Do you want to close a company?

The total number of companies registered in India, as on 30th November, 2018, stood at 18,28,595. Of them, 6,54,646 companies were closed; 1547 companies were assigned dormant status as per the Companies Act, 2013; 6,301 companies were under liquidation; 38,522 companies were in the process of being struck-off and 101 companies were in the process of being re-activated. There were 1,127,477 active companies as on 30th November, 2018. This means around 38% of the companies were inactive. (Source: MCA Monthly Information Bulletin, November 2018)

Such inactive companies may be inoperative since incorporation or may have commenced business but may have become inoperative or defunct due to various reasons.

If your are reading this post, you might have such an inactive company. If you have one, best option is to close the company.

There are two ways to close an inactive company:

1. Removal of name of the Company from the records of Registrar of Companies
2. Voluntary winding up by members or creditors.

In this post, I will take you through the strike-off mode to close a company. This option is comparatively easy and quick and require less formalities.

In 2011, MCA introduced an exit scheme (general circular no. 36/2011 dated June 7, 2011) for defunct companies. This scheme is known as Fast Track Exit (FTE) mode. A defunct company can make an application under FTE mode to get its name strike off from the records of Registrar of Companies. However, the decision of the Registrar of Companies in striking off the name of the company will be final.

In December 2016, MCA replaced the scheme with new rules known as Companies (Removal of Names of  Companies from the Register of Companies), Rules, 2016.

Which companies can apply for strike-off?

A company which has :

• not started its business activity or operation within one year of its incorporation

OR

• not been carrying any business activity or operation for the last two immediately preceding financial years and has not made any application for dormant status.

OR

• the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of the company and have not filed a declaration to that effect within 180 days of its incorporation.

Hence, an active or dormant company, which fulfills the above criteria, can make an application for strike off of its name.

Which companies cannot apply for strike-off?

The following companies cannot apply for strike-off:

• listed companies
• companies that have been delisted due to non-compliance of listing agreement or any other statutory Laws;
• companies registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act. 2013;
• vanishing companies;
• companies where inspection or investigation is ordered and being carried out or action on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
• companies where notices under section 234 of the Companies Act, 1956 or section 206 or section 207 of the Companies Act, 2013 have been issued by the Registrar of the Inspector and reply is pending or report under section 208 has not been submitted or follow up of the instructions is pending or where any prosecution arising out of such inquiry or scrutiny  is pending in court;
• companies against which prosecution for any offence is pending in any court;
• companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;
• companies, which have accepted public deposits, which are outstanding or company has made default in repayment of the same;
• companies having charge which are pending for satisfaction.

How can a company apply for strike-off?

The company has to file Form STK-2 with the MCA, The form has to filed online. The filing fees is Rs. 10,000/-

The following are the attachments along with the form:

1. An indemnity bond in form STK – 3 by every director, either individually or collectively  (Click here to download the format of indemnity bond).
2. An affidavit in form STK – 4 duly signed by every director.  (Click here to download the format of affidavit).
3. A statement of accounts prepared as on date, not more than 30 days before the date of filing of application, duly certified by a Chartered Accountant in whole time practice.
4. A copy of board resolution authorising a director to file the form. (Click here to download a suggested draft of  board resolution)
5. A copy of special resolution duly certified by each of the directors of the company OR consent of 75% of the shareholders in terms of paid-up capital of the company. (Click here to download a suggested draft of special resolution)
6. A statement regarding pending litigation, if any, involving the company. (Click here to download a suggested draft of the statement)

Some more points to be taken care of:

1. The form has to be digitally signed by the Director authorised by the Board.
2.  In case the director does not have a digital signature, a physical copy of  the form duly filled in, should be signed manually by a director authorised by the Board of Directors of the company and should be attached to the form STK – 2 at the time of filing.
3. Form STK-2 must be certified by a CA / CS / CWA in whole time practice
4. The company also needs to get order from concerned regulatory authority, like SEBI, approving the filing of application for strike-off.
5. In case of foreign national or NRIs, the Affidavit and the Indemnity Bond shall be notarized as per the laws of respective countries.

After filing the application:

1. Once the Registrar of Companies finds the application in order it will publish a notice on the website of MCA as well in the Official Gazette and two newspapers. It will also inform the concerned regulatory authorities concerning the company like income tax, service tax and central excise.
2. If withing 30 days of publishing the notice, the Registrar of Companies does not receive any objection, it shall strike the name off the register.
3. Registrar will then send notice for publication in the Official Gazette. The company shall stand dissolved from the date of publication of the notice in the Official Gazette.
4. Upon approval of the application form, status of the company shall be changed to ‘Struck off’ from the Registrar of Companies.

If you need any assistance in applying for strike-off of you company name, you can write to me at kruti@cskruti.com.