Lawsikho Blog

Learn how to close a company through the strike-off process under section 248 of the Companies Act 2013. If you are a lawyer advising clients with the winding-off process, then this article can teach you an alternate procedure that is less complex and time-consuming than winding up.

Introduction

I remember that call I received from Mr. Sharma in 2023, around the same time the Minister of State for Corporate Affairs, Mr. Rao Inderjit Singh, informed the Lok Sabha that 128,000 companies had been struck off. 

His company was among the 128000 companies that “disappeared” from the ROC register without his knowledge. 

The panic in Mr Sharma’s voice lives in my head rent-free. “How can my company just vanish?” he demanded. 

His company assets, including a commercial property valued at ₹3.5 crore in South Delhi, were now at risk of being classified as “ownerless property.” 

Just so you know, Mr. Sharma was a sophisticated businessman who had never heard of strike-off companies by the Registrar of Companies (RoC).

Believe me, I have noticed that striking off a company through RoC is the least known way of closing a company. 

This process is laid down in section 248 of the Companies Act, 2013 (the Act). 

For corporate lawyers and students, it is essential to understand strike off procedure to provide strategic advice to corporate clients.

That is why, in this article, I am guiding you through the process of striking off a company voluntarily. 

The law around strike-off

Let me start by explaining the concept of “strike-off”. 

The term “strike-off” refers to the removal of a company’s name from the ROC. 

The legal framework for this process is found in sections 248 to 252 of the Companies Act, 2013, along with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. 

Section 248 is particularly important as it grants the Registrar the power to remove a company’s name from the register under certain circumstances, such as:

• when the company has failed to commence business within one year of incorporation;
• when the company has not been carrying on any business or operation for two immediately preceding financial years and has not made any application for dormant company status
• when the company itself applies for removal under specific conditions

It is worth noting what “dormant status” means in this context. 

Section 455 of the Companies Act allows a company to apply for “dormant company” status if it: – 

• Has no significant accounting transactions during the previous financial year, or 
• Is formed for a future project,
• Is holding assets/intellectual property and has no significant accounting transactions,
• Is an inactive company that has not been carrying on business activity but does not want to be struck off 

To obtain dormant status, a company files Form MSC-1 with the ROC after passing a special resolution or getting board approval. This status reduces compliance requirements while maintaining the company’s legal existence. 

A dormant company must file an annual return in Form MSC-3 and can remain dormant for up to five consecutive years. This option is ideal for companies that may resume operations in the future or wish to preserve valuable intellectual property or business names without the full compliance burden of an active company. 

By applying for dormant status, a company can avoid being targeted for strike-off under section 248(1).

Talk about the differences between strike-off and winding-up

I have seen way too many professionals mix up ‘strike-off’ and ‘winding-up’ like they are the same thing. However, there is a huge difference between the two. 

Let us clear that up right away with a simple table to lay out the difference.

Types of strike-off

You cannot explain strike-off procedures to clients unless you have absolute clarity. When advising clients, I often use this simple analogy: 

• voluntary strike-off is like an amicable divorce, 
• while involuntary is more like being served divorce papers unexpectedly. 

Voluntary strike-off

Let us talk about Voluntary strike off first. 

I remember my first experience with voluntary strike-off. 

It was with a tech startup that was about to go bankrupt three times before the founders decided to call it quits. 

The relief on their faces was palpable when my senior told them about a simpler alternative to wind-up their company. 

But here is the catch. 

There are certain conditions that must be fulfilled before a company can file a striking off application with the RoC. 

It is important for you to know that a company can voluntarily apply for a strike-off under section 248(2) of the Act if it meets the following conditions:

• the company has extinguished all its liabilities and has properly disposed of or transferred any assets before filing the application.
• it has not commenced business operations or has not been carrying on business for the previous two years.
• it has no pending litigation or prosecution.
• it is not under inspection or investigation. 
• it has no outstanding statutory dues.
• it has no application for compounding pending before the competent authority for compounding the offences committed by the company or any of its officers in default,
• it is not listed on any stock exchange.
• it has secured the approval of concerned regulatory authorities in specified cases.
• it has no amount of public deposits as outstanding, or the company has not defaulted in repayment of the same.

