Closure of Defunct Company


The Following are categorised as Defunct Company under the Companies Act 2013.

  1. Companies that are not started any business within one year of its incorporation
  2. Companies where the subscribers to the memorandum have not paid the subscription money within a period of one hundred and eighty days from the date of incorporation
  3. Companies that are not carrying on any business or operation for a period of two immediately preceding financial years.

Registrar of Companies (ROC) has the power to strike off defunct companies from the register after giving due notice. Also the Directors of the Company

Companies can make application strike off its name from the register of companies as a Defunct Company.

Closure of Defunct Company

Once registered with the Registrar of Companies (ROC), Ministry of Corporate Affairs (MCA), it is mandatory for the Company to file the regular returns with Registrar of Companies and other statutory authorities in time. If the company is inoperative for two years, it must file an application with Registrar of Companies to obtain the Dormant Company status if the promoters are planning to keep the company alive for future business.

If the Company is defaulted in filing of regular returns with the Registrar of Companies, the Company and its Director are liable to face the penalties and prosecution process as per Companies Act 2013.

If the promoters are not intending to keep the company alive, they can file an application for closure of the company by removing its name from the register of the companies maintained by MCA.

There is no relaxation for compliance filing even if ‘Company is Not carrying any Business’. So, it is very important to ensure the filing in time or removal of Company’s name from the Registrar of Companies to avoid penalties and prosecution process.

The Following Companies can make application strike off its name from the register of companies as a Defunct Company.

  • Companies that are not started any business within one year of its incorporation
  • Companies where the subscribers to the memorandum have not paid the subscription money within a period of one hundred and eighty days from the date of incorporation
  • Companies that are not carrying on any business or operation for a period of two immediately preceding financial years

Following types of companies cannot be closed as Defunct Company

  1. Listed Companies
  2. Companies that has been delisted due to non-compliance of listing regulation or listing agreement or any other statutory laws
  3. Vanishing companies (The company which is listed and which is in default in filing return with Registrar of companies or SEBI for two years or it is not maintaining the registered office or none of its directors are traceable)
  4. Companies where inspection or investigation is ordered and being carried out or such other order are yet to be taken up or completed but prosecutions arising out of such inspection or investigation is pending in the court
  5. The companies to which the notice for inspection of books has been issued by the registrar or inspector and the reply, report, prosecution etc. is pending
  6. Companies against which any prosecution for an offence has been pending in any court
  7. Any compounding application is pending before any competent authority
  8. Companies which has accepted public deposit and which is either outstanding or company is in default of repayment of the same.
  9. Company having charges which is not satisfied
  10. Non-profit company registered under this act or earlier act.

Other Restrictions

The company has not made any of the following actions at any time in the previous three months,

  1. Changed its name
  2. Shifted its registered office from one state to another
  3. has made a disposal for value of property or rights held by it, immediately before cessation of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
  4. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application for strike off, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
  5. has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
  6. is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016.

What is the procedure for closure of the Company?

  • An application for removal of the name of the company from the register of the ROC to be filed in form STK 2 along with a fee of Rs.5000/-
  • If the company is regulated by any other authority, no objection letter from such authority need to be mandatorily submitted along with application.
  • The documents to be submitted alongwith closure application are;
  • Duly notarised Indemnity bond from all directors
  • A statement of account certified by a Chartered Accountant stating the assets and liabilities of the company not older than 30 days prior to the date of filing the application
  • An affidavit from all directors of the company
  • Special Resolution duly attested by all directors of the company or Consent Letter from the members of the company as on the date of application.
  • A statement in relation with pending litigations if any.

How to file the application

Duly completed application need to be field in Form STK-2 digitally or physically signed by the director of the company authorised for this purpose.

The application need to be certified by a company secretary or Chartered Accountant or Cost Accountant in whole time practice.

What action will be taken by the Registrar after filing the application

a.The registrar shall verify the application and if it is in order

b.Publish a notice in official gazetted

c.Public notice to be published at least once in English and vernacular language newspaper

d.Send notice of intimation to other regulatory authorities such as Income Tax, Sales Tax, Service tax etc. having jurisdiction over the company and if no objection is not received from the concerned authorities within 30 days from the date of notice it shall be presumed that they have no objection for the proposed action of strike off the name.

Final Striking off the name of the company

Once all the procedures completed, the registrar shall publish a notice in prescribed format in the Official Gazette and dissolve the company.

FAQ

What is the eligibility criteria for strike off the name?

The company which is has not started any business within one year of its incorporation or a company is not carrying on any business or operation for a period of two immediately preceding financial years can file an application for strike off its name from the register of companies.

Who can initiate action/application for Strike Off?

An inoperative company can be struck off by;

1.The concerned Registrar of Companies if he has reasonable cause to believe that;

a.The company which is has not started any business within one year of its incorporation or

b.The company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application for obtaining the dormant company status.

2.By the company filing an application after passing a special resolution and submit an application in the prescribed form along with supporting documents

What is the documents required?

The documents to be submitted for strike off the company are;

a.Duly notarised Indemnity bond from all directors

b.A statement of account certified by a Chartered Accountant stating the assets and liabilities of the company not older than 30 days prior to the date of filing the application

c.An affidavit from all directors of the company

d.Special Resolution duly attested by all directors of the company or Consent Letter from the members of the company as on the date of application.

e.A statement in relation with pending litigations if any.

Whether DSC is mandatory for filing the application?

The duly filled application need to be digitally signed by the director authorised in this behalf and if the director doesn’t have the digital signature certificate, duly filled physical application signed manually by the director need to be attached to the form.

Whether the certification is mandatory?

Yes. The application need to be certified by a company secretary or Chartered Accountant or Cost Accountant in whole time practice.

Whether the directors will have any liability after company Struck Off?

The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved, shall continue and may be enforced as if the company had not been dissolved.

What is the penalty for filing a wrong application?

  1. A company is not eligible to file an application for strike off if, at any time in the previous three months, It;
  2. Has changed its name or shifted its registered office from one State to another;
  3. has made a disposal for value of property or rights held by it, immediately before cessation of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
  4. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
  5. has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
  6. is being wound up under Chapter XX of the Companies Act or under the Insolvency and Bankruptcy Code, 2016

If the company falls under any of the above category and file any application for strike off the name under section 248 of the companies act, it shall be punishable with fine which may extend to one lakh rupees.

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