Company Winding Up & Strike Off: Complete Process Under the Companies Act, 2013

When Should You Choose Strike Off vs. Winding Up?

The choice between strike off and winding up depends on the company’s financial position and the complexity of its affairs. We at Virtual Auditor advise clients based on the following criteria.

Strike Off Under Section 248 — Ideal For

• Companies that have not commenced business within one year of incorporation, or have not carried on any business or operation for two immediately preceding financial years
• Companies with nil assets and nil liabilities as on the date of the application
• Companies that have no pending litigation before any court or tribunal
• Companies where all statutory returns have been filed up to the date of application (or penalties for non-filing have been paid)
• Companies that have obtained NOCs from all regulatory authorities (GST, Income Tax, PF, ESI, etc.)

Winding Up Under Sections 270-365 — Required When

• The company has outstanding debts to creditors that need to be settled through a structured process
• The company has assets that need to be liquidated and proceeds distributed
• There are disputes among members or the affairs of the company are being conducted in a manner prejudicial to public interest
• The company has acted against the sovereignty and integrity of India (Section 271(a))
• The Tribunal deems it just and equitable to wind up the company (Section 271(e))

Voluntary Strike Off Under Section 248: Step-by-Step Process

Section 248(2) of the Companies Act, 2013 permits a company to apply to the ROC for strike off. Here is the complete process we follow at Virtual Auditor.

Step 1: Board Resolution and Member Approval

Convene a Board Meeting and pass a resolution authorising the filing of an application for strike off. Subsequently, obtain approval of members holding not less than seventy-five per cent of the total voting power by way of a special resolution. The special resolution must be filed with the ROC in Form MGT-14 within 30 days. For guidance on board resolutions, refer to our board resolution templates guide.

Step 2: Settle All Liabilities and Realise Assets

Before filing the application, the company must ensure that:

• All assets have been realised or disposed of — bank accounts should show nil balance or a nominal amount for filing fees
• All liabilities including statutory dues (Income Tax, GST, TDS, PF, ESI) have been fully discharged
• All pending returns — ROC annual returns (MGT-7/MGT-7A), financial statements (AOC-4), Income Tax returns, GST returns — have been filed up to date
• GST registration has been surrendered by filing Form GST REG-16
• TAN has been surrendered after filing the final TDS return

Step 3: Obtain Chartered Accountant Certificate

A practising Chartered Accountant (or Company Secretary) must certify that the company has no assets and no liabilities as on the date of the application. This certificate must be attached to Form STK-2. As a firm with CA V. Viswanathan, FCA (IBBI/RV/03/2019/12333) at the helm, we issue this certificate after thorough verification of the company’s books.

Step 4: File Form STK-2 on MCA Portal

Form STK-2 must be filed on the MCA portal along with the following attachments:

• Special resolution or consent of seventy-five per cent members
• Indemnity bond duly notarised by all directors (in Form STK-3)
• Statement of accounts (not older than 30 days from the date of application) showing nil assets and nil liabilities
• CA/CS certificate confirming nil assets and nil liabilities
• Copy of the Board Resolution authorising the application

Step 5: ROC Publishes Notice

Upon receiving Form STK-2, the ROC publishes a notice in the Official Gazette and on the MCA portal, giving 30 days for any objections from members, creditors, or the public. If no objections are received, the ROC proceeds to strike off the name of the company.

Step 6: Final Strike Off Order

The ROC strikes off the name of the company from the Register of Companies and publishes a notice in the Official Gazette. The company stands dissolved from the date of such publication.

Compulsory Winding Up by the Tribunal (Sections 270-274)

When strike off is not feasible — typically because the company has unsettled liabilities, disputed assets, or ongoing litigation — the winding up route under Section 270 must be followed.

Who Can File a Winding Up Petition? (Section 272)

Under Section 272, the following persons may present a petition to the NCLT for winding up:

• The company itself (by special resolution)
• Any creditor (including contingent or prospective creditors) — under Section 272(1)(b), the creditor must establish that the debt is undisputed and the company is unable to pay
• Any contributory (member)
• The Registrar of Companies — under Section 272(1)(d), the ROC may file a petition with the prior sanction of the Central Government
• Any person authorised by the Central Government (Section 272(1)(e))

Grounds for Winding Up (Section 271)

The Tribunal may order winding up on the following grounds:

1. Special resolution: The company has passed a special resolution that it be wound up by the Tribunal — Section 271(a)
2. Fraud or unlawful conduct: The company has acted against the sovereignty and integrity of India, or the affairs have been conducted in a fraudulent manner — Section 271(c)
3. Default in filing: The company has not filed its financial statements or annual returns for immediately preceding five consecutive financial years — Section 271(d)
4. Just and equitable: The Tribunal is of the opinion that it is just and equitable that the company be wound up — Section 271(e)

Procedure Before the NCLT

1. Filing of Petition: A winding up petition is filed before the NCLT bench having jurisdiction over the registered office of the company. The petition must be accompanied by a statement of affairs in the prescribed form.
2. Advertisement: The Tribunal directs advertisement of the petition in newspapers as prescribed under Rule 4 of the Companies (Winding Up) Rules, 2020.
3. Hearing: The petition is heard by the NCLT. Interested parties (creditors, members, employees) may appear and be heard.
4. Winding Up Order: If the Tribunal is satisfied, it passes a winding up order under Section 273 and appoints a Company Liquidator.
5. Statement of Affairs: Under Section 274, the directors and officers of the company must submit a statement of affairs to the Company Liquidator within 60 days of the winding up order.

