Introduction

When a company ceases operations and wants to close down legally, strike off under Section 248 of the Companies Act 2013 provides a simplified route for closure. This process is particularly suitable for dormant companies or those with minimal assets and liabilities.

Understanding the strike off process is crucial for company directors, compliance officers, and business owners looking to wind up their companies efficiently while ensuring full regulatory compliance.

Understanding Strike Off Under Section 248

What is Strike Off?

Strike off is a process where a company’s name is removed from the Register of Companies (ROC) maintained by the Ministry of Corporate Affairs (MCA). Once struck off, the company ceases to exist as a legal entity.

Legal Framework:

• Primary Legislation: Section 248 of the Companies Act 2013
• Rules: Companies (Removal of Names of Companies from Register of Companies) Rules 2016
• Forms: STK-2 (Application for Strike Off)

Conditions for Strike Off

1. No Business Operations

• Company has not carried on any business or operations for immediately preceding two financial years
• No significant accounting transactions recorded

2. Asset and Liability Position

• No assets and liabilities OR
• Assets do not exceed ₹1 lakh and liabilities do not exceed ₹1 lakh

3. Compliance Status

• Company is not in default in filing annual returns or financial statements
• All statutory compliances are up to date

4. Legal Clearances

• No pending proceedings before any court, tribunal, or statutory authority
• No investigation pending under Companies Act 2013

5. Secured Creditors

• Company has no secured creditors
• All debts (if any) are settled

6. Public Deposits

• Company has not accepted any deposits from public
• No deposit liability exists

Documents Required for Strike Off

1. Board Resolution

• Resolution approving strike off application
• Signed by all directors
• Clearly stating reasons for strike off

2. Shareholders’ Resolution

• Special resolution passed by shareholders
• 75% majority required for approval
• Consent for strike off application

3. Financial Documents

• Latest audited financial statements
• Statement of assets and liabilities
• Bank statements for last two years

4. Compliance Documents

• Certificate from Company Secretary/Chartered Accountant
• Confirmation of no pending compliances
• ROC filing status certificate

5. Legal Documents

• Indemnity bond by directors
• Affidavit confirming no pending legal proceedings
• NOC from secured creditors (if applicable)

6. Tax Clearances

• Income Tax clearance certificate
• GST clearance certificate
• Professional tax clearance (if applicable)

7. Regulatory Clearances

• NOC from respective regulatory bodies
• Sector-specific clearances (if required)
• Environmental clearance (if applicable)

Step-by-Step Process

Timeline and Fees

Government Fees:

• STK-2 filing fee: ₹10,000
• Additional fees for delayed filings (if applicable)

Important Considerations

Tax Implications:

• Final Tax Returns: Must be filed before strike off
• Tax Clearances: Mandatory from all tax authorities
• Deemed Distribution: May attract tax implications

Regulatory Compliance:

• Sectoral Clearances: Required from respective regulators
• Environmental Compliance: Clearance from pollution control boards
• Labour Law Compliance: Settlement of all employee dues

Conclusion

Strike off under Section 248 provides an efficient mechanism for company closure, particularly suitable for dormant companies. However, it requires careful planning, complete documentation, and full compliance with regulatory requirements.

The process, while streamlined, demands attention to detail and professional expertise to ensure smooth execution. Companies considering strike off should evaluate their eligibility carefully and engage qualified professionals to navigate the process successfully.

Remember that strike off is a permanent decision with significant legal and financial implications. Therefore, it’s essential to consider all alternatives and ensure complete compliance before initiating the process.