Off by the Company: A company can also apply for striking off voluntarily after fulfilling certain criteria. The company must convene a board meeting where they approve the resolution for striking off and authorize the application to C-PACE. The company must extinguish all liabilities and then convene an extraordinary general meeting to pass a special resolution for striking off. If the company is regulated by any other authority, their approval is also required.
The company then files an E-form MGT-14 within 30 days of passing the resolution and applies in E-form STK-2 with C-PACE. A prescribed fee of Rs 10,000 is applicable for this form. Various attachments, such as an indemnity bond (STK-3), individual affidavits (STK-4), certified statement of accounts (STK-8), and a no-objection certificate (NOC), need to be submitted. The company must also ensure that all overdue financial statements and annual returns are filed.
Once the application is filed, C-PACE initiates the strike off process by publishing a notice of strike off inviting objections from the public. If no objections are received within 30 days, C-PACE publishes a notification in the Official Gazette and on the MCA website, declaring the company’s strike off and dissolution.
While strike off offers a way to close a company, certain companies are not eligible for this procedure. These include companies that have recently changed their name or registered office, engaged in activities other than those necessary for the strike off process, have pending applications before the tribunal, or are undergoing voluntary or court-mandated winding up proceedings.
Striking off a company involves a meticulous process governed by the Companies Act, 2013. Whether initiated by the RoC or pursued voluntarily, the goal is to dissolve a company and officially remove its name from the register. Understanding the legal provisions, adhering to the prescribed procedures, and fulfilling the necessary requirements are crucial for a successful strike off. By following the appropriate steps, companies can effectively close their operations and conclude their corporate journey.