Advantages of voluntary strike off

When comparing options with clients, it is important that you demonstrate the cost breakdown of both routes, i.e, voluntary strike off or a winding up. 

A voluntary strike-off can save a lot of money for your client and typically takes between 3-12 months, depending on case complexity, though the establishment of C-PACE has improved processing times significantly.

With the establishment of C-PACE, I have seen straightforward strike-offs wrapping up in 3-6 months, though more complex cases can take longer if there are regulatory concerns or objections from stakeholders.

There are several advantages of taking a voluntary strike-off route, as depicted in the infographic:

• Cost effective: Trust me on this one. Your wallet will thank you! You are basically looking at the ₹10,000 filing fee for Form STK-2 plus whatever your lawyer charges. 
• Time efficient: I have seen strike-offs wrapping up in just 3-6 months. 
• Minimal documentation: Do not get me wrong. You will still be signing papers. But we are talking a manageable stack rather than the forest of documents needed for winding-up. 
• No NCLT involvement: Say goodbye to those endless NCLT hearings! I remember spending three full days at NCLT for a winding-up that could have been a simple strike-off. No tribunal means no adjournments, no court appearances, and no explanation to your client as to why things are taking forever.
• Controlled process: Here is something my clients love. You and your fellow directors stay in the driver’s seat throughout. They decide the timing, they control the process, and they are not at the mercy of a liquidator’s schedule. 

Involuntary strike-off

The aftermath of an involuntary strike-off can be devastating. 

I have seen directors scrambling to restore their companies years later when creditors claiming pending dues suddenly appeared. 

One particularly memorable case involved a client named Mr. Kathpalia. 

He discovered that he was disqualified as a director when he approached HDFC Bank to apply for a home loan. 

The bank’s rejection was his first indication that his company had been struck off for non-compliance.

Let me show you the situations under which the RoC can initiate the strike-off process under section 248(1) of the Act. It is when the company:

• has not started business within one year of incorporation
• has not carried on any business or operation for a period of two immediately preceding financial years and has not made any application for obtaining the status of a dormant company under section 455.
• the subscribers to the memorandum have not paid the subscription money which they had undertaken to pay within 180 days from the date of incorporation of a company and a declaration under subsection (1) of section 10A to this effect has not been filed within 180 days of its incorporation.
• the company is found to be not carrying on any business or operations, as revealed after physical verification carried out under sub-section (9) of section 12.

Risks and consequences for directors and shareholders

Involuntary strike off brings business risks for directors. 

Under section 164(2), directors of companies that fail to file financial statements or annual returns for three consecutive years may be disqualified from directorship in all companies. 

This disqualification continues until compliance is restored or the company ceases to exist legally, and is not necessarily tied to the strike-off itself, though strike-off may occur as a consequence of the same non-compliance. Therefore, you need to understand the severe implications of an involuntary strike-off:

• directors may remain personally liable for all lawful claims against the company.
• under section 164(2), directors of companies struck off for non-filing of financial statements or annual returns for three consecutive years may be disqualified from directorship for five years.
• company assets become ownerless and may be claimed by the government.
• stakeholders may petition for company restoration, leading to unexpected legal challenges years after the strike-off.
• an involuntary strike-off creates a negative record that can affect future business opportunities.

Step-by-step guide to voluntary strike-off

I think the time is ripe for me to share with you the step-by-step guide for striking off a company voluntarily. 

Let us have a look at the infographic to get a quick understanding of the steps involved:

Let me share a recent case that illustrates the practical application of this procedure. 

Samarth Technologies Pvt. Ltd., a software development company incorporated in Bangalore in 2018, approached me in July 2023. 

The three directors (names anonymised for confidentiality), had decided to shut down operations after their main product failed to gain market traction.

Note: The following case study is based on real experiences but has been anonymised and modified to protect client confidentiality. Company and director names, specific dates, and exact financial figures have been altered.

