Strike off of Company
Strike off or closure of a company is the legal process of dissolving a company that is no longer carrying on business or has become defunct. Companies may be struck off for various reasons including business failure, completion of business objectives, or voluntary closure by shareholders. The strike off process can be initiated voluntarily by the company through the Fast Track Exit (FTE) mode or Strike Off application, or involuntarily by the Registrar of Companies (ROC) for non-compliance. The process involves settling all liabilities, obtaining necessary clearances, filing required forms with the Ministry of Corporate Affairs (MCA), and ensuring compliance with tax and regulatory requirements. Proper closure is essential to avoid future legal complications and liabilities for directors and shareholders.
Why Strike Off a Company?
- Business Failure: Company has failed to achieve its business objectives and is no longer viable
- Completion of Object: Company has completed the specific purpose for which it was incorporated
- Financial Losses: Continuous losses making business operations unsustainable
- Market Conditions: Unfavorable market conditions or industry downturn
- Strategic Decision: Strategic decision to close business and pursue other opportunities
- Merger/Acquisition: Company being merged or acquired by another entity
- Regulatory Issues: Inability to comply with increasing regulatory requirements
- Retirement: Proprietor or key shareholders retiring with no succession plan
- Non-Compliance: Company wants to avoid penalties for non-compliance by closing properly
- Cost Savings: Avoiding ongoing maintenance costs and compliance expenses
Types of Company Closure
- Voluntary Strike Off: Company voluntarily applies for strike off through FTE or normal mode
- Involuntary Strike Off: ROC strikes off company for non-compliance (no filings for 2+ years)
- Fast Track Exit (FTE):strong> Quick closure for dormant companies with no assets/liabilities
- Normal Strike Off: Standard closure process for companies with assets/liabilities
- Winding Up: Formal winding up process through National Company Law Tribunal (NCLT)
- Defunct Company Closure: Closure of companies that have not commenced business or ceased operations
- Amalgamation/Merger: Closure through merger with another company
Eligibility for Fast Track Exit (FTE)
- No Business Activity: Company has not carried on any business activity or operation
- No Assets/Liabilities: Company has no assets and liabilities as on application date
- No Pending Litigation: No legal proceedings pending against the company
- No Tax Dues: No outstanding tax liabilities with income tax, GST, or other authorities
- No Statutory Dues: No dues to employees, creditors, or government authorities
- Not Listed: Company is not listed on any stock exchange
- Not Converted: Company has not converted from one type to another in past 3 years
- No Public Deposits: Company has not accepted public deposits
- No Secured Loans: Company has not taken any secured loans
- Filing Compliance: Company has filed all statutory returns up to date
Detailed Process: Fast Track Exit (FTE)
| Step |
Action |
Timeline |
Responsible |
| 1 |
Convene board meeting to approve strike off |
Day 1 |
Board of Directors |
| 2 |
Pass board resolution for FTE application |
Day 1 |
Board of Directors |
| 3 |
Obtain shareholder consent (75% majority) |
Day 5-10 |
Shareholders |
| 4 |
File all pending statutory returns |
Day 10-20 |
Company Management |
| 5 |
Obtain NOC from tax authorities |
Day 20-30 |
Tax Authorities |
| 6 |
File Form STK-2 with MCA |
Day 30-35 |
Professional/Company |
| 7 |
ROC verification and approval |
Day 35-60 |
Registrar of Companies |
| 8 |
Strike off notice published in Gazette |
Day 60-90 |
Registrar of Companies |
| 9 |
Company name removed from register |
Day 90-120 |
Registrar of Companies |
Documents Required for Company Strike Off
- Certificate of Incorporation (COI) of the company
- MOA and AOA (certified true copy)
- Board resolution for strike off
- Notice of board meeting
- Shareholder consent (special resolution)
- Notice of general meeting (EGM) if required
- Latest audited financial statements
- Nil balance sheet and profit & loss account
- Affidavit from directors (no assets/liabilities)
- Indemnity bond from directors
- Statement of accounts (assets/liabilities)
- NOC from income tax department
- NOC from GST department (if registered)
- NOC from secured creditors (if any)
- Closure of bank accounts (certificate)
- Form STK-2 application
- Company PAN card copy
- DIN numbers of all directors
- CIN of the company
- Proof of closure of all registrations
Forms Required for Strike Off
| Form |
Purpose |
Filing Timeline |
Attachments |
| STK-2 |
Application for strike off of company |
After obtaining all NOCs |
Board resolution, affidavit, indemnity bond, NOCs |
| MGT-14 |
Filing of special resolution (if required) |
Within 30 days of special resolution |
Special resolution copy, attested copy |
| DIR-3 KYC |
Director KYC (must be up to date) |
Before strike off application |
Director PAN, Aadhaar, address proof |
Key Compliance Requirements Before Strike Off
