Practical Aspects: Strike-Off of Company l STRIKE-OFF OF COMPANY

Every company is based on the ‘Principle of Perpetual Succession’. This principle means that Company continues to exist despite of any change in membership and/or directorship. Therefore, the existence of a company, is absolutely independent from that of its members or directors existence. Indeed, a Company has a perpetual existence but sometimes due to unforeseeable grounds a company is require to be closed. There is a certain procedure to close the company and closure of companies is governed by the Companies Act, 2013. The Companies Act, 2013 has prescribed following 2 methods/procedures to close a company-

Strike-Off of the name of the company from the Register of Companies
Winding Up of Company

Both of the methods are substantially different from each other.

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Strike Off Company procedure is the fast track procedure to close the company subject to the satisfaction of other conditions and thus it is most preferred and easy method to close a company. As per the Section 248 of the Companies Act, 2013, a company’s name can be struck off voluntarily by the company itself or compulsory by the Registrar of Companies subject to the satisfaction of other conditions. If a company chooses to dissolve itself through Voluntary Strike Off Company procedure then it is required to file STK-2 with the MCA and is required to remember various technical points before filing the form.

In this blog, we will contemplate the practical questions related to Voluntary Striking-off of the name of the Company from the Register of Companies by the Company itself.

Which Form is required to be filed with MCA for Voluntary Strike-Off of the Company?

A company willing to strike-off its name must first check whether it is eligible for Voluntary Strike-Off or not. If yes, then it shall file Form STK-2 with the MCA for voluntary Strike-Off of the Company.

When a company can apply for voluntary strike-off?

According to Section 248 of the Companies Act, 2013, a company can apply for strike-off voluntarily on any of the following grounds –

The first and foremost ground is when the company has been incorporate but it has failed to initiate its business operations within 1 year of its incorporation.
Secondly, a company can strike-off its name when the subscribers to the memorandum of the company have failed to pay the subscription amount within 180 days from the date of its incorporation.
Lastly, when the company is not carrying on any business operations immediately preceding 2 financial years then also company can apply for strike off.

What is the fee applicable on e-form STK-2?

Rs.10,000 is applicable fees on e-form STK-2 for striking off. Earlier on, it was Rs. 5,000 but with effect from10.05.2019,it has been raised to Rs.10,000/- vide the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2019.

Whether a company can apply for strike-off by filing e-form STK-2 without the completion of Annual Filing?

This question is answered by the provisions of Section 248 read with Rule 4 of the Companies Act, 2013. These provisions state that a company cannot file the Form STK-2 for suo motu strike-off unless it has filed its overdue returns i.e. Financial Statements (Form No. AOC-4) and/or Annual Returns (Form No. MGT-7) as the case may be, up-to the end of the financial year in which the company has ceased to carry on its business operations.

If we interpret these provisions then we can say that filing of pending annual compliances is required only up-to the financial year in which company was carrying on business operations and thus if the company has not carried on any business in the preceding financial year then the company is not required to complete any annual compliances.

Whether a company can apply for strike-off by filing e-form STK-2 even after the strike off has been initiated by ROC?

The Section 248(1) of the Companies Act, 2013 empowers the Registrar of Companies to strike-off the company’s name subject to the satisfaction of other conditions. Now the question arises, whether a company can apply for strike-off even when the strike-Off action has already been initiated by the ROC. Since the provisions of Section 248 do not bar the company from applying for Strike-Off when the ROC has sent the notice under Section 248(1) therefore a company can apply for strike-off by filing e-form STK-2 even after the strike off Company has been initiated by ROC. However, a company must comply all the perquisites of voluntary strike-off.

Whether directors become disqualified when ROC suo-moto struck off a company?

ROC can struck-off a company if any of the grounds of struck-off exists. According to Section 164(2) of the Companies Act, 2013, Yes, a person shall not be eligible to become a director in any company who is or has been a director of company who has failed

To file Financial Statements for any continuous period of 3 Financial Years, or
To file Annual Returns for any continuous period of 3 Financial Years, or
To repay any deposits accepted by the company or pay interest thereon or to redeem the debentures on the prescribed due date or to pay due interest thereon or to pay any declared dividend for 1 or more financial years of that company

What documents are required to be attached with e-form STK-2?

Following documents are required to be attached with strike-off form STK-2 –

STK-3 (Indemnity Letter by each and every director of the company)
STK-4 (Affidavit by each and every director of the company)
STK-8 (Statement of Accounts and Solvency Certified by Chartered Accountant)
Board Resolution for strike-off of company
Special Resolution for strike-off of company
Letter of Consent for strike-off of company (by each and every shareholder of the company)

Conclusion

Consequently, a company which is not operating its business since 1 years of its incorporation can voluntarily struck off its name from the register of companies by filing e-form STK-2 with MCA along with Rs.10,000/- fee.

If you are looking for a professionals’ team for undertaking the striking-off task on your behalf then contact your Trustworthy Advisors Manthan Experts by dialing +91 9643-969-969 or mail at info@manthanexperts.com.

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