Strike Off Company | File Form STK-2 Online

Fast Track Exit (FTE) Scheme

The Fast Track Exit (FTE) Scheme is a simplified process introduced by the Ministry of Corporate Affairs (MCA) in India to allow defunct companies to shut down quickly and with minimal compliance requirements. Under this scheme, companies that have no assets and liabilities, no business operations for the past one year, and no pending litigations can apply for voluntary closure without undergoing lengthy liquidation procedures.

The primary objective of the FTE Scheme is to provide an easy exit route for inactive or dormant companies that do not intend to continue their business. Companies registered under the Companies Act, 1956 or 2013, including private companies, one person companies (OPCs), and public companies, can avail themselves of this scheme. However, certain companies, such as those listed on stock exchanges, Section 8 companies, companies with outstanding loans or dues to creditors, or those under investigation, are ineligible for this scheme.

To apply for the Fast Track Exit, the company must file Form STK-2 with the Registrar of Companies (ROC), along with supporting documents such as an indemnity bond, affidavit, statement of assets and liabilities, and board resolution. Once the ROC verifies the application and is satisfied that the company meets the criteria, it publishes a notice in the Official Gazette for objections, if any. If no objections are raised, the ROC strikes off the company's name from the register, legally dissolving it.

The FTE Scheme offers a cost-effective and time-saving alternative to the traditional winding-up process, making it ideal for companies that want to exit the corporate framework without heavy legal and financial burdens. However, it is essential to ensure all statutory compliances are met before applying to avoid future complications.

Legal Framework for Closing a Private Limited Company

The strike-off process is governed by Sections 248 to 252 of the Companies Act, 2013, and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. These provisions provide a simple mechanism for dissolving non-operational companies, eliminating the need for complex liquidation proceedings.

The Ministry of Corporate Affairs (MCA) has further streamlined the process through the Centre for Processing Accelerated Corporate Exit (C-PACE), making the STK 2 company closure application faster and more efficient.

What is C-PACE for Company Strike-Off?

On April 17, 2023, the Ministry of Corporate Affairs (MCA) introduced a significant amendment by establishing the Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE). This dedicated authority is responsible for processing and handling company strike-off applications under the Companies Act, 2013. C-PACE operates with territorial jurisdiction across India, overseeing all applications related to the striking off of companies. It specifically processes applications submitted through E-form STK-2 under Section 248 of the Companies Act, 2013, ensuring a streamlined and centralized approach to dissolving non-operational companies. As the sole authority for handling the company strike-off process, C-PACE enhances efficiency by providing a structured mechanism for companies seeking voluntary closure. This initiative simplifies regulatory compliance and accelerates the exit process for businesses that are no longer operational.

Options of Private Limited Company Closure

The following are the Options of Private Limited Company Closure in India:

Voluntary Closure of a Private Limited Company

A company that is no longer operational can voluntarily apply for company closure online by filing an application to the RoC through E-form STK-2. Before filing, the company must ensure that it has settled all outstanding liabilities and has not been engaged in any business operations for at least two financial years.

The following conditions must be met for voluntary closure of a private limited company:

• The company must have no outstanding liabilities.
• All necessary filings such as financial statements and annual returns must be up to date.
• A special resolution or approval of at least 75% of shareholders (based on paid-up capital) must be obtained.

Once the company applies for Pvt Ltd company closure, the RoC will verify the documents and issue a public notice. If no objections are raised within 30 days, the company will be struck off the register.

Strike Off by the Registrar of Companies (RoC)

If a company has not conducted any business activities for two consecutive financial years and has not applied for dormant status, the RoC can initiate the strike-off process on its own. Additionally, a company may be struck off if:

• It has not commenced business within one year of incorporation.
• The directors have not paid their initial subscription amount.
• The company has not filed necessary compliance documents.

Before striking off a company, the RoC will send a notice to the company and provide it with an opportunity to respond. If no valid response is received, the RoC will proceed with the closure of a private limited company and publish a notice in the Official Gazette.

Eligibility Criteria for Striking Off a Company

The eligibility criteria for striking off a company in India are governed by the provisions of the Companies Act, 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. A company can apply for strike off under Section 248(2) if it has not commenced business since incorporation or has not carried out any business or operations for the last two financial years and has not applied for dormant company status. The company must have no pending litigations, no outstanding liabilities, and no active bank accounts with unutilized funds. Additionally, all statutory filings, including financial statements and annual returns, should be up to date before making an application for strike off. Certain types of companies, such as listed companies, Section 8 (non-profit) companies, companies registered under special statutes, and companies with pending disputes, tax liabilities, or regulatory inquiries, are ineligible for strike off.

