Strike Off of Company

Strike off refers to the removal of a company's name from the Register of Companies maintained by the Registrar of Companies (ROC). Once struck off, the company ceases to exist as a body corporate, although the liability of every director, manager, and member continues as if the company had not been dissolved. Section 248 of the Companies Act, 2013 lays down the provisions governing both voluntary and compulsory (suo motu) strike off of companies in India.

Voluntary Strike Off

Under Section 248(2), a company may apply to the ROC for striking off its name from the Register. To be eligible, the company must have not commenced business within one year of incorporation, or must not have been carrying on any business or operation for a period of two immediately preceding financial years and has not made any application for obtaining dormant status during this period. The application is made in Form STK-2, accompanied by a special resolution or consent of at least 75% of the members.

Before filing the application, the company must ensure it has no assets or liabilities, all pending statutory returns are filed, all pending charges are satisfied or discharged, and it has obtained a no-objection certificate from all regulatory authorities. The company must also settle all pending tax liabilities and obtain clearance from the Income Tax Department.

Suo Motu Strike Off by ROC

Under Section 248(1), the ROC has the power to strike off a company's name on its own motion (suo motu) if the company has failed to commence business within one year of incorporation and has not obtained dormant status, or if the company is not carrying on any business or operations for two immediately preceding financial years and has not applied for dormant status. Additionally, the ROC may act where subscribers have not paid their subscription money and a declaration to this effect has not been filed within 180 days of incorporation.

Before striking off, the ROC is required to send a notice to the company and its directors, giving them an opportunity to be heard. A notice is also published in the Official Gazette and on the Ministry of Corporate Affairs (MCA) portal. If no cause is shown within 30 days, the ROC may proceed to strike off the company's name.

Consequences of Strike Off

Once struck off, the company is dissolved and ceases to exist as a legal entity. However, the liability of directors, managers, and officers continues and can be enforced as if the company had not been dissolved. Any property (including actionable claims) of the company vests in the government (the Central Government for companies incorporated before the Companies Act, 2013, and the respective State Government for property within state boundaries). Bank accounts are frozen, contracts may become unenforceable, and ongoing legal proceedings may be affected.

Remedies Against Strike Off

The primary remedy available to aggrieved parties is an application for restoration under Section 252 of the Companies Act, 2013. Any member, creditor, or workman of the company may file an application before the NCLT within twenty years of the strike off. If the Tribunal is satisfied that the company was carrying on business at the time of strike off or that it is otherwise just to restore the company, it may order restoration. Upon restoration, the company is deemed to have continued in existence as if it was never struck off. Directors who were disqualified under Section 164(2)(a) due to the strike off may also seek relief through the NCLT.