Nevertheless, this is how I navigated through the strike-off process:

Step 1: Conduct a board meeting

My first action was to organise a formal board meeting. For this purpose, I prepared the Notice of Board Meeting along with the agenda. 

We scheduled it for July 15, 2024, with all three directors present. I drafted a detailed agenda outlining:

• the rationale for considering the strike-off route
• confirmation of eligibility criteria (the company had negligible operations for the past two years)
• the legal consequences and directors’ continuing liabilities

During the meeting, the directors unanimously passed a board resolution approving the strike-off application and authorised Rajiv Mehta to sign and file the necessary forms. A draft notice for calling an Extraordinary General Meeting of shareholders was also approved by the board. 

I ensured the meeting was properly documented with meticulous minutes, as I’ve seen applications rejected simply because of procedural deficiencies in this initial step.

Click here to see the draft documents prepared for the board meeting.

Step 2: Settle liabilities and assets

The company had minimal assets, just some office equipment valued at approximately ₹2.5 lakhs and a bank balance of ₹3.75 lakhs. However, there were several outstanding liabilities such as:

• An office lease with 3 months remaining (₹1.5 lakhs)
• Outstanding salary to two part-time developers (₹90,000)
• GST dues for the previous quarter (₹42,000)
• A small business loan from HDFC Bank (₹2.1 lakhs)

I worked with the directors to systematically settle each liability:

• We negotiated an early termination of the lease by paying a one-month penalty
• All employee dues were cleared with proper documentation
• The GST dues were paid, and we obtained a clearance certificate
• The HDFC loan was fully settled, and we secured a no-dues certificate

A critical step was closing the company’s bank accounts after settling all payments, but keeping detailed records of the final bank statements. 

I prepared a comprehensive asset-liability statement showing zero outstanding obligations.

Step 3: Obtain approval from shareholders

Since Samarth Technologies had five shareholders beyond the three directors, we needed formal shareholder approval. I carefully prepared and sent:

• a notice for an Extraordinary General Meeting with a 21-day notice period
• a detailed explanatory statement outlining the reasons for the strike-off
• a draft special resolution for shareholder consideration

Click here to see the documents.

The EGM was held on August 20, 2023, where we achieved the required 75% majority approval. 

Two shareholders initially raised concerns about potential future business opportunities, but after explaining the revival provisions under section 252 of the Act, they consented. 

I ensured proper recording of attendance, voting patterns, and comprehensive minutes elements that are frequently scrutinised by the ROC.

Step 4: File application with ROC (Form STK-2)

With all prerequisites in place, I prepared the STK-2 application, which included documents such as:

• The board resolution authorising the strike-off application
• The special resolution with EGM notice and minutes
• An indemnity bond (Form STK-3) executed on ₹500 non-judicial stamp paper, signed by all three directors
• Individual affidavits (Form STK-4) from each director on ₹200 stamp paper
• Statement of accounts (Form STK-8) prepared within 30 days of the application date
• Bank statements showing a zero balance after all settlements

I double-checked every document against the ROC checklist before submission. 

We paid the filing fee of ₹10,000 and submitted the application to the Centre for Processing Accelerated Corporate Exit (C-PACE) on September 5, 2023.

The Centre for Processing Accelerated Corporate Exit (C-PACE) is a centralized facility established by the Ministry of Corporate Affairs in 2023 to streamline the strike-off process. Located at the Indian Institute of Corporate Affairs in Manesar, Haryana, C-PACE significantly improves processing times, reducing them from approximately 180 days to 70-90 days by centralizing applications under section 248 of the Companies Act. This initiative reflects the government’s commitment to enhancing the ease of doing business by simplifying exit procedures.

Step 5: ROC publication and objection period

After the initial scrutiny, the ROC published the strike-off notice in:

• The Official Gazette on October 12, 2023
• The MCA website on October 10, 2023

I advised my clients that while the rules specify a 30-day objection period, the practical timeline is often longer. 

I monitored both the Official Gazette and the MCA website regularly, as the ROC does not always notify applicants when the notice is published.