The company’s directors must ensure that there are no outstanding loans, dues to creditors, or unsettled statutory obligations such as GST, income tax, or provident fund payments. The application for strike off is filed with the Registrar of Companies (ROC) in Form STK-2, accompanied by an indemnity bond, affidavit, board resolution, and a statement of accounts not older than 30 days from the date of filing. Once the ROC verifies the application and ensures compliance, a public notice is issued, allowing stakeholders to raise objections. If no objections are received, the company’s name is struck off from the Register of Companies, and it ceases to exist legally. Ensuring compliance with all eligibility conditions is crucial to avoid future liabilities or revival claims under Section 252 of the Companies Act.

Documents Required for Voluntary Strike-Off of a Company

When a company decides to apply for voluntary strike-off under the Companies Act, 2013, it must submit E-form STK-2 along with several supporting documents. These documents ensure that the strike-off process is conducted in compliance with legal requirements and that all liabilities are accounted for. Below are the essential documents required for the voluntary strike-off of a company:

Indemnity Bond in STK-3 (Duly Notarized) – This document serves as a guarantee from all directors of the company, collectively undertaking responsibility for any future liabilities that may arise even after the company has been struck off. It must be notarized to ensure its legal validity.

Affidavit in STK-4 (Duly Notarized) – Each director of the company must individually sign an affidavit declaring that the company has no pending dues or obligations and that all the information provided in the application is accurate. This affidavit must also be notarized to be legally binding.

Statement of Accounts in STK-8 (Certified by a Chartered Accountant) – The company must submit a statement of accounts that reflects its financial position, ensuring that all outstanding liabilities have been cleared. This statement must be certified by a Chartered Accountant and should not be older than 30 days from the date of filing the application.

No Objection Certificate (NOC) – If applicable, the company must obtain a No Objection Certificate from any concerned regulatory authority or third party. This is required in cases where the company has been involved in regulated activities, ensuring that all permissions and obligations have been addressed.

Copy of Board Resolution – The company must provide a copy of the board resolution in which the directors have formally approved the decision to apply for voluntary strike-off. This document serves as official proof that the strike-off request has been authorized at the management level.

Copy of Special Resolution – Along with the board resolution, the company must also attach a special resolution passed by its members, approving the strike-off. This resolution must be passed as per the requirements of the Companies Act, ensuring that the shareholders have consented to the closure of the company.

Any Other Optional Attachments – Depending on the nature and history of the company, additional documents may be required. These could include confirmations from financial institutions, clearance certificates from regulatory bodies, or any other relevant documents necessary to support the strike-off application.

Procedure for Voluntary Strike Off of a Private Limited Company

The company closure process involves several steps, including obtaining approvals, clearing liabilities, and filing necessary documents with the RoC. Below is the step-by-step procedure:

Step 1: Board Resolution

The company must first pass a board resolution approving the closure of the company. This resolution should also authorize a director to file the STK 2 company closure application with the RoC.

Step 2: Clearing Liabilities

Before applying for closure, the company must ensure that all outstanding dues, loans, and financial obligations are settled. If the company has no liabilities, a declaration must be filed stating the same.

Step 3: Extraordinary General Meeting (EGM)

An Extraordinary General Meeting (EGM) must be convened to pass a special resolution for closure. At least 75% of shareholders (in terms of paid-up capital) must approve the strike-off.

Step 4: Filing E-Form MGT-14

After passing the special resolution, the company must file E-form MGT-14 within 30 days with the RoC. This filing serves as an official record of the shareholders' decision to dissolve the company.

Step 5: Filing E-Form STK-2

The final step is to file E-form STK-2, which is the formal application for striking off the company. This form must be accompanied by supporting documents such as:

• Indemnity bond (STK-3)
• Affidavit from directors (STK-4)
• Statement of accounts (STK-8) certified by a Chartered Accountant
• No objection certificate (if applicable)
• Copy of board resolution and special resolution

The prescribed company closure fees for filing STK-2 is Rs. 10,000.

Step 6: Public Notice and Objections

Once the application is submitted, the RoC will issue a public notice and invite objections from the public. If no objections are raised within 30 days, the company will be struck off.

Step 7: Final Strike-Off Notification

After verifying all documents, the RoC will issue a final dissolution notice in E-form STK-7, and the company will be removed from the register, marking its official closure.

Cancellation of GST Registration Company Closure

When a company applies for strike off under Section 248 of the Companies Act, 2013, it must also ensure that its GST registration is surrendered before the process is completed. As per the GST laws, any business that ceases to operate or intends to close permanently must apply for cancellation of GST registration. The company must file Form GST REG-16 on the GST portal, providing details such as the date of discontinuation, reason for surrender, and final tax liabilities, if any.

Before surrendering GST, the company must ensure that all pending GST returns are filed, input tax credits are reversed, and outstanding dues, including penalties or interest, are cleared. Once the application is submitted, the GST officer reviews the request and, if satisfied, issues a cancellation order in Form GST REG-19, officially closing the GST registration. If the GST is not surrendered before strike off, the company may face legal and compliance issues, as the GST authorities may continue to demand filings and penalties. Additionally, the ROC may reject the strike-off application if the company has active GST registration, assuming that business operations are still ongoing. Therefore, it is essential to complete the GST surrender process before applying for strike off, ensuring a smooth and hassle-free closure of the company.

Conditions for Striking Off a Company by RoC (C-PACE)

The Registrar of Companies (RoC), through C-PACE, may strike off a company if it meets certain conditions indicating inactivity or non-compliance. A company can be removed from the register if it has failed to commence business within one year of incorporation or has not carried out any business or operations for the last two financial years without applying for dormant status. Additionally, if the subscribers to the memorandum have not paid the subscription amount they committed to at the time of incorporation and have not filed a declaration within 180 days, the company is also liable for strike-off.

Furthermore, if a physical verification by the authorities reveals that the company is not engaged in any business operations, the RoC can proceed with its removal. In such cases, the RoC first issues a notice in E-form STK-1, giving the company 30 days to respond and present a defence. If no response is received, a public notice is issued in E-form STK-5 to invite objections from the public. If no valid objections are raised, the final notification of the company's dissolution is published in the Official Gazette through E-form STK-7, officially striking the company off the register.

Companies That Cannot Be Struck Off Suo Moto by the Registrar

Certain companies cannot be struck off by the RoC on its own initiative due to their legal and operational nature. These include listed companies and those that have been delisted, as well as vanishing companies. Companies that are under investigation or inspection, or those facing ongoing prosecution, cannot be removed from the register until the proceedings are completed. Additionally, companies that have received notices under Sections 206 or 207 of the Companies Act but have not yet responded or whose reports are pending are also exempt from suo moto strike-off. Other exempted entities include companies with pending applications for compounding of offences, those with outstanding public deposits or defaults in repayment, and companies with unresolved charges or encumbrances.

Furthermore, Section 8 companies (non-profit organizations) cannot be struck off through this process. A significant regulatory provision states that if a company does not respond to a suo moto strike-off notice issued by the RoC, it loses the right to file for voluntary strike-off later. This measure ensures that companies comply with statutory regulations and address any outstanding liabilities before seeking closure.

Consequences of Strike Off a Company

When a company is struck off, it ceases to exist as a legal entity, meaning it can no longer carry out business operations, enter into contracts, or hold any legal rights. However, this does not absolve its directors and members from their responsibilities. They remain personally liable for any outstanding legal obligations, pending litigations, or debts of the company. Creditors, tax authorities, or other stakeholders can still initiate claims against the directors or members to recover dues.

Even after the Fast Track Exit (FTE) closure, any remaining assets of the company do not vanish. These assets are available for settling outstanding liabilities. If it is discovered later that the company was struck off despite having unpaid liabilities or undisclosed assets, regulatory authorities or creditors can approach the National Company Law Tribunal (NCLT) to restore the company’s status. In such cases, the company may be revived and required to fulfill all pending obligations.

Moreover, directors of struck-off companies may face restrictions, including disqualification from holding directorships in other companies. Therefore, before applying for strike-off, companies must ensure that all liabilities are cleared, statutory filings are completed, and legal obligations are fulfilled to avoid complications in the future.

Restoration of a Struck-Off Company

A company that has been struck off due to non-compliance or an error can be restored within three years by filing an appeal with the National Company Law Tribunal (NCLT). The restoration process allows the company to regain its legal status and continue its operations. To initiate the process, an application must be submitted to the NCLT, providing valid reasons for the restoration along with supporting documents such as financial statements, compliance records, and evidence of business activity.

If the NCLT is satisfied that the company was struck off unjustly or has rectified its non-compliance, it will pass an order for reinstatement. Following this order, the Registrar of Companies (RoC) will update the company’s status in its records, effectively restoring its legal identity. Once restored, the company can resume its operations, enter into contracts, and conduct business as before.

However, directors and shareholders must ensure compliance with all statutory requirements to avoid future strike-off actions. Non-compliance after restoration could lead to severe penalties, and repeated violations may make it difficult to obtain approvals from regulatory authorities. Therefore, it is essential for businesses to maintain proper compliance to prevent unnecessary disruptions in their operations.