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Strike-off of the Company

Strike off is a process where a company name is removed from the register of companies maintained by the Registrar of Companies (ROC). This means that the company ceases to exist as a legal entity.

What is Strike Off?

Strike off is a process where a company name is removed from the register of companies maintained by the Registrar of Companies (ROC). This means that the company ceases to exist as a legal entity.

Section 248 of the Companies Act, 2013 empowers the Registrar of Companies (ROC) to remove the name of a company from the register of companies.

The Ministry of Corporate Affairs (MCA) in India has established the Centre for Processing Accelerated Corporate Exit (C-PACE) to handle the process of striking off companies. This initiative aims to make company closure faster and more efficient. The C-PACE may initiate the strike-off for non-compliance, or the company itself can apply for voluntary strike-off.

 

Reasons for Strike Off

A company can be struck off for various reasons, including:

1. The company has failed to commence business within one year of incorporation.

2. The company has not carried on business for a period of two immediately preceding financial years.

3. The company is not carrying on any business or operation and has not made any application for dormant status.

4. the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under subsection (1) of section 10A;

 

Voluntarily Strike-off

A company may, after extinguishing all its liabilities and with the consent of the Shareholder, may file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies.

 

Process of Voluntarily Strike Off

The process of voluntarily strike off involves the following steps:

1. Conduct a Board Meeting: Conduct a Board meeting where the company's board of directors passes a resolution to apply for voluntary strike off.

2. Shareholder’s Approval: The company obtains the consent of all its shareholders through a special resolution.

3. Creditor’s Approval: The company obtains the consent of all its creditors.

4. Application to ROC: The company files an application with the ROC in Form STK-2, along with the required documents and fees.

Documents Required for Voluntarily Strike Off

The following documents are required for voluntarily strike off:

1.      Board resolution

2.      Shareholder’s approval

3.      Creditor’s approval

4.      Acknowledgement of Income tax returns

5.      Notarized indemnity bond

6.      Statement of Accounts

7.      Affidavit

8.      Statement regarding any pending litigations

 

Companies not eligible for Voluntarily Strike-off

1.      listed companies;

2.      delisted companies due to non-compliance of listing regulations

3.      vanishing companies;

4.      companies where inspection or investigation is ordered or yet to be taken up;

5.      companies against which any prosecution for an offence is pending in any court;

6.      companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

7.      companies having charges which are pending for satisfaction;

8.      companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

 

Frequently Asked Questions

1. Q: What is Voluntary Strike Off?

A: Voluntary Strike Off is a process where a company voluntarily applies to the Registrar of Companies (ROC) to remove its name from the register of companies.

 

2. Q: Why would a company opt for Voluntary Strike Off?

A: A company may opt for Voluntary Strike Off if it has ceased to carry on business or operation for a period of two immediately preceding financial years; or a company has failed to commence its business within one year of its incorporation; or the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under subsection (1) of section 10A.

 

3. Q: Is Voluntary Strike Off the same as winding up?

A: No, Voluntary Strike Off and winding up are different processes. Voluntary Strike Off is a simpler and faster process, whereas winding up involves the appointment of a liquidator and the realization of assets.

4. Q: Which companies are eligible for Voluntary Strike Off?

A: Companies that have not commenced business or have not carried on business for a period of two immediately preceding financial years are eligible for Voluntary Strike Off.

 

5. Q: Can a company with assets or liabilities opt for Voluntary Strike Off?

A: No, a company with assets or liabilities cannot opt for Voluntary Strike Off. It must first settle its assets and liabilities before applying for Voluntary Strike Off.

 

6. Q: What is the process for Voluntary Strike Off?

A: The process for Voluntary Strike Off involves passing a board resolution, obtaining shareholder approval, filing an application with the ROC, and paying the required fees.

 

7. Q: How long does the Voluntary Strike Off process take?

A: The Voluntary Strike Off process typically takes 2-3 months, it may take longer in certain cases.

 

8. Q: Can I apply for Voluntary Strike Off if the company has outstanding debts?

A: No, you cannot apply for Voluntary Strike Off if the company has outstanding debts. You must first settle the debts before applying for Voluntary Strike Off.

 

9. Q: Can I apply for Voluntary Strike Off if the company is under investigation?

A: No, you cannot apply for Voluntary Strike Off if the company is under investigation. You must first obtain clearance from the investigating authority before applying for Voluntary Strike Off.

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Frequently Asked Questions

Chartered Accountants (CAs); Tax Return Preparers; Tax Consultants and Certified Tax Professionals are the experts in India who can guide and file returns.

Private Limited Company set-up process typically takes around 10-12 working days. However, it can vary depending on several factors, such as the speed of document submission, verification, and approval from the authorities.

Selection of suitable entity structure for a startup involves considering several factors such as:

1. Business Goals: Define your startup's mission, vision, and objectives.
2. Ownership: Determine the number of owners (sole proprietorship, partnership, or multiple owners).
3. Liability: Consider the level of personal liability protection needed.
4. Taxation: Think about tax implications.
5. Funding: Will you need to raise capital from investors or lenders?
6. Growth Plans: Consider future expansion, mergers, or acquisitions.
7. Compliance: Evaluate the regulatory requirements and compliance burden.
8. Flexibility: Assess the need for flexibility in decision-making and management.

Common business structures for startups:
1. Sole Proprietorship: Simple, low-cost, but offers no liability protection.
2. Partnership: Shared ownership, but partners have personal liability.
3. Limited Liability Partnership (LLP): Combines partnership benefits with liability protection.
4. Private Limited Company: Offers liability protection, tax benefits, and credibility.
5. Limited Liability Company (LLC): Flexible with liability protection.

The Presumptive Taxation Scheme (PTS) offers several benefits to small businesses and professionals:

1. Simplified Accounting: No need to maintain detailed accounts and records.
2. Estimated Income: Tax is calculated on an estimated income, rather than actual profits.
3. Reduced Compliance: No requirement to get accounts audited.
4. Lower Tax Liability: Tax is calculated at a prescribed rate.
5. Exemption from Tax Audit: No requirement to get tax audit done.
6. Easy Calculation: Profit is calculated on a fixed percentage of gross receipts.

No, you cannot obtain two Director Identification Numbers (DIN) for two companies. DIN is a unique identifier assigned to an individual who is a director or proposed to be a director of a company. If you want to be a director in two companies then you can use the same DIN for both companies.

Yes, it is mandatory to maintain records of all financial transactions for your business. The Companies Act, 2013 and the Income Tax Act, 1961, require businesses to maintain accurate and complete financial records and it should be accurate; up-to-date; easily accessible for inspection by authorities and must be retained for a minimum of 8 years.

Maintaining financial records helps:
1. Track business performance: Accurate records can help you track your business performance, identify opportunities and problems and compare your business to others.
2. Prepare financial statements: Accurate records are needed to prepare financial statements, such as income statements and balance sheets. These statements can help you manage your business and deal with creditors and banks.
3. File tax returns: Accurate records can help you comply with tax laws and avoid penalties.
4. Detect and prevent fraud: Accurate records can help prevent and detect fraud and theft.

Failure to maintain proper financial records can result in penalties, fines, and legal issues.


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