It is ideal to leave a sinking and an ill-fated ship than to go down with it. A business might require to be shut for several reasons: business failure or any other unavoidable situations. This write up will aid you in learning several ways to dissolve a company in India.
As per Companies Act 2013, a Company can be shut in two ways.
1. Winding Up
Winding up can be a bit cumbersome and is executed either voluntarily by scheduling a meeting of all stakeholders and passing a special resolution or on the order of Court or Tribunal. Strike Off mode was initiated by the MCA to help the defunct companies to get their names eliminated from the Register of Companies. On 27th December 2016, MCA informed new rules i.e. Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 standard norm for closing the private limited company as per companies act 2013. By releasing the form STK 2, the ministry of Corporate Affairs has brought the Section 248- 252 of 2013 act into force.
2. Fast track Exit
This is a process that was worth the wait and got enabled on 5th April 2017. This method was brought in the Section 248 of Companies Act 2013. Fast Track exit happens in two ways:
Suo Moto by Registrar
The registrar would take down the name of Company on his own if:
Company is unable to start any business in a year of its incorporation
The company has not performed any business or Activity for the last 2 financial years and has not asked for the status of Dormant Company.
The Registrar provides a notice (STK-1) of his intent to take off the name and ask for the Company representation in 30 days.
To be noted: Liability on the part of Directors of the company will remain. ROC can activate penalty clauses anytime, and the penalty usually ranges from INR 50K to INR 5Lakhs per director.
Voluntary Elimination of Name with Form STK 2
The company can even file an application to the Registrar of Companies for taking down the name by filing form STK-2 together with a fee of Rs 5000/-. Once the form is filed, the Registrar has the authority to convince him that all outstanding amount of the company for the meeting and its liabilities and other obligations have been realized. ROC can also give a show cause notice if there is a default in filing returns or other obligations. Post above formalities, ROC gives a public notice and takes off the name of Company post its expiry.
Note: The form is in approval. So, relevant ROC can seek the completion of the fillings.
Details needed
- Incorporation Certificate
- Director Identification Number
- Pending Litigation Proceedings if any
Documents needed
- Application in form STK-2
- Government filing fees: INR 5,000/-
- Copy of Board resolution empowering the filing of this application;
- A statement of accounts displaying the assets and liabilities of the Company created till a day, not more than thirty days prior to the date of application and authorized by a Chartered Accountant
- The shareholder’s approval through Special Resolution
- If a company governed by any other authority, consent of such authority shall also be needed.
- Copy of concerned order for delisting, if any, from the relevant Stock Exchange;
- Indemnity bond in Form No. STK-3;
- Affidavit in Form No. STK-4
Note: This form has to have the signature of a practicing CA or CS
Companies that are not fit to file for voluntary strike-off: A company lis not supposed to file the form STK 2 at any time in the last 3 months if the company has
Changed its name or moved its registered office from one State to another;
Created a disposal for property value or rights held by it, urgently
Before cesser of trade or otherwise performing business, for the sake of disposal for gain in the usual course of trading or otherwise conducting business;
Involved itself in any other activity other than the one which is essential or expedient for the sake of making an application according to that section, or deciding to do so or finishing the affairs of the company or adhering to any statutory requirement;
Filed an application with the Tribunal for the approval of a compromise or arrangement and the matter is still pending conclusion; or
Wound up under Chapter XX of Companies Act or under the Insolvency and Bankruptcy code, 2016
Companies that are forbidden from using Fast Track Exit option:
Companies Registered Under Section 8
Listed companies
Companies delisted as a result of non-compliance of listing regulations or listing agreement or any other statutory laws;
Vanishing companies;
Companies where inspection or probe is ordered and going on or actions on such order have not been taken up or were concluded but prosecutions as a result of such inspection or investigation are pending in the Court;
Companies where notices were served by the Registrar or Inspector (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Act)and reply thereto is pending;
Companies facing prosecution for an offense that is pending before any court;
Companies whose application pertaining to compounding is pending;
Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
Companies possessing charges which happen to be pending for satisfaction.
Once your company name is struck off from Register:Once the name of the company is taken off from Register, from the date specified in the notice under sub-section (5) of section 248, such an entity stops functioning as a company and the Certificate of Incorporation issued to it will be considered as cancelled from such date except for the sake of recouping the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.