Did you know that 40% of business owners keep paying compliance costs for inactive companies because they don’t understand the closure process?
Understanding the company strike off procedure is significant for business owners who want to formally end their operations. Many people think the striking off procedure is complex and time-consuming. However, a voluntary strike off can be straightforward with the right approach.
Our detailed guide will help you through each step to close your company properly. You’ll learn about eligibility requirements, documentation, financial obligations and regulatory compliance. This guide covers everything about the strike-off process.
Let’s take a closer look at the essential steps that will help you make this important business decision confidently.
Understanding Company Strike Off Requirements
Let’s look at everything you need to know about the company strike off procedure. You should understand these requirements before starting the process.
Legal Eligibility Criteria for Strike Off
A company becomes eligible to strike off under two main conditions. The first applies when it hasn’t started business operations within one year of incorporation. The second kicks in when there are no business operations for two consecutive financial years.
The company needs to clear all its liabilities and get consent from 75% of its members based on paid-up share capital before applying for strike off.
Documents and Forms Required
You’ll need several documents to strike off your company. Here’s what to prepare:
- Form STK-2 application with a fee of Rs. 10,000
- Special resolution or consent from 75% members
- Board resolution authorizing the filing
- Statement of accounts certified by a Chartered Accountant
- Indemnity bond (Form STK-3)
- Affidavit in Form STK-4
Note that you must file all financial statements under section 137 and annual returns under section 92 before submitting your strike off application.
Common Disqualification Reasons
Your company can’t apply for strike off if it has done any of these things in the last three months:
- Changed its name or relocated its registered office
- Made disposal of company property for gain
- Applied for a compromise or arrangement with the Tribunal
- Been under winding-up proceedings
On top of that, some companies are automatically disqualified from the strike off process. These include:
- Listed companies
- Companies under investigation
- Companies with pending prosecutions
- Companies with outstanding public deposits
A good grasp of these requirements will help you ensure a smooth strike off procedure for your company.
Step-by-Step Strike Off Application Process
Let’s walk through the company strike off procedure step by step now that we’ve confirmed our eligibility.
Preparing Board and Shareholder Resolutions
The board meeting starts the voluntary strike off process. Here’s what you need to do:
- Issue a board meeting notice (7 days prior)
- Hold the board meeting to approve strike off
- Schedule a general meeting (21 days notice required)
- Get special resolution with 75% member consent
Filing STK-2 Form and Supporting Documents
You need to prepare Form STK-2 with mandatory documents. The filing fee costs Rs. 10,000. Here’s your submission checklist:
| Document Type | Details |
|---|---|
| Form STK-2 | Main application form |
| Form STK-3 | Notarized indemnity bond from directors |
| Form STK-4 | Director’s affidavit |
| Financial Statement | Not older than 30 days |
| Special Resolution | Certified by directors |
Timeline and Processing Details
The process follows this timeline after submission:
The Registrar will review your application within 30 days. They will publish a public notice in:
- The Official Gazette
- An English newspaper
- A local language newspaper
The ROC allows 30 days for public objections. Your company name will be struck off from the register if no one objects. The whole ordeal usually takes 3-4 months to complete.
Note: You must upload the DSC (Digital Signature Certificate) affixed PDF within 15 days of SRN generation and complete payment within 7 days of successful upload.
Managing Financial and Legal Obligations
We need to handle all financial obligations before we can move forward with the company strike off procedure. Let’s get into each part step by step.
Settling Outstanding Liabilities
The company strike off process needs all debts and liabilities to be fully settled. We must make sure that:
- All creditor dues are cleared
- Employee obligations are fulfilled
- Statutory payments are completed
- Legal claims are resolved
More importantly, directors might face personal accountability for any unsettled liabilities even after the strike off.
Handling Bank Accounts and Assets
The striking off company procedure requires proper management of our banking operations. Here’s what happens with bank accounts:
| Action Required | Timeline |
|---|---|
| Account Closure | Before application |
| Final Statement | Within 30 days |
| Asset Disposal | Before submission |
Banks will freeze all accounts once the strike off happens. That’s why we need to close all bank accounts before filing the application.
Tax Clearances and Compliance
A smooth voluntary strike off needs proper tax clearances. These requirements can’t be skipped:
- Settlement of all outstanding tax liabilities
- Cancelation of GST registration
- Finalization of tax assessments
- Resolution of any pending tax queries
IRAS will object to the strike off application within 2 months if tax matters aren’t resolved. We need to complete all tax submissions and clear liabilities before starting the company strike off procedure.
Any remaining assets after settling liabilities must follow legal requirements for disposal. Directors still have to pay any outstanding dues even after the strike off is complete.
Navigating the ROC Approval Process
The ROC approval process has several significant stages we need to guide through after meeting our financial obligations.
Public Notice Period Requirements
The ROC starts by sending Form STK-1 to our company and each director. We must respond with the work to be done within 30 days.
