How to Strike off Company within 1 year of Incorporation

Did you register your company, but somehow the business does not take off? Then what are the safeguards there to protect you? How can you protect yourself from the problems? What are the ways by which you can strike off your company? It is common for a business idea to not take off. Further, you should be prepared in case something like this happens. You should be prepared for the worst-case scenario, before starting your own business. In this article we will discuss about how to Strike off a Company within 1 year of Incorporation.

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What does Striking Off Company means?

Striking off the name of a company is a mechanism by which a business may close it’s operations. The Registrar of Companies (RoC) are able to issue a notice notice to strike off the name of a registered company from the Register of Companies, for certain reasons. Further, The Company by themselves can apply to the RoC to remove its name from the Register of Companies.

Can you Strike off a Company Within One year of Incorporation?

The section 248 to 252 of the Companies Act, 2013 provides the procedure for Striking off a Company. As per Sec 248(1) of the Companies Act, a company may strike off its name if the Registrar has a reason to believe that a company has failed to commence its business within one year of its incorporation. Further, as per sec 248(2), before striking  off its name a company has to take care of all its liabilities. 

Moreover, 75% of the board members has to pass a special resolution to apply to the RoC to remove its name from the Register of Company. It has to be in all ground specified in the sub-section 1. Further, on receiving the application the Registrar may issue a public notice in the prescribed manner.

How can you Strike Off a Company

There are two ways to Strike off a Company,

  • By the RoC on its own
  • By application of the Company for removal

For a company to apply to Strike off its name, it has to pass a special resolution or obtain 75% votes of the members (in terms of paid-up capital) to file an application to the RoC.

Reasons for which a Company can apply to Strike off

After taking care of its liabilities, a company may strike off its name if it can prove the following grounds,

  • It fails to or does not commence business within one year of incorporation
  • It has a receipt Subscription Money and files INC 20A
  • A year has not passed from the date of incorporation.

Or, the Company is inoperative for the last two financial year. However, it has not filed an application within this period to get the status of a dormant company under section 455 of the Act.

Documents Requirement

To Strike off you company you will require the following documents,

  • Certified true copy of board resolution for authorization given for filing the application.
  • Registered Digital Signature Certificate of director for signing the form.
  • Memorandum of association of the Company
  • Article of Association of the Company.
  • Identity Proof (PAN Card/Aadhar Card/Voter ID card).
  • Residence proof (Passport/Driving License/Voter ID Card)
  • Statement of account duly certified by a chartered accountant.
  • Affidavit in Form STK-4 and Indemnity bond in Form STK-3 duly notarized.
  • Certified true copy of Special Resolution
  • No Objection Certificate (NOC) from certain regulator authorities such as, Non-Banking Financial Companies, Housing Finance Companies, Insurance Companies, Asset Management Companies, etc. 

Restrictions in Striking off Company

A company can’t apply to strike off it’s name if within the last three months from the date of submitting it has done any of the following,

  • Changed its name
  • Shifted its office from one state to another
  • Made a disposal of value of rights or property held by it
  • Filed an application to the National Company Law Tribunal for sanctions of an arrangement or compromise and the matter has not finished
  • Has engaged in other activities
  • There is a pending investigation
  • There are public deposits which are yet to be repaid

These are governed by sec. 249 for the Companies Act, 2013.

Procedure to Strike off Company

  • The Registrar on its own can Strike off Company. The RoC send a notice about its intention to Strike off Company.
  • The Directors have to send representation to the RoC within 30 days. 
  • However, on the expiry of the notice period, the RoC may Strike off Company. 
  • Further, a notice will be published by the Roc in the official Gazette. 
  • If no objections are received within 30 days then another notice about the dissolution of the company will be published. 
  • Otherwise, a company may apply to Strike off. Similarly, a notice will be published in the Gazette. 
  • Further, a letter of informant is sent to Income Tax Authorities, Central Excise Authorities and Service Tax Authorities.
  • If there are no objections from the public and the respective authority then the company is dissolved. The company will cease to exist after the Strike off.

Ways to Restore a Company that is Struck Off

Any individual who is affected by the dissolution of the Company may appeal to the Tribunal. However, they have to appeal within 3 years. Further, if the tribunal finds that the dissolution of the Company is not justified it can order to restore the company. The Company has to file a copy of the order passed by the tribunal to the RoC within 30 days. The RoC will then restore the company name in the Register of Companies and issue a fresh Certificate of Incorporation.

Conclusion

If a Company has not started any business within one year of its incorporation then it can apply to Strike off.  You can fast-track the closing of your company in this manner. Moreover, it is the simplest way to dissolve a company.  You can cut your losses much quicker. The process of closing a business can be very hectic. This will make it much easier.

CategoryCompany Law

CS Madhavi Singh Rajawat is a commerce graduate from IIS University, Jaipur and an associate member of Institute of Company Secretaries of India. She is also an LLB aspirant. Her interest lies in the field of corporate and securities laws, general corporate advisory matters and FEMA matters and compliances, litigation services, and also in NCLT related services. She has proficiency in the drafting of documents

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