As a precautionary measure, we also published a voluntary notice in a local Bangalore newspaper to preemptively address any potential stakeholder concerns. 

No objections were received during the 30-day period.

Step 6: Final strike-off from ROC

After the objection period elapsed without incident, we monitored the process for the final strike-off. The ROC issued the final gazette notification on December 18, 2023, officially striking off Samarth Technologies from the register.

The MCA database was updated on December 22, 2023, changing the company status to “Struck Off.” However, we did not automatically receive Form STK-7 (the strike-off certificate). 

I had to follow up with a formal letter to the ROC requesting it, which we finally received on January 10, 2024.

I compiled a comprehensive dossier of all documents related to the strike-off process and advised the directors to preserve these records for at least 20 years—the maximum period during which the company could potentially be restored by creditors, members, or workmen under section 252(3), though the ROC itself is limited to a 3-year window for restoration applications under section 252(1). 

I also provided them with detailed guidance on their continuing obligations and potential liabilities as directors of a struck-off company.

The entire process took approximately 6 months from the initial board meeting to the final strike-off, demonstrating the efficiency of this route compared to formal winding-up proceedings, which could have taken over a year.

Consequences of being struck off

Consequences of being struck off

I need to be brutally honest with you here. 

Many directors breathe a sigh of relief once their company is struck off, thinking they have closed that chapter of their life. 

But here is what they do not realise—and what I always make a point to explain in clear terms.

Just a few months back, I got a call from a former client whose company was struck off three years ago. 

He had just received a notice from GST authorities for dues that predated the strike-off. 

The poor guy thought he was completely in the clear! 

“But my company does not exist anymore,” he argued. 

I had to give him the news he did not want to hear: “Yes, but your liability still does.” 

Under the Central Goods and Services Tax Act, 2017, tax authorities can pursue claims for pre-strike-off periods even after a company has been dissolved. 

This can occur when GST dues were undisclosed during the strike-off process, tax assessments were pending at the time of strike-off, or if authorities determine there was a deliberate attempt to evade tax obligations. 

Section 84 of the CGST Act specifically deals with the continuation of liability in cases of company liquidation. This underscores the importance of obtaining proper tax clearances before applying for strike-off and ensuring all tax filings are complete and accurate. Failure to do so can result in personal liability for directors long after they believe their company matters are settled.

Moreover, section 248(7) of the Act explicitly states that directors, managers, and other officers involved in the company’s management remain liable as if the company had never been dissolved. 

This liability does not just linger for a year or two. 

Technically, liability can continue for a significant period after strike-off. Under section 252(1), the ROC can apply for restoration within 3 years if the strike-off was based on incorrect information. Separately, under section 252(3), aggrieved parties such as members, creditors, or workmen may apply to the NCLT for restoration within 20 years from the date of dissolution.

Two decades of potential liability hanging over your head!

Even more alarming are the consequences for directors who were not entirely truthful in their strike-off applications. I have seen cases where directors faced:

• penalties for fraud as provided under section 447 of the Act, which can include imprisonment and substantial financial penalties;
• disqualification from holding any directorship positions
• personal liability for company debts they thought were long buried
• criminal prosecution that came out of nowhere years later

This is why I always tell my clients: “Do not think of strike-off as a clean break—think of it as a long-distance relationship with your liabilities.”

Revival of a struck-off company

While I have focused primarily on the strike-off process, it is important to understand that a struck-off company can be restored under certain circumstances.

Section 252 of the Companies Act, 2013 provides for two distinct revival processes:

1. ROC-Initiated Revival (Section 252(1)): If the Registrar believes that the company was struck off due to inadvertence or based on incorrect information, the Registrar can apply to the National Company Law Tribunal (NCLT) for restoration within 3 years from the date of strike-off.

