Eligibility Criteria for Strike Off of a Company

A company is eligible for strike off if it has not commenced business within one year of incorporation, or if it has not been carrying on any business or operation for at least two immediately preceding financial years and has not applied for dormant status. These are the two primary grounds under Section 248(1) of the Companies Act, 2013.

The company must also have no assets or liabilities at the time of application. This means all debts must be settled, all creditors paid, and any remaining assets distributed among members. The company must file all overdue annual returns and financial statements up to the end of the financial year preceding the application. If the company has any pending statutory dues, such as income tax, GST, or employee provident fund, the strike off application will be rejected.

Additionally, the company must not be involved in any legal proceedings, including pending cases before any court, tribunal, or adjudicating authority. The company must also not have any outstanding loans or borrowings from banks or financial institutions. If the company has any secured creditors, their consent must be obtained before applying for strike off.

No, a company with pending tax dues or legal cases is not eligible for strike off. The Registrar of Companies (ROC) will reject any application where there are outstanding statutory dues, including income tax, GST, customs duty, or any other government dues. Similarly, if the company is a party to any ongoing litigation, whether civil or criminal, the strike off application will not be processed.

The rationale is that strike off is a summary procedure intended only for defunct companies with no liabilities. If there are pending dues or cases, the proper route is either winding up under the Insolvency and Bankruptcy Code, 2016 or voluntary liquidation under the Companies Act. The ROC has the discretion to refuse strike off if it believes the company's affairs require investigation or if the company has been involved in any fraudulent activity.

Even if the company has settled all dues but the settlement is not reflected in government records, the ROC may still raise objections. It is advisable to obtain a no-objection certificate from the relevant tax authorities before applying. For pending legal cases, the company must first obtain a stay or closure order from the court before the ROC will consider the strike off application.

The company must submit an application in Form STK-2 along with several supporting documents. The key document is an affidavit by every director of the company, sworn before a notary public or magistrate, confirming that the company has no assets or liabilities, no pending legal proceedings, and that all statutory dues have been paid. The affidavit must also state that the company has not been carrying on any business for the preceding two financial years.

Other required documents include a statement of accounts prepared as on the date of application, showing nil assets and nil liabilities. This statement must be certified by a chartered accountant. The company must also submit a copy of the board resolution authorizing the strike off application, signed by at least two directors. If the company has any secured creditors, their consent in writing must be attached.

The ROC may also require an indemnity bond from the directors, indemnifying the ROC against any future claims arising from the strike off. Additionally, the company must publish a public notice in a newspaper in the district where the registered office is located, inviting objections from the public. The notice must be in Form STK-5 and published in both English and the local language. The ROC will also publish a notice on its website for 30 days before striking off the name.

Yes, the eligibility criteria vary slightly depending on the type of company. For a private limited company, the standard conditions apply: no business for two years, no assets or liabilities, and no pending dues. However, if the private company has any outstanding loans from directors or shareholders, those must be settled before applying. The company must also ensure that all share capital has been refunded to shareholders.

For a public limited company, the same basic conditions apply, but the ROC may be more stringent in verifying that no public interest is affected. Public companies that have issued shares to the public or have listed securities must follow additional procedures under the Securities and Exchange Board of India (SEBI) regulations. Such companies cannot use the strike off route and must instead go through a formal delisting and winding up process.

For Section 8 companies (non-profit), the eligibility is similar, but the company must also obtain approval from the Regional Director under Section 8(6) of the Companies Act. The company must demonstrate that it has no assets or liabilities and that its dissolution will not affect any charitable or public purpose. The company must also surrender its license under Section 8 to the ROC. Additionally, any surplus assets must be transferred to another Section 8 company with similar objects, as per the company's memorandum.

If the ROC rejects the strike off application, the company receives a notice in writing stating the reasons for rejection. Common reasons include incomplete documentation, pending statutory dues, unresolved objections from creditors, or the company being involved in legal proceedings. The company can file a fresh application after rectifying the defects, but there is no formal appeal mechanism against the ROC's rejection.

If the ROC believes the company has made a false declaration or suppressed material facts, it may initiate prosecution under Section 448 of the Companies Act for furnishing false statements. This can result in penalties of up to ₹5 lakh for the company and imprisonment for up to three years for the officers in default. The ROC may also refer the matter to the Serious Fraud Investigation Office (SFIO) if fraud is suspected.

In practice, if the ROC rejects the application, the company's only option is to either rectify the defects and reapply, or pursue a formal winding up under the Insolvency and Bankruptcy Code. The company cannot simply abandon the process, as the ROC may take suo motu action to strike off the company if it remains non-compliant with filing requirements. Directors should also be aware that even after rejection, they remain personally liable for any statutory dues or legal claims against the company.

If your company meets the eligibility criteria and you wish to proceed with strike off, prepare the required documents and consult a company secretary or chartered accountant to verify compliance. For companies with any outstanding dues, pending cases, or complex shareholding structures, professional guidance is essential to avoid rejection or legal consequences.

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This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.