Private Limited Company Closure - Explained

Running a business comes with its own challenges. Sometimes the contract ends, business will not start, and at other times, the operational cost of business increases when compared to revenue. In these cases, the directors or shareholders wish to close the company.

In these cases, the company can apply for striking of the company. The process of striking off is an alternative way to the winding up of a company.

Understand the difference between Closure, Strike Off, Who can file such, the fees associated and the processing timelines.

1. Reasons for Closure or Strike off

The company can apply for closure in the following cases.

If the company has not commenced its business within 1 year of incorporation
The company is not carrying out any business activity for preceding 2 financial years and has not acquired the status of dormant company.
The subscribers to memorandum have not paid the subscription money and the company has not filed INC 20A

Expert Advice?

If you are an existing or new client seeking expert advice on Company Closure Process, Convert Company, or related problems, visit EZTax Customer Support Page.

2. Private Limited Company Statistics

Average number of companies incorporated every year - 1,09,200
Number of active companies as at the end of 2022 - 14,00,000
Number of companies above 10 Cr turnover - 1,10,000
Widely believed most companies are non-operational, showing < Rs. 5 Lakhs turnover

3. Strike off by ROC

The Registrar of Companies will issue a notice to the companies and its directors in STK-1 for removal of names of companies from the Registrar of Companies
The notice will be issues if the ROC officer has a valid reason that the company has not commenced its business or directors are disqualified.
Once the notice is received the company or director, they should send the representation for non-removal of company name within 30 days of such notice.

4. Voluntary Strike off by the Company

The company might wish to close the company due to various reasons. The company can file an application to the Registrar of Companies (ROC) in form STK-2 after closing the bank account and paying the liabilities

Held Board Meeting to decide for voluntary strike off and pass the special resolution
Conduct EGM and pass the special resolution
File the resolutions passed in MGT 14 with 30 days of passing special resolution
Statement of Accounts in STK-8 should be drawn (not less than 30 days from the date of application) and should be certified by CA
File Form STK-2 along with the attachments

5. Companies who cannot file for voluntarily strike off

The following companies cannot file for voluntarily strike off with ROC

Listed Companies
Companies delisted due to non-compliance of listing regulations or listing agreement
Vanishing companies
Companies where inspection or investigation is ordered
Companies against which prosecution or offence is pending in court
Companies having charges which are pending for satisfaction.
Companies registered u/s 25 or 8 of companies act

6. Government Fee

Form STK-2 should be accompanied by a Government fees of Rs 10,000. It needs to be payable at the time of uploading STK-2

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