2. Aggrieved Party Revival (Section 252(3)): Any member, creditor, or workman affected by the strike-off can apply to the NCLT within 20 years from the date of dissolution for restoration if they can prove that:

• the company was actually operating at the time of the strike-off, or
• the revival is justified to pursue a legal claim or settle company affairs

The revival procedure typically involves: –

• Filing an application with the NCLT (in Form NCLT-9)
• Providing evidence of standing as an aggrieved party
• Demonstrating grounds for restoration
• Paying all pending fees, penalties, and compliance costs
• Obtaining the NCLT order for restoration
• Filing the order with the ROC for implementation

If the NCLT approves the revival, the company is deemed to have continued in existence as if its name had never been struck off. All rights, liabilities, and properties revert to the company, and it becomes responsible for pending compliances from the intervening period.

This revival possibility reinforces why directors must maintain records and remain vigilant about potential liabilities even years after a strike-off.

Common practical problems and how to handle them

In my 10 years of experience, I have handled numerous strike-off applications. Just like any other lawyer, I too made mistakes. 

But I do not want you to make the same mistakes that I did. Therefore, here are the frequent pitfalls and their solutions in a tabular form:

Issues arising from non-compliance before the strike-off application

Before starting the strike-off process, do a short due diligence to confirm previous non-compliance. 

Non-compliance with provisions of the Act can significantly complicate the strike-off process. I am dropping some of the common non-compliances you may find before you file an STK-2 form for your client.

Final thoughts

Before concluding, let me clue you in with the market reality.

I am about to tell you something that most corporate law practitioners would not tell you.

Strike-off applications can be financially rewarding for legal professionals while requiring relatively straightforward work. 

Through my years of handling these applications in the Delhi NCR region, I have observed that clients are often willing to pay premium fees for what they perceive as eliminating a significant burden. 

In my experience, a process that might require approximately 10-15 hours of work may command fees ranging from ₹50,000-₹1,00,000, depending on factors such as the company’s size, complexity, location, and the experience level of the professional handling the matter. 

These figures are indicative based on my practice in Delhi and may vary significantly across different regions and firms. 

The professional fee typically scales with the complexity of the company’s structure, the extent of its operations, and any unique challenges that may arise during the process. 

I recommend researching prevailing fee norms in your practice area and tailoring your pricing strategy to reflect the value you provide.

Remember, clients are not just paying for paperwork. 

They are paying for peace of mind and the expertise that prevents costly mistakes. 

By positioning yourself as a strategic advisor rather than a form-filler, you are not just closing companies; you are opening the door to a steady, profitable revenue stream in your practice.

Frequently Asked Questions

1. Can a company with pending litigation apply for a strike-off?

No. Section 248(2) explicitly prohibits companies involved in any pending litigation from applying for voluntary strike-off. The company must first resolve all litigation through settlement, court judgment, or withdrawal of legal proceedings before becoming eligible for the strike-off process.

If litigation arises after submitting the strike-off application, the company should immediately inform the ROC and may need to withdraw its application.

To prevent this outcome, all company assets should be properly disposed of or transferred before applying for a strike-off.

2. Can a struck-off company still face legal action?

Yes. Section 248(7) of the Companies Act, 2013, explicitly states that the liability, if any, of every director, manager, or other officer who was exercising any power of management, and of every member of the struck-off company, continues and may be enforced as if the company had not been dissolved.

Additionally, the company itself can be restored to the register upon application by aggrieved parties within 20 years, after which legal proceedings against the company can continue.

3. What’s the timeline typically involved in the voluntary strike-off procedure?

The voluntary strike-off procedure typically takes 3-12 months, but timelines can vary based on several factors:

1. Preparation Phase: 2-4 weeks
   • Board and shareholder meetings
   • Settlement of liabilities
   • Document preparation
2. Application Filing: 1-2 weeks
   • Form STK-2 submission
   • Document verification by ROC
3. Public Notice Period: 30 days minimum
   • Publication in the Official Gazette
   • Objection window
4. Objection Resolution: Variable (if applicable)
   • 2 weeks to several months, depending on the nature of the objections
5. Final Strike-off: 2-12 weeks after completion of the objection period
   • Final Gazette notification
   • Status update in MCA records

For companies with complex financial histories, multiple creditors, or regulatory complications, the process may extend to 12-18 months, depending on the backlog with RoC.