Understanding the Strike Off of a Company

After finishing company registration online, you get the active company status. But after that there are many different statues that a company goes through. One of them is strike off. Stricke off company meaning stands for removal of a company’s name from the register of companies maintained by the Registrar of Companies (ROC) in India. This administrative action effectively dissolves the company, ceasing all its operations as well as legal existence. The concept of striking off a company is essential for business owners who wish to close down their operations formally and legally. This article will delve into the intricacies of the strike off company meaning, it’s procedure, its implications, and also the legal framework under which it operates.

What is Strike Off Company?

You can summarize strike off company meaning as an official process that leads to the dissolution of a company. When the authorities strike off a company, it can no longer conduct business, hold assets, or incur liabilities. The strike-off process can occur voluntarily at the request of the company’s directors or involuntarily by the ROC due to non-compliance with regulatory requirements.

Company Status Strike Off Means

When the Registrar of Companies (ROC) marks a company’s status as “strike off,” it indicates that the ROC has legally dissolved the company. This status signifies that:

• The company no longer exists as a legal entity.
• All business operations must cease immediately.
• The company may transfer its assets to the government to settle any outstanding debts.

Reasons for Strike Off

There are several reasons why a company might undergo a strike-off:

1. Non-Commencement of Business: If a company does not commence its business within one year of incorporation, the authorities may strike it off.
2. Inactivity: Companies that have not conducted any business operations for two consecutive financial years may be eligible for strike-off.
3. Voluntary Closure: Shareholders may decide to wind up operations due to various reasons, including lack of profitability or strategic changes.
4. Non-Compliance: Failure to file annual returns or maintain compliance with statutory requirements can lead to involuntary strike-off by the ROC.

Strike Off Under Companies Act 2013

The strike off under Companies Act 2013 provides a legal framework for both voluntary and involuntary strike-offs. The relevant sections include:

• Section 248(1): Allows the ROC to strike off companies that have not commenced business within one year or have not been active for two consecutive financial years.
• Section 248(2): Permits companies to apply for voluntary strike-off if they have settled all debts and also liabilities.

Strike Off Company Procedure

The strike off company procedure involves several steps, whether initiated voluntarily by the company or mandated by the ROC:

Voluntary Strike Off Procedure

1. Board Resolution: The company’s board must pass a resolution approving the decision to strike off.
2. Consent from Shareholders: Obtain consent from at least 75% of shareholders.
3. Clearance of Liabilities: Ensure all debts and liabilities are settled before filing for strike-off.
4. Filing with ROC: Submit Form STK-2 along with required documents to the ROC.
5. Public Notice: The ROC will issue a public notice inviting objections from creditors as well as stakeholders.
6. Strike Off Order: If no objections are raised, the ROC will issue an order striking off the company’s name from the register.

Involuntary Strike Off Procedure

1. Notice from ROC: The ROC issues a notice if a company fails to comply with statutory requirements.
2. Opportunity to Respond: The authorities give the company an opportunity to respond and also rectify any non-compliance issues.
3. Final Decision: If non-compliance persists, the ROC proceeds with striking off the company’s name.

Winding Up a Private Limited Company vs. Strike Off

Winding up a private limited company and striking off are two different processes for closing a business:

• Winding Up: This is a more complex process involving liquidation of assets, settling debts, and distributing remaining assets among shareholders. It often requires court intervention and can also be lengthy.
• Strike Off: This is a simpler administrative process that does not involve liquidation proceedings. That is unless there are outstanding debts that need addressing first.

Implications of Strike Off

The implications of being struck off include:

1. Loss of Legal Status: The company ceases to exist as a legal entity, meaning it cannot enter into contracts or conduct business activities.
2. Asset Distribution: If there are outstanding debts, the company will transfer any remaining assets to the government.
3. No Revival Option: Once the company is struck off, you cannot reinstate its status unless you meet specific conditions through legal proceedings.

Company Registration Online

If you plan on starting anew after striking off your previous entity, you can easily register your new company through company registration online processes available on various platforms.

Conclusion

Understanding the strike off company meaning, procedures, and implications is crucial for business owners considering closing their companies in India. Whether opting for voluntary closure or facing involuntary action from regulatory authorities, knowing how to navigate this process effectively can save time and resources while ensuring compliance with legal requirements under the Companies Act 2013. By following proper procedures and understanding what being “struck off” entails, businesses can transition smoothly into their next phase, whether they choose to start anew or pursue other opportunities outside their previous corporate structure.