The ROC then publishes a public notice in:
- Form STK-5 on the MCA website
- The Official Gazette
- Two newspapers (one English and one vernacular)
The company’s status changes from ‘Active’ to ‘In Process of Strike’ at this point.
Responding to Objections
Stakeholders get 30 days from the publication date to raise objections. Here are the common objectors:
| Stakeholder Type | Objection Basis |
|---|---|
| Shareholders | Incomplete information |
| Creditors | Outstanding debts |
| Employees | Legal claims |
| Tax authorities | Pending liabilities |
The strike off procedure gets suspended for 3-6 months while the ROC breaks down any objections that come up. We must complete these tasks during this time:
- Provide evidence to counter objections
- Submit additional documentation if required
- Address stakeholders’ concerns
Final Strike Off Certificate
The ROC issues the final strike off notification in Form STK-7 when valid objections are resolved or none exist. This notification:
- Confirms the company’s dissolution
- Gets published in the Official Gazette
- Appears on the MCA website
The Certificate of Incorporation becomes void after dissolution, but director liabilities continue for existing obligations. All the same, any aggrieved party can file an appeal within three years of the strike off order.
Post-Strike Off Considerations
We need to protect our interests by knowing what happens after a company strike off process. Let’s get into the key points that need our attention after the strike off ends.
Legal Status After Dissolution
The company stops existing as a legal entity once the strike off procedure succeeds. This means we can’t:
- Enter into contracts or conduct business
- Hold bank accounts or own property
- Use the company name for any transactions
The government takes over any leftover assets, which become “bona vacantia”. This happens because property must have an owner, and constitutional provisions make the state the default owner.
Record Keeping Requirements
We must keep proper documentation after a voluntary company strike off. Here’s a detailed breakdown of what records to keep:
| Record Type | Retention Period | Format |
|---|---|---|
| Financial Statements | 8 years | Electronic/Physical |
| Tax Documents | 4 years minimum | Electronic/Physical |
| Corporate Records | 3 years | Physical |
| Personnel Files | 7 years | Electronic/Physical |
We need to keep these documents safely:
- Appointment documentation and terms
- Claims verification records
- Professional engagement details
- Statutory filings with authorities
- Correspondence during dissolution
Future Business Implications
The company strike off procedure brings what it all means that we should think over carefully. Directors might face limits on their future business activities.
The Certificate of Incorporation becomes void, and here’s what that means:
| Consideration | Impact |
|---|---|
| Business Name | Available for new registrations |
| Legal Protection | Limited liability ends |
| Asset Recovery | Not possible after strike off |
| Director Status | May affect future appointments |
Without doubt, directors and officers who managed the company must still handle their corporate liabilities even after dissolution. Our duty to pay outstanding dues and obligations stays active.
The company strike off affects our chances to restore the business. Getting the company back becomes harder and might need court approval after 12 months. Interested parties have 20 years from dissolution to apply for restoration in specific cases.
Note: Our reputation in the business community takes a hit from the strike off status. We must fulfill all obligations properly before moving ahead with the strike off procedure.
Conclusion
A successful company strike-off procedure demands attention to detail and careful preparation. This detailed guide outlines everything you must do to close your company properly.
Business owners must check their eligibility, get all required documents ready, and clear any outstanding financial obligations before they begin. Good record-keeping and knowledge of post-strike off implications will protect a director’s interests after dissolution.
The whole ordeal takes patience since it usually spans 3-4 months. Starting early and following each step carefully will help you avoid delays or complications.
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Note that a director’s responsibilities continue even after company dissolution. A complete compliance check and proper closure of all business matters serve as the life-blood of a successful strike-off procedure. This approach protects your interests and maintains your reputation for future business ventures.
FAQs
Q1. What are the main requirements for a company to be eligible for strike off?
A company is generally eligible for strike off if it hasn’t started business operations within one year of incorporation or hasn’t carried out any business for two consecutive financial years. Additionally, the company must settle all liabilities and obtain consent from 75% of its members in terms of paid-up share capital.
Q2. How long does the company strike off process typically take?
The entire company strike off process usually takes about 3-4 months to complete. This timeline includes the application review by the Registrar, publication of public notices, and the objection period.
Q3. What happens to a company’s bank accounts during the strike off procedure?
All bank accounts must be closed before filing the strike off application. Banks monitor company status regularly, and upon strike off, they will freeze any remaining accounts. It’s crucial to handle all banking matters before initiating the strike off process.
Q4. Are directors still liable for company debts after strike off?
Yes, directors’ responsibility to pay outstanding dues and obligations continues even after the company is struck off. Existing corporate liabilities of directors and officers who managed the company remain enforceable after dissolution.
Q5. Can a struck-off company be restored?
Yes, a struck-off company can be restored, but the process becomes more challenging if more than 12 months have passed since the strike off. Interested parties can apply for restoration within 20 years of dissolution under specific circumstances, but it may require court intervention.
