It is better to abandon a sinking and damaged ship than to sink with it. A business may need to be closed for many reasons that may be due to business failure or any other unavoidable circumstances.
Under Companies Act 2013, A Company Can Be Closed In Two Ways
Winding up is a tedious process and can be done either voluntary by calling up a meeting of all stakeholders and passing a special resolution or can be done on the order of Court or Tribunal. Strike Off” mode was introduced by the MCA to give the opportunity to the defunct companies to get their names struck off from the Register of Companies. On 27th December 2016, MCA has notified new rules i.e. Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 prescribing rule for winding up or closure of private limited company under companies act 2013. By releasing the form STK 2, ministry of Corporate Affairs has brought the Section 248- 252 of 2013 act into force.
- Fast track Exit
This is the most awaited procedure that got active again on 5th April 2017. This procedure was introduced in Section 248 of Companies Act 2013.
Fast Track exit can be done in two ways:
Suo Moto by Registrar
The registrar may strike off the name of Company on its own if:
- Company has failed to commence any business in a year of its incorporation.
- Company is not carrying out any business or Activity for preceding 2 financial years and has not sought the status of Dormant Company.
The Registrar sends a notice (STK-1) of his intention to remove the name and seeks the representation of Company in 30 days.
- Voluntary Removal of Name using Form STK 2
Company can also move an application to Registrar of Companies for striking off the name by filing form STK-2 along with a fee of Rs 5000/-. Once form is filed, the Registrar has power and duty to satisfy him that all amount due by the company for the discharge of its liabilities and obligations has been realized. ROC can also issue a show cause notice in case of default in filing returns or other obligations.
After above formalities, ROC issues a public notice and strike off the name of Company after its expiry. Note: The form is in approval route. Therefore, concerned ROC can ask for the completion of the fillings.
- Incorporation Certificate
- Director Identification Number
- Pending Litigation Proceedings if any
- Application in form STK-2
- Government filing fees: INR 5,000/-
- Copy of Board resolution authorizing the filing of this application;
- A statement of accounts showing the assets and liabilities of the Company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant.
- Shareholder’s approval by way of Special Resolution.
- In the case of a company regulated by any other authority, approval of such authority shall also be required.
- Copy of relevant order for delisting, if any, from the concerned Stock Exchange;
- Indemnity bond[to be given individually or collectively by the director(s)] in Form No. STK-3;
- Affidavit in Form No. STK-4
Note: This form must be signed by a practicing CA or CS
Companies That Cannot File For Voluntary Strike-Off
A company cannot fill the form STK 2 at any time in the previous 3 months if the company has
- Has changed its name or shifted its registered office from one State to another;
- Has made a disposal for value of property or rights held by it, immediately
- Before cesser 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;
- Has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company or complying with any statutory requirement;
- Has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
- Is being wound up under Chapter XX of Companies Act or under the Insolvency and Bankruptcy code, 2016
Companies that cannot use Fast Track Exit option:
- Companies Registered Under Section 8
- Listed companies;
- Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
- Vanishing companies;
- Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
- Companies where notices have been issued by the Registrar or Inspector (under Section 234 of the Companies Act, 1956 (old Act) or section 206 or section 207 of the Act)and reply thereto is pending;
- Companies against which any prosecution for an offense is pending in any court;
- Companies whose application for compounding is pending;
- Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
- Companies having charges which are pending for satisfaction.