Winding Up & Strike Off Services
Winding Up & Strike Off – Services by Deepak Prakash & Associates
In the life cycle of a business, there may come a point when the company needs to be closed or dissolved due to various reasons such as financial distress, loss of business purpose, or strategic decision-making. The winding up and strike off processes are two legal methods for closing a company in India, and it is essential to understand the difference between the two and the proper procedures involved.
At Deepak Prakash & Associates, we offer professional services related to winding up and strike off of companies, helping you navigate the legal complexities and ensure full compliance with the applicable laws under the Companies Act, 2013 and other related regulations.
This guide provides an in-depth understanding of the winding up and strike off procedures and how we can assist you in making the process smooth and legally compliant.
Winding Up of a Company
Winding up refers to the process of closing a company in a structured manner, where its assets are sold, liabilities are settled, and any remaining funds are distributed among shareholders. Winding up is generally initiated when a company is financially distressed, insolvent, or when the company’s objective can no longer be fulfilled.
There are two types of winding up:
- Voluntary Winding Up:
- This type of winding up occurs when the shareholders or members of the company voluntarily decide to dissolve the company. It may be initiated when the company is solvent, and the members believe there is no further need for the company to continue operations.
- This type of winding up occurs when the shareholders or members of the company voluntarily decide to dissolve the company. It may be initiated when the company is solvent, and the members believe there is no further need for the company to continue operations.
- Compulsory Winding Up (Court Ordered):
- In compulsory winding up, the decision to close the company is made by the Tribunal (National Company Law Tribunal or NCLT). This usually happens in cases of insolvency, disputes between shareholders, or violations of the law.
Procedure for Winding Up
Board Resolution:
- The first step in the voluntary winding up of a company is the passing of a board resolution in a board meeting, where the members decide to initiate the winding-up process.
- The first step in the voluntary winding up of a company is the passing of a board resolution in a board meeting, where the members decide to initiate the winding-up process.
Special Resolution:
- In the case of voluntary winding up, a special resolution is passed by the members at a General Meeting (GM) or Extraordinary General Meeting (EGM) to approve the winding-up of the company.
- In the case of voluntary winding up, a special resolution is passed by the members at a General Meeting (GM) or Extraordinary General Meeting (EGM) to approve the winding-up of the company.
Filing with the Registrar of Companies (ROC):
- After the special resolution, the company needs to file Form STK-2 with the Registrar of Companies (ROC) and NCLT to initiate the winding-up process.
- After the special resolution, the company needs to file Form STK-2 with the Registrar of Companies (ROC) and NCLT to initiate the winding-up process.
Appointment of Liquidator:
- A liquidator is appointed to oversee the entire winding-up process. The liquidator is responsible for selling the company’s assets, settling liabilities, and distributing the remaining assets to the shareholders.
- A liquidator is appointed to oversee the entire winding-up process. The liquidator is responsible for selling the company’s assets, settling liabilities, and distributing the remaining assets to the shareholders.
Asset Liquidation:
- The company’s assets are liquidated to pay off any outstanding liabilities or debts, including employee dues, taxes, and creditors.
- The company’s assets are liquidated to pay off any outstanding liabilities or debts, including employee dues, taxes, and creditors.
Final Report and Dissolution:
- After all the liabilities have been settled, the liquidator prepares a final report, and the company is dissolved. A certificate of dissolution is issued by the ROC.
- After all the liabilities have been settled, the liquidator prepares a final report, and the company is dissolved. A certificate of dissolution is issued by the ROC.
Filing of Forms:
- The company must file Form STK-5 with the ROC to complete the process of winding up and to obtain the certificate of dissolution.
Key Points to Note About Winding Up
- The process can take several months or years, depending on the complexity of the company’s financial situation.
- A company can be wound up voluntarily even if it is solvent.
- Companies in financial distress or unable to pay off their debts might be subject to compulsory winding up by the court.
