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Striking off a company is a process where a company’s name is removed from the official records of the Registrar of Companies (ROC), effectively dissolving the entity. This method is typically used when a company is inactive, has ceased operations, or has no significant liabilities or assets.
It is a voluntary process initiated by the company’s directors or ROC under specific conditions. Striking off is a quicker and less complex method than winding up and is often used to close down defunct or dormant companies. Once a company is struck off, it no longer exists legally and cannot conduct any business operations.
A company can voluntarily apply for strike-off when it is no longer operational or does not have any significant assets or liabilities. The process allows the company to close its operations efficiently and avoid future compliance requirements.
Here are the steps for voluntary strike-off:-
Board Resolution:
The company’s board of directors must pass a resolution to apply for striking off, indicating that the company has ceased operations and wishes to be dissolved.
Filing Form STK-2:
The company must file Form STK-2 with the Registrar of Companies (ROC) along with supporting documents, including the board resolution, indemnity bond, and statement of accounts.
Settling Liabilities:
Before applying, the company must settle all liabilities and close all bank accounts.
Public Notice:
Once the application is submitted, the ROC issues a public notice, giving stakeholders the opportunity to raise objections within a specific period.
Final Strike Off:
If no objections are raised, the ROC proceeds to strike off the company from the register, officially dissolving it.
Issuance of Notice
Appointing a director can bring specialized knowledge and skills that strengthen the company’s leadership, guiding it toward growth and success.
Publication of Notice
The ROC publishes the notice in the Official Gazette, giving stakeholders a chance to raise objections within a stipulated period.
Response from the Company
The company is given the opportunity to respond and provide justifications for continued existence.
Final Strike Off
If no objections are raised or valid reasons provided, the ROC strikes off the company from the register, dissolving it legally.
Cost-Effective Closure:
Striking off a company is a cost-effective way to close down an inactive or defunct business, as it avoids the lengthy and expensive liquidation process.
Simplified Process:
The strike-off procedure is simple and involves less paperwork compared to other methods of winding up a company.
Avoid Future Compliance:
Once a company is struck off, it is no longer required to comply with statutory obligations like filing annual returns or maintaining financial records.
Release from Liabilities:
Directors and shareholders are relieved from the burden of maintaining a non-operational company and its related liabilities once it is legally dissolved.
Quick Dissolution:
The strike-off process usually takes less time, allowing companies to dissolve quickly and efficiently when compared to formal winding-up procedures.
The company’s board of directors must first pass a resolution approving the application for striking off, confirming that the company is no longer operational.
Before filing the application, the company must clear all outstanding liabilities, close all bank accounts, and ensure there are no pending legal obligations.
Once the application is submitted, the ROC publishes a public notice in the Official Gazette and on the ROC website, informing stakeholders that the company is applying for strike-off. Stakeholders have a chance to object within 30 days.
If no valid objections are raised, or if the company resolves them, the ROC proceeds with the strike-off. If any objections arise, the ROC reviews them and may reject or hold the application until resolved.
After the 30-day objection period, and if everything is in order, the ROC strikes the company's name off the register, legally dissolving it.
The ROC publishes the final notice of dissolution in the Official Gazette, confirming the company's strike-off.
End of Legal Existence:
The company ceases to exist as a legal entity. It is no longer recognized in law, and it cannot engage in any business or legal activities.
Termination of Liabilities:
The company’s liabilities and obligations towards creditors, suppliers, and customers are terminated, unless revived by a court or tribunal.
Assets Transfer to Government:
Any remaining assets of the company, including bank balances or properties, automatically vest with the government (under the term “Bona Vacantia”) and can be claimed by the state.
Inability to Sue or be Sued:
Once dissolved, the company cannot initiate legal action or be a party to any lawsuit, except for certain cases where reinstatement of the company may be sought.
Directors and Officers Relieved of Duties:
The directors and officers are relieved from their responsibilities to manage the company’s affairs and maintain statutory compliances.
Reinstatement Possible:
In some cases, a company can be reinstated if any stakeholder petitions for it within the allowed period, especially if the dissolution was improper or unjustified.
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