Closure/ Strike Of Company by Registrar of Companies

Sue moto Strike Off by ROC:

Once the name of the company has been entered into the Registrar, it can not be removed unless the company applies to it or is processed by law. If the company fails to begin its business or fails to send annual reports, the registrar may, on its own, terminate the name of the company.

The Registrar of Companies may issue a notice to the Companies and their Directors in the form STK-1 (Removal of Company Names from the Registrar of Companies) if ROC has a reasonable cause as described out above. Such a notice would warn the respective companies of the removal of their name from the record and would ask them to send the necessary documents to their representatives within thirty days of the receipt of such a notice. This process is also referred to as the compulsory removal of the name from the Registrar of Companies.

The Registrar sends a notice (STK-1) of his intention to remove the name and seeks the representation of Company in 30 days.

Reasons on which ROC may Strike Off the company:

• the company did not start its business within one year of its incorporation.
• For the preceding two financial years, the company has not carried out any business or activity for which it has not sought the status of Dormant Company pursuant to Section 455 of the Act.

Effect on Closing of Company by ROC:

• If the Company has no Borrowings from Bank means no Charge is Created Then the company can be closed by ROC.
• Shareholders are free to do any kind of business after CLOSURE .
• Liability on the Directors of the company still exists. ROC can invoke penalty clauses anytime, and the penalty may range from INR 50K to INR 5Lakhs per director
• The Directors will be disqualified and their DIN will be marked as Disqualified and hence they cannot be appointed as Director in any new Company for minimum of 5 years.

Strike Off by ROC on application made by company – Fast track Exit mode

A company may submit an application to the Registrar of Companies in E-Form STK-2 upon discharge of its liabilities. That may be achieved by passing a special resolution, which must be approved by 75% of its members.

The company may submit an application to the Registrar of Companies for revocation of the name by filing STK-2 along with a fee of Rs 10000/-.

Once the application has been filed, the Registrar shall have the power and responsibility to satisfy him that all sums owed by the company for the discharge of its responsibilities and obligations have been fulfilled.

ROC can also issue a notice of cause in the event of default in the filing of returns or other obligations. After the formalities stated to above, ROC shall issue a public notice and revoke the name of the Company after its expiry. If he form is on the approval path. The ROC concerned could also order the completion of the fillings due.

Companies which can apply for voluntary striking off its name

• Companies which are not operating or not carrying on any business since last two year from the date of application or,
• Companies which are not operating or not carrying on any business within one year of incorporation and,
• Company having Nil assets & liability.

Companies that cannot file for voluntary strike-off

Some Companies are restricted on filing applications for strike-off, if at any time during the last three months, it has:

• Changed its name or relocated its registered office to another state.
• Made a disposal for the value of property or rights held by it (subject to conditions).
• Engaged in any other activity other than what is necessary or expedient for making an application under the concerned provision, and so and so forth.
• Filed an application to the Tribunal for the granting of Compromise or Arrangement, and a consensus for the same hasn’t yet been arrived at.
• Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.

Companies that cannot file Strike off Application

The following companies can not apply for Strike of Company by filing STK-2:

• Listed companies.
• Companies delisted on account of non-compliance of listing regulations, listing agreement or any other statutory laws.
• Vanishing companies.
• Companies  which has been listed for inspection or investigation – if such directive is being carried out/pending/completed but the prosecutions concerning such inspection or investigation are pending in the Court of law.
• Companies  which hasn’t yet responded to notices of select provisions.
• Companies which hasn’t furnished the follow-up instructions on any report under section 208 of the Act.
• If the prosecutions related to the above two provisions are pending in a Court of law.
• Companies against which any case for prosecution is pending in a Court of law.
• Companies, whose application for compounding is pending before the competent authority for compounding the offences committed by it or any of its officers in default.
• Companies accepting any public deposits which are outstanding.
• Companies having any charges which remain to be satisfied.
• Companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Act.

Process Of Closing a Company under STK-2:-

Step 1: Holding of Board Meeting- A resolution for the purpose of this provision must be passed by a company through a Board of Directors, in which each of its directors would be appointed to make an application to the Registrar of Companies (ROC) for a strike.

Step 2: Closing of liabilities- A company desirous of a strike off must have realized all its assets & closed or paid off all its liabilities.

Step 3: Holding of General Meeting– The company will hold a general meeting of shareholders by passing a resolution to delete the name of the company. This resolution must be approved by 75% of its members as part of the company’s paid-up share capital. At this point, the Company will have to file an E-form MGT-14 within a period of thirty days.

Step 4: Furnishing of Applications and documents– Companies on the pursuit of strike-off must file an application to the Registrar of Companies (ROC), accompanied by the following documents:

• Indemnity Bond duly notarized by all directors (in Form STK 3).
• A statement of liabilities comprising of all assets and liabilities of the companies (certified by a Chartered Accountant).
• An affidavit in Form STK 4 (by all directors of the company).
• CTC of Special Resolution  (duly signed by every director of the company).
• A statement concerning any pending litigations with respect to the company.

Step 5: Implications of dissolvement.- As soon as the name of the company is removed from Register, from the date mentioned in the notice under sub-section (5) of section 248 cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been canceled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company

DISCLAIMER: The entire contents have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all or any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. Reader should seek appropriate counsel for their own situation. I shall not be held liable for any of the consequences directly or indirectly.

 Any other suggestions /opinions are welcomed.

Regards

Author: CS Megha Sharan (Company Secretary in Practice)

Contact No 9650082009 

Email: ezzusindia@gmail.com

Ezzus India Team