Strike Off of a Company
Strike off is a simpler and quicker method of closing a company than winding up. It is generally applicable when a company is inactive, has not carried on business for a certain period, or has failed to comply with legal and regulatory requirements. Strike off is typically done by the Registrar of Companies (ROC), who removes the company from the register, thereby ending its legal existence.
Eligibility for Strike Off
A company may apply for strike off if it meets the following conditions:
- The company has not conducted any business for at least two consecutive financial years.
- The company has no outstanding liabilities or dues.
- The company has not made any filings with the ROC (such as annual returns or financial statements) for a significant period.
- The company is not under investigation or facing any legal proceedings.
Procedure for Strike Off
No Business Activity:
- The company must not have conducted any business activity for the past two years. This is a requirement under the Companies Act, 2013.
- The company must not have conducted any business activity for the past two years. This is a requirement under the Companies Act, 2013.
Filing an Application with ROC:
- A company can file an application for strike off by submitting Form STK-2 to the Registrar of Companies (ROC).
- The application should include a statement affirming that the company has not conducted any business in the past two years and that all dues, liabilities, and obligations have been settled.
Public Notice:
- After receiving the application, the ROC will issue a public notice, allowing stakeholders, creditors, or anyone with a claim against the company to object to the strike-off.
- After receiving the application, the ROC will issue a public notice, allowing stakeholders, creditors, or anyone with a claim against the company to object to the strike-off.
Strike-Off Approval:
- If there are no objections, and the ROC is satisfied that all conditions are met, the company is officially struck off from the Register of Companies.
- If there are no objections, and the ROC is satisfied that all conditions are met, the company is officially struck off from the Register of Companies.
Dissolution of the Company:
- The company is then considered dissolved, and it ceases to exist as a legal entity. A certificate of strike-off will be issued by the ROC to confirm the dissolution.
- The company is then considered dissolved, and it ceases to exist as a legal entity. A certificate of strike-off will be issued by the ROC to confirm the dissolution.
Key Points to Note About Strike Off
- The process is quicker and more straightforward than winding up.
- A company must not have any outstanding liabilities, such as pending taxes or debts, before applying for strike off.
- Companies that have failed to file annual returns for consecutive years and have not carried out any business activities are ideal candidates for strike-off.
Winding Up vs. Strike Off
| Criteria | Winding Up | Strike Off |
|---|---|---|
| Scope | Applies to both solvent and insolvent companies | Only applies to companies that have ceased business activity and have no debts |
| Initiation | Can be initiated voluntarily or by the court | Initiated by the company or the ROC |
| Process Duration | Takes longer (months or years) | Generally quicker (a few months) |
| Cost | Involves liquidation costs and legal fees | Minimal costs compared to winding up |
| Assets and Liabilities | Assets are liquidated to pay off liabilities | No liquidation of assets; company must have no outstanding liabilities |
| Approval Required | Requires board, shareholders, and tribunal approval | ROC approval after a public notice and no objections |
Why Choose Deepak Prakash & Associates for Winding Up & Strike Off?
At Deepak Prakash & Associates, we specialize in providing comprehensive services for the winding up and strike off of companies. Our team of Chartered Accountants and legal experts ensures that the process is handled efficiently, legally, and with minimal disruption to your business.
Here’s how we can assist:
Expert Guidance: We provide detailed guidance on whether your company should go for winding up or strike off, based on its financial position and legal standing.
Complete Documentation: We handle all the necessary documentation, including the board resolution, special resolution, and filing with the Registrar of Companies (ROC).
Legal Compliance: We ensure that your company complies with all legal formalities under the Companies Act, 2013, Indian Stamp Act, and other applicable laws.
Efficient Process Management: Our team manages the entire winding-up or strike-off process, ensuring timely completion and avoiding legal pitfalls.
Cost-Effective Solutions: We offer affordable services to help you close your company in a manner that is both legally compliant and cost-effective.
