Company Strike Off: Fast Track Exit Procedure for Closing Your Company

Not every business succeeds, and not every company needs to exist forever. If your company has been dormant for years, has never commenced operations, or has simply served its purpose, keeping it alive on the MCA register is both costly and risky. Pending annual compliance filings, ROC penalties, and director disqualification are real consequences of ignoring an inactive company.

This is where company strike off comes into the picture. Under Section 248 of the Companies Act, 2013, the Registrar of Companies (ROC) or the company itself can apply to remove the name of a defunct or inactive company from the official register. The voluntary route, commonly known as the fast track exit (FTE) scheme, allows promoters and directors to close their company quickly and legally by filing Form STK-2 with the MCA.

In this guide, you will find everything about the strike off procedure, eligibility criteria, required documents, government fees, and the timeline involved. Whether you are a startup founder winding down a failed venture or a finance head cleaning up group entities, this article covers all the essentials.

What is Company Strike Off?

Company strike off is the process of removing a company's name from the Register of Companies maintained by the ROC. Once struck off, the company ceases to exist as a legal entity. It can no longer conduct business, hold assets, enter contracts, or incur liabilities.

There are two ways this can happen. The ROC can initiate strike off on its own (known as suo motu strike off) if the company has failed to file annual returns or financial statements for two consecutive years. Alternatively, the company's directors can voluntarily apply for strike off by filing Form STK-2. The voluntary route gives promoters more control over the process and is the preferred method for most inactive startups and dormant entities.

Strike off is different from winding up. Winding up is a lengthier, court-supervised process involving a liquidator, settlement of debts, and distribution of remaining assets. Strike off, on the other hand, is an administrative procedure suited for companies with no assets, no liabilities, and no ongoing business operations. For a detailed comparison and professional help with company closure, it helps to work with experienced compliance advisors.

Who Can Apply for Company Strike Off?

Not every company qualifies for the fast track exit route. The eligibility conditions under Section 248(2) of the Companies Act, 2013 are specific. Your company must satisfy all of the following:

• The company has not commenced business within one year of incorporation, or it has not carried on any business or operations for two immediately preceding financial years.
• The company has no pending liabilities. All debts, including dues to creditors, employees, statutory authorities, and government agencies, must be fully settled.
• The company has no assets or has disposed of all its assets. Bank accounts in the company's name should be closed.
• The company is not listed on any stock exchange.
• The company has not been involved in any proceedings before a court, tribunal, or any regulatory authority within the last three months.
• No application under Section 233 (mergers or compromises) is pending against the company.

If any of these conditions remain unmet, the ROC may reject the STK-2 application. It is therefore critical to settle all outstanding matters before filing.

Step-by-Step Procedure for Company Strike Off

Here is the complete process to voluntarily strike off a company under the fast track exit scheme.

Step 1: Cease All Business Operations

The company must stop all commercial activities. If the company is still conducting any form of business, it must formally cease operations before initiating the strike off process. Ensure that no transactions are processed through the company's bank accounts for at least the last two financial years.

Step 2: Settle All Liabilities and Close Bank Accounts

Clear every pending obligation. This includes dues to employees, vendors, statutory authorities like the GST department, income tax department, and any other creditor. Once all liabilities are settled, close all bank accounts held in the company's name and obtain closure certificates from the respective banks.

Step 3: Obtain Consent of Directors

Convene a board meeting and pass a resolution authorizing the filing of Form STK-2 for voluntary strike off. All directors must provide their written consent. An indemnity bond, executed by every director on non-judicial stamp paper, is also required. This bond protects stakeholders by declaring that the company has no pending liabilities.

Step 4: Pass a Special Resolution

A special resolution must be passed by shareholders at a general meeting (EGM or AGM). The resolution should clearly state that the company applies for strike off under Section 248 of the Companies Act. For companies with a single member or where all shareholders sign the resolution, a written resolution can serve the purpose without convening a physical meeting.

Step 5: File Form STK-2 with the ROC

Submit Form STK-2 electronically through the MCA portal. This form must be digitally signed by a director and certified by a practicing professional, either a Chartered Accountant, Company Secretary, or Cost Accountant. Along with the form, you must attach the required documents and pay the prescribed government fee of Rs. 10,000.

Step 6: ROC Publication and Objection Period

After receiving the application, the ROC publishes a notice on the MCA portal inviting objections from the public, creditors, and other stakeholders. This notice remains open for 30 days. If no objections are received, the ROC proceeds to strike off the company. If valid objections are raised, the process may be delayed or the application may be rejected.

Step 7: Company Struck Off from the Register

Upon satisfactory completion, the ROC issues an order striking off the company from the register. A public notice to this effect is published in the Official Gazette. The company ceases to exist as a legal entity from the date of the strike off order.

Documents Required for Filing STK-2

Keep the following documents ready before initiating the filing:

• Board resolution approving the strike off application
• Special resolution passed by shareholders
• Indemnity bond signed by all directors on non-judicial stamp paper
• Affidavit by each director confirming nil liabilities and cessation of business
• Statement of accounts prepared not more than 30 days before the filing date, audited by a CA
• Bank account closure certificates
• Copy of the CIN (Corporate Identification Number)
• GST cancellation letter or proof of surrender of GST registration
• NOC from regulatory authorities, if applicable

Incomplete documentation is one of the primary reasons for rejection of STK-2 applications. Preparing everything in advance reduces delays considerably.

Government Fees and Costs Involved

The prescribed government fee for filing Form STK-2 is Rs. 10,000. This is a flat fee regardless of the authorized capital of the company. In addition, you should account for professional fees charged by the Chartered Accountant or Company Secretary who certifies the form and prepares the statement of accounts.

Stamp duty on the indemnity bond varies by state. In most states, non-judicial stamp paper worth Rs. 100 to Rs. 500 is sufficient. If the company has outstanding annual filing penalties, those must be cleared before the application can be processed. In such cases, the total cost of closure may increase depending on the number of years of non-compliance.

Strike Off vs. Winding Up: Key Differences

Choosing between strike off and winding up depends on your company's specific situation. Here is a quick comparison:

For most dormant startups and small private limited companies with no assets or liabilities, the strike off route is simpler, faster, and more cost-effective.

What Happens After a Company is Struck Off?

Once the ROC strikes off the company, several legal consequences follow:

• The company loses its legal identity. It cannot enter contracts, hold property, or sue or be sued.
• Any remaining assets of the company become the property of the Central Government.
• Directors are not automatically relieved of personal liability for any fraud or wrongful acts committed during the company's existence.
• The company's name becomes unavailable for registration by other entities.

However, a struck-off company can be restored by filing an appeal before the National Company Law Tribunal (NCLT) within 20 years from the date of the strike off order. Restoration is typically sought when directors or shareholders discover that the company held assets that were not accounted for, or when a third party has a legitimate claim against the company.

Conclusion

Company strike off through the fast track exit route offers a practical, affordable, and legally sound way to close an inactive or dormant company in India. The process under Section 248 of the Companies Act is designed to help promoters avoid the complications of a full winding-up proceeding. By filing Form STK-2 with the ROC, settling all liabilities, and maintaining complete documentation, you can close your company within 60 to 90 days.

If you are looking to close an inactive company or need guidance on whether strike off or winding up is the right option for your business, consult the experts at Patron Accounting. From preparing the board resolution and indemnity bond to filing STK-2 and managing the objection period, their team handles the entire process so you can focus on what comes next.