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If the company owners or directors decide to discontinue or wind up the business, they may consider for the options of the closure. Most feasible or easiest way to close a company is striking off its name from Register of Companies. This is preferable when a company is inoperative for a certain period. Other options include a winding-up petition, however that involves more time, investment and compliance.
On approval of the strike off, the company’s name is removed from the register and thus, it is not existent in the eyes of laws. The company must fulfill all the compliance before proceeding for the strike-off application. The application is accompanied by various documents and requires assistance from the professional.
This option is preferred when the company is operational and holds assets and liabilities. It requires approval from members, directors, and creditors, along with the appointment of a liquidator to manage the company’s affairs throughout the process. This method is often time-consuming.
Striking off is preferred for companies with minimal or no external liabilities. A company that has been inactive since incorporation or for the past two years may apply for strike-off, commonly known as a fast-track exit. The key conditions are that the company must have no assets or liabilities and must comply with all relevant legal provisions.
Company’s MoA – AoA, Certificate of Incorporation, PAN card and other registration certificates
The financial statement of the Company for the most recent year, prepared prior to 30 days of filing the application
Details whether the company has been operative for any period. If yes, since when the operations are discontinued
A statement regarding pending litigations, if any involving the company
The company must provide NOC for closure from creditors, if any
(Draft to be provided by LW experts)
NoC for closure to be obtained from Income Tax Department, SEBI, RBI, etc. if relevant
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The Registrar of Companies may remove a company’s name from the register if there is reasonable cause to believe that:
The company failed to commence business within one year of incorporation; or
The company has not carried on any business or operations for the two immediately preceding financial years and has not applied for dormant status during that period.
Closure is the most suitable option for a non-operational company, as it:
Eliminates ongoing compliance costs
Avoids the risk of non-compliance
Prevents hefty penalties and legal prosecutions
Reduces the risk of future defaults
If a company is struck off due to default, it must apply to the National Company Law Tribunal (NCLT) to restore its status from “struck off” to “active.” The application must include valid reasons justifying the default and requesting reinstatement.
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