Role of the Company Liquidator (Sections 275-290)

The Company Liquidator is a key functionary in the winding up process. Under Section 275, the Tribunal appoints an Insolvency Professional registered with the IBBI as the Company Liquidator.

Powers and Duties of the Company Liquidator

• Section 287: Power to carry on the business of the company so far as may be necessary for the beneficial winding up
• Section 288: Power to sell the immovable and movable property of the company by public auction or private contract
• Section 290: Duty to submit quarterly progress reports to the Tribunal
• Section 281: Obligation to maintain proper books of account of the winding up proceedings
• Section 285: Power to accept claims from creditors, admit or reject proofs of claims

Distribution of Assets (Sections 326-327)

The distribution follows a statutory priority order under Section 326 (overriding preferential payments) and Section 327 (preferential payments):

1. Section 326 — Overriding preferential payments: Workmen’s dues for the period of 24 months preceding the winding up order, and debts due to secured creditors who have relinquished their security
2. Section 327 — Preferential payments: Government dues (taxes for the preceding 12 months), salary and wages of employees for the preceding 4 months, contributions under employee benefit schemes
3. Ordinary unsecured creditors
4. Preference shareholders
5. Equity shareholders

Suo Motu Strike Off by the ROC (Section 248(1))

The ROC has the power to strike off a company suo motu under Section 248(1) in the following circumstances:

• The company has failed to commence business within one year of incorporation and has not obtained the status of a dormant company under Section 455
• The company is not carrying on any business or operation for a period of two immediately preceding financial years and has not applied for dormant status
• The subscribers to the memorandum have not paid their subscription money and a declaration under Section 10A has not been filed within 180 days of incorporation

Before initiating suo motu strike off, the ROC sends a notice to the company and all directors, providing 30 days to show cause why the company should not be struck off. If no satisfactory reply is received, the ROC proceeds with the strike off process.

Restoration of Struck-Off Companies (Section 252)

A company that has been struck off can be restored to the Register of Companies by filing an application before the NCLT under Section 252.

Who Can Apply for Restoration?

• The company itself (through its directors)
• Any member of the company
• Any creditor of the company
• Any workman of the company

Time Limit for Restoration

The application must be made within 20 years from the date of publication of the notice of strike off in the Official Gazette. This is a long window, but early application is advisable as the company remains liable for all compliances during the struck-off period.

Documents Required for NCLT Restoration

• Petition in the prescribed form before the NCLT bench having jurisdiction
• Affidavit supporting the petition, setting out the grounds for restoration
• Copy of the strike off order or Gazette notification
• All pending annual returns and financial statements from the date of last filing to the date of the petition
• Proof of payment of all pending fees and penalties on the MCA portal
• NOC from the Income Tax department and other regulatory authorities

Tax Implications of Winding Up and Strike Off

Income Tax Consequences

Under Section 46 of the Income Tax Act, 1961, any distribution of assets by a company to its shareholders on liquidation is not treated as a transfer. However, the shareholders are taxed under Section 46(2) — the money received or the market value of assets received is treated as consideration for the transfer of shares.

The company must file its final income tax return up to the date of dissolution. Additionally, a nil TDS return must be filed for the final quarter, and the TAN must be surrendered.

GST Implications

The company must apply for cancellation of GST registration by filing Form GST REG-16 on the GST portal. Any input tax credit balance in the electronic credit ledger as on the date of cancellation must be reversed and paid. The final GST return (GSTR-10) must be filed within three months of the date of cancellation order.

Dormant Company as an Alternative (Section 455)

If the promoters intend to revive the company at a future date, obtaining dormant company status under Section 455 is a practical alternative to strike off. A dormant company has reduced compliance requirements — it need only file an annual return in Form MSM E-2 and is exempt from holding regular board meetings.

To obtain dormant status, file Form MSC-1 with the ROC along with a special resolution and a statement that the company has no pending liabilities. The ROC grants dormant status for a period of five years, extendable by another five years.

Common Pitfalls and How to Avoid Them

Pitfall 1: Filing STK-2 Without Clearing Tax Dues

The ROC may strike off the company, but the Income Tax department can still raise demands against the directors personally. Always obtain a tax clearance before filing STK-2.

Pitfall 2: Not Closing Bank Accounts

An active bank account after strike off creates complications. The bank may freeze the account, and any balance becomes inaccessible. Close all bank accounts before filing.

Pitfall 3: Ignoring Employee Liabilities

Unpaid gratuity, leave encashment, PF dues, and ESI contributions are personal liabilities of directors under various labour laws. Settle all employee-related dues before initiating strike off.

Pitfall 4: Director Disqualification

Under Section 164(2), directors of companies that have not filed annual returns for three continuous financial years are disqualified from being appointed as directors in any company. This disqualification must be addressed before