INTRODUCTION

It is better to give-up on a Sinking Ship than to sink with it. Likewise, in case of uncertain and unavoidable circumstances, freedom for exit is very essential for the Business. In India there are several ways to exit from business, some are voluntary while some may be compulsory under the various regulatory authority.

In some instances, we register companies with the idea of starting new business or projects and for some reason it does not work so we do not even start operations. And there are some cases where business stops for some reason and hence companies becomes non-operational.

There may be several reasons for not commencing business or non-operational status, but there are various compliances which every company needs to comply once it gets registered under the Companies Act,2013. And definitely no would want to bear more cost for the company which is non-operational in present and uncertainty in the future as well.

This Article discusses about the voluntary closure of the business in the above aspects.

STRIKING OFF or REMOVAL OF NAME OF THE COMPANY (FAST TRACK EXIT MODE)

The company can file an application with Registrar of Companies for the removal of name of the company from the register, subject to statutory criterion specified under Section 248 of the Companies Act, 2013 and the rules made thereunder.

Eligibility Criteria

Companies which meet the following criteria shall be eligible for making such application;

1. Company which failed to commence its business within one year from its incorporation.

2. The company is not carrying on any operation or business activities from last two years.

3. Company has not defaulted in payment obligations and is having NIL Assets and NIL liabilities

4. Company is not defaulted in filing ROC annual forms and other applicable Forms.

Application Procedure

Brief procedural aspects of such applications are as follows;

1. Holding Board Meeting and Members Meeting to get approval of the Board as well as shareholders to decide on the matter of strike off.

2. Extinguishing all liabilities of the company, if any and preparation of statement of accounts containing assets and liabilities of the company made up to date.

3. Make an application of strike-off in Form STK-2 along with the other attachments which includes Indemnity Bond and affidavit from all the Directors, Statement of accounts, Copy of Resolutions passed at the meeting/s etc.

4. Submitting the Strike-off application with the Registrar of Companies along with the filing fee of INR 10,000.

Further actions by the Registrar

The Registrar on receipt of application shall examine the same and if application found in order, it shall intimate the Company and simultaneously intimate the concerned regulatory authority viz. Income Tax, GST etc about the proposed action of strike off and seek objections if any to be furnished within the period of 30 days from the date of such intimation.

The Registrar on being satisfied shall strike off the name of the Company from its Register and send notice for publication in the Official Gazette. With effective from the date of such publication the company shall stand dissolved.

CONCLUSION

On considering the cost of keeping inactive business, this Fast Track exit mode is a privilege to the corporates to close their entities legally without any hassles. As seen, this is the best option for the closure of the company if your company not defaulted in payment obligations and meets other eligibility criteria including asset and liability position.