- Tax Clearance: Obtain NOC from income tax department (no pending tax dues)
- GST Cancellation: Cancel GST registration (if registered)
- Bank Account Closure: Close all bank accounts of the company
- Asset Disposal: Dispose of all company assets properly
- Liability Settlement: Settle all liabilities with creditors and suppliers
- Employee Settlement: Settle all employee dues (salary, gratuity, PF, ESIC)
- Statutory Filings: File all pending statutory returns (MCA, GST, Income Tax)
- License Cancellation: Cancel all business licenses and registrations
- DIN Deactivation: Directors may apply for DIN deactivation after strike off
- Record Preservation: Preserve company records for 8 years after strike off
Important Points to Note
- Director Liability: Directors remain liable for company liabilities even after strike off
- Asset Disposal: All assets must be disposed before strike off application
- Liability Settlement: All liabilities must be settled before closure
- Timeline: Complete process typically takes 90-120 days
- Filing Fees: Government filing fees apply for strike off application
- Professional Fees: Professional fees for documentation, filing, and compliance support
- Record Preservation: Company records must be preserved for 8 years after strike off
- Penalties: Non-compliance attracts heavy penalties under Companies Act
- Revival Possibility: Struck off company can be revived within 20 years with NCLT approval
- Director Disqualification: Directors of struck off companies face DIN disqualification for certain period
- Credit Impact: Strike off may impact credit rating of directors
- Legal Validity: Strike off is effective only after ROC approval and Gazette notification
Comparison: FTE vs Normal Strike Off
| Aspect |
Fast Track Exit (FTE) |
Normal Strike Off |
| Eligibility |
No assets, no liabilities, no business activity |
Companies with assets/liabilities |
| Timeline |
90-120 days |
6-12 months (or longer) |
| Process |
Simplified process with minimal documentation |
Detailed process with comprehensive documentation |
| Cost |
Lower government fees |
Higher government fees |
| Approval |
ROC approval required |
ROC approval + NCLT approval (in some cases) |
| Complexity |
Low complexity |
High complexity |
Consequences of Involuntary Strike Off
| Consequence |
Description |
Impact |
| Director Disqualification |
Directors disqualified for 3-5 years |
Cannot become director in other companies |
| Asset Forfeiture |
Company assets may be forfeited to government |
Loss of company assets |
| Legal Action |
Creditors can take legal action against directors |
Personal liability for company debts |
| Tax Penalties |
Heavy tax penalties and interest |
Financial burden on directors |
| Credit Impact |
Negative impact on credit rating |
Difficulty in obtaining loans/credit |
| Revival Difficulty |
Revival requires NCLT approval and is expensive |
Costly and time-consuming process |
Penalties for Non-Compliance
- Company Penalty: Fine ranging from ₹1 lakh to ₹10 lakh for non-compliance
- Director Penalty: Fine ranging from ₹1 lakh to ₹10 lakh for individual directors
- Additional Fees: Additional government fees for delayed filings
- Disqualification: Directors disqualified for 3-5 years from holding director positions
- Legal Action: Prosecution under Companies Act for willful default
- Asset Forfeiture: Company assets may be forfeited to government
- Personal Liability: Directors may face personal liability for company debts
- Tax Penalties: Heavy tax penalties and interest for non-compliance
- Banking Issues: Permanent impact on credit rating and banking relationships
- Reputation Damage: Severe damage to professional reputation
Benefits of Professional Company Strike Off
- Expert Guidance: Professional assistance throughout the strike off process
- Compliance Assurance: Ensures compliance with all Companies Act requirements
- Timely Filing: Timely filing of all necessary forms with MCA
- Documentation: Proper preparation and maintenance of all documents
- Board Support: Assistance in conducting board meetings and drafting resolutions
- Tax Clearance: Help in obtaining NOCs from tax authorities
- Regulatory Liaison: Liaison with ROC and other regulatory authorities
- Asset Disposal: Guidance on proper disposal of company assets
- Liability Settlement: Assistance in settling all liabilities properly
- Risk Mitigation: Avoids penalties and legal complications
- Peace of Mind: Allows management to focus on closure without stress
Post-Strike Off Requirements
- Record Preservation: Preserve company records for 8 years after strike off
- DIN Deactivation: Directors may apply for DIN deactivation after strike off
- PAN Surrender: Surrender company PAN card after strike off
- Bank Account: Ensure all bank accounts are closed
- License Cancellation: Confirm cancellation of all business licenses
- Asset Disposal: Ensure all assets are properly disposed
- Liability Settlement: Confirm all liabilities are settled
- Employee Settlement: Confirm all employee dues are paid
- Tax Compliance: Confirm all tax liabilities are cleared
- GST Cancellation: Confirm GST registration is cancelled
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