Process for Company Strike Off and LLP Closure | Jordensky

Process for Company Strike Off and LLP Closure . The word "striking off" refers to a firm that is in the process of being struck off.

Process for Company Strike Off and LLP Closure | Jordensky

A company's existence can be terminated in a variety of ways. One of them is removing its name from the register of company names. This procedure may be used by a corporation that has ceased operations and wishes to have its name removed from the registrar's records.

Before we proceed any further, let's define these two terms: striking off and liquidation.

The word "striking off" refers to a firm that is in the process of being struck off. In contrast, liquidation or dissolution is the final stage of the process. When the name is removed from the records, the company is declared liquidated.

This process can be initiated by the ROC or the company as well.

The registrar can initiate this process on his own on any of the below-mentioned grounds-

  • The company did not begin operations within a year of its incorporation.
  • The company has not operated in the previous two fiscal years and has not yet applied for the status of inactive corporation.
  • Physical inspection reveals that the company is not in operation.
  • The subscription money for the company's memorandum has not been paid, and a declaration about the commencement of business has not been made within 180 days of the company's incorporation.

If the ROC feels that any of the aforementioned ground exist, he may issue a notice to the company and all of its directors. The company has 30 days to respond to the notification. The company needs to provide justifications for why its name should not be removed and If the representation seems reasonable then the ROC will halt the process; otherwise, ROC will proceed for liquidation. ROC also posts a notice on its website and in media to inform the public about the start of this process. The authorities in charge of the subject company are also notified to file any complaints they may have.

Before removing the name, the registrar creates a provision for the repayment of all the company's debts or obligations. The company's name is deleted from the register when all objections presented within the time frame are considered.

Companies that are not engaged in any operations have the option of having their names removed from the registry. This way, they will not have to comply with the typical compliances, regardless of whether they are working or not. This is a more appropriate technique to dissolve a business.

Companies may request for closure on the same grounds that the registrar may remove a company's name from the register. The following is the procedure that the company must follow:

1. The Board first holds a board meeting to decide on these two matters-

  • Who will be the authorized director to undertake all filing-related acts?
  • The next Extraordinary General Meeting.

2. Before proceeding with this operation, all liabilities must be cleared. On addition, directors must sign a bond and an affidavit in Form STK-3 and STK-4.

3. The company must additionally compile a statement of accounts and have it certified by a Chartered Accountant in Practice (not older than thirty days from the date of the application). In order to exercise this authority, the firm must pass a special resolution, for which an EGM is held. If the corporation is governed by an authority such as the RBI, SEBI, IRDAI, or others, their consent is required before proceeding.

4. Finally, Form STK-2 is filed, together with a Rs 10,000 company closure charge (government fee). The following attachments are required with this form:

  • Certificate of no objection from the regulatory authority
  • Directors' bond and affidavit signed
  • An account statement in Form STK-8
  • A copy of the resolution adopted at the EGM

This form is certified in practice by a chartered accountant, company secretary, or cost accountant.

5. Upon receipt of this application, ROC encourages objections from the general public and regulatory bodies. He also makes arrangements for the payment of all outstanding debts.

When all of these stages are completed, the company is liquidated.

Restoration of Company's Name

There is a possibility that a company will receive a notice from the department for removal of name from the register of companies even if the company is still in operation. In this instance, the company can file petition the NCLT to get its name restored. This appeal must be filed within 3 years of the final order's date. If ROC discovers that the information provided is inaccurate, he may file an appeal with the NCLT to have the company's name restored.

Forms involved in the process:

  • Form STK-1: Notice by ROC to intimate the company about his intention to remove its name from the register of companies
  • Form STK-2: Application by the company to get its name struck off voluntarily
  • Form STK-3: Indemnity Bond by the directors
  • Form STK-4: Affidavit by the directors
  • Form STK-5: 5A, 6: Public notice
  • Form STK-7: Notice of final striking off by the ROC
  • Form STK-8: Company's statement of accounts

Many a time, companies shut themselves to defraud government departments, their members, employees, creditors and other stakeholders. The aggrieved party has the right to appeal to the NCLT within 20 years of removing its name.

A point to note here is that there are some exceptional cases where one cannot opt for this process. Some of those are:

  • If the company is a Section-8 company, a listed company, or a disappearing company 
  • If a charge is pending for satisfaction
  • If a compounding application is pending
  • If a prosecution against it is pending

LLP Closure Process

The procedure for closing an LLP is quite similar to the process for striking off a corporation. There are simply a few documents needed to close an LLP. One can close their LLP by just filing LLP Form-24. LLPs, like corporations, can be closed in two ways: suo moto by the ROC and by application to the Registrar.

The manner in which ROC removes the LLP's name from the register is identical to that of the company.

And the procedure for LLP closure differs just slightly when the corporation applies to the ROC. The procedure is outlined below:

1. The selected partners convene and authorize one of them to file Form LLP 24 with the ROC.

2. Before applying to the ROC for LLP closure, all pending forms, Form-8 (Statement of Account and Solvency) and Form-11 (Annual Return),must be filed. Furthermore, if the LLP is subject to the regulations of any authority, the LLP must acquire their approval as well.

3. An LLP Form-24 is then filed, together with specified attachments.

4. Upon receipt of this application, ROC will post a notice(for one month) on the MCA website for the general public's information. If the public has any concerns, they can voice them.

5. If the ROC receives no legitimate objections and believe sit is appropriate to proceed with the strike-off, he will make a provision to realize all of the LLP's debts.

6. The registrar will then publish a notice of dissolution in the official gazette, and the LLP will be dissolved as of that date.

Process for Restoration of an LLP

If a LLP has a problem with the striking off its name, it can appeal to the NCLT and have its name restored. In the case of an LLP, however, there is no such provision for restoration. As a result, the sole option is to file a writ petition before the High Court.

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