Closing a business or company can be done by striking off its name from the Register of Companies, which is a simpler and quicker alternative to traditional liquidation. The Registrar of Companies (ROC) can initiate the process if certain conditions are met, but a company can also apply for the same. The process for Strike Off Company name is explained in Sections 248 to 252 of the Companies Act, 2013 (the Act).
A company can apply for voluntary striking off of its name by passing a special resolution or getting consent from 75% of its members. The company can file an application with the ROC to remove its name from the Register of Companies after extinguishing all its liabilities on either of the following grounds:
- The company fails to commence business within one year of incorporation
- The company has not carried out any business for two preceding financial years and has not filed an application within such period for obtaining the status of a dormant company under Section 455 of the Act.
Once the company applies for striking off its name, the Registrar of Companies (ROC) will issue a public notice as prescribed by the Act.
However, a company cannot apply for striking off its name if it has made a disposal for gain, shifted its registered office or changed its name within the past three months, has filed an application to the National Company Law Tribunal for sanctioning an arrangement or compromise that has not been concluded, engaged in activities other than those required for making the application, complying with statutory requirements or concluding the company’s affairs, or is being wound up under Chapter XX of the Act. If a company violates these conditions and still applies for striking off, it can face a fine of up to Rs. 1 lakh.
If the Registrar of Companies (ROC) believes that a company is inoperative or hasn’t carried out any business, it can send a notice to the company and its directors with the intention of removing the company name from the Register of Companies. The company has thirty days to send its representations with copies of relevant documents from the date of notice.
After the expiry of the specified time for striking off mentioned in the notice, the Registrar of Companies (ROC) will strike off the company’s name from the Register of Companies unless the company presents reasons to the contrary. The dissolution notice will be published in the Official Gazette after the ROC has struck off the name.
Before ordering dissolution and striking off the company name, the ROC will ensure that the company’s liabilities are discharged within a reasonable time, and the director or other persons in charge of management provide the necessary undertaking.
Even after the striking off of the company name, the company’s assets are available for the payment or discharge of its liabilities and obligations. The liability of every manager, director, officer, or member of the dissolved company continues and can be enforced as if the company had not been dissolved.
Once a company is dissolved under Section 248 of the Act and the notice is published in the Official Gazette, it ceases to operate from the date mentioned in the notice. The ROC will cancel the Certificate of Incorporation from the date of dissolution. However, the certificate remains valid for paying or discharging the company’s liabilities and obligations.
Individuals who are aggrieved by the ROC order notifying the company’s dissolution can file an appeal to the Tribunal within three years. The Tribunal can restore the company name if it finds that the removal is unjustified.
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