Striking Off a Company: Easy Exit Scheme Explained
Rakesh Gupta
Rakesh Gupta (FCS, LLB) is a seasoned corporate and legal advisor with over a decade of experience in Company Law, Secretarial and Compliance services. He leads RMR & Company, a peer-reviewed Practicing Company Secretary (PCS) firm renowned for its expertise in ROC filings, NCLT matters, and a wide range of corporate legal assignments. Through his deep knowledge and practical approach, Rakesh continues to support businesses in navigating complex regulatory landscapes.
As businesses evolve, some entities may become inactive, redundant, or financially unviable. In such cases, the Companies Act, 2013 provides an avenue for companies to exit the register of companies through a process known as ‘strike-off’ under Section 248. This mechanism allows for an easy, cost-effective exit route, avoiding complex winding-up procedures.
This article offers a comprehensive explanation of the strike-off provisions under Section 248, the use of Form STK-2, judicial developments, and recent regulatory actions, including MCA’s suo motu strike-off orders, as well as the scope of restoration under Section 252.
Understanding Strike-Off Under Section 248
What is Strike-Off?
Strike-Off refers to the removal of a company’s name from the official records of the Registrar of Companies (RoC). Once struck off, the company ceases to exist as a legal entity and is not permitted to conduct any business operations.
There are two modes of strike off:
1. Voluntary Application by the Company under Section 248(2), using Form STK-2.
2. Suo Motu Removal by the RoC under Section 248(1), for companies not complying with statutory requirements.
Voluntary Strike-Off – Section 248(2)
Under Section 248(2), a company that has either never commenced business or has been inactive for the last two financial years, and has no liabilities, may apply to the RoC for removal of its name.
Key Conditions for Voluntary Strike-Off:
1. The company must extinguish all liabilities before applying.
2. Board and shareholders’ approval (special resolution or consent of 75% in paid-up capital) is mandatory.
3. The application must be filed in Form STK-2 with prescribed fees and attachments.
Attachments with STK-2:
1. Statement of Accounts (not older than 30 days, certified by a Chartered Accountant (CA).
2. Board resolution and shareholder consent.
3. Affidavit and Indemnity Bond (STK-3 & STK-4).
4. Copy of PAN and Aadhaar of directors.
5. No-dues certificate or NOCs from concerned regulators (if applicable).
Suo Motu Strike-Off by RoC – Section 248(1)
The RoC may, on its own, strike-off a company if:
1. It fails to commence business within one year of incorporation.
2. It remains inactive for two financial years without obtaining dormant status under Section 455.
3. It fails to file the declaration of commencement of business (Form INC-20A) under Section 10A.
4. Verification reveals that the company is not carrying on any business or operations.
Recent MCA Order – Strike-Off for Non-Filing of Form INC-20A
While non-filing of INC-20A is not mentioned explicitly under Section 248, the MCA is treating such cases as fulfilling the condition under Section 248(1)(a) — “failure to commence business.”
Hence, RoC is empowered to strike-off such companies using Section 248(1), with the non-filing of Form INC-20A being supportive evidence of the default.
Note: Though Form INC-20A relates to Section 10A and not Section 248 per se, non-filing within 180 days of incorporation can be interpreted by the RoC as proof that a company has not commenced business. As per Section 248(1)(a), this becomes a valid basis for striking off a company. In July 2024, the MCA enforced this interpretation by striking off a company solely for failure to file Form INC-20A, thereby setting a precedent for similar future actions.
Form STK-2: The Application Mechanism
Form STK-2 is the prescribed electronic form for companies wishing to be voluntarily struck off.
Filing Fee: ₹10,000 (Government fee)
Certification Required: The form must be digitally signed by a director and certified by a practicing Chartered Accountant (CA), Company Secretary (CS), or Cost and Management Accountant (CMA).
The RoC may publish the name of the company in the Official Gazette and on the MCA portal and, if no objections are received within 30 days, proceed with striking off.
Restoration Under Section 252: Scope and Clarification
Once a company is struck off—whether voluntarily or by the RoC—it is not necessarily the end. The law allows aggrieved parties to seek restoration under Section 252 of the Companies Act, 2013.
Sub-section (1) – Allows an appeal to the National Company Law Tribunal (NCLT) by any person aggrieved (including the company, shareholders, creditors) within 3 years from the date of the order of strike-off if it was done by the RoC.
Sub-section (3) – Allows an application to be made even where the company has voluntarily filed for strike-off, provided it is shown that:
1. The company was carrying on business at the time of strike-off, or
2. It is just to restore the company in the public interest.
Important Judicial Observation (IBC Laws – July 2024)
A critical interpretation recently emphasized in legal commentary is that Section 252 does not draw any distinction between cases in which:
1. The RoC struck off the company [Section 248(1)]
2. The company voluntarily applied for strike off [Section 248(2)]
In essence, both Sections 252(1) and 252(3) offer equal opportunity to seek restoration depending on who initiates the application and under what grounds. This interpretation prevents ambiguity in judicial remedies and protects bona fide interests of stakeholders.
Consequences of Strike-Off
Once a company is struck off:
1. It ceases to exist as a legal person.
2. It cannot initiate or defend legal actions unless restored.
3. Any remaining assets are deemed to vest with the Central Government.
4. Directors may face liability if strike-off is later found to conceal fraud or defaults.
When Strike-Off is Not Allowed
Strike-off under STK-2 is not permitted if the company:
1. Has been delisted for non-compliance.
2. Is undergoing compromise, arrangement or amalgamation.
3. Is regulated by special sectoral laws (e.g., NBFCs, Insurance Companies) without prior regulatory approval.
4. Has pending prosecutions or inquiries.
Conclusion
The strike-off mechanism under Section 248 and Form STK-2 provides a streamlined, compliance-friendly exit route for companies that are no longer operational. It saves time, cost, and regulatory burden compared to formal winding-up. However, it comes with responsibilities—accurate disclosures, extinguishing liabilities, and strict adherence to timelines.
Recent actions by the MCA, such as striking off companies for non-filing of Form INC-20A, underline the seriousness with which compliance is enforced. At the same time, judicial interpretations such as no rigid separation in Section 252 ensure that companies wrongly struck off are given a fair opportunity for revival.
Therefore, whether opting for voluntary strike-off or responding to RoC’s action, companies must act transparently, maintain documentation, and engage professionals to ensure smooth closure — or revival, if needed.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
Disclaimer
The content published on this blog is for informational purposes only. The opinions expressed here are solely those of the respective authors and do not necessarily reflect the views of Fintrac Advisors. No warranties are made regarding this information’s completeness, reliability, or accuracy. Any action taken based on the information presented in this blog is strictly at the reader’s own risk, and we will not be liable for any losses or damages resulting from its use. It is recommended that professional expertise be sought for such matters. External links on this blog may direct users to third-party sites beyond our control. We do not take responsibility for their nature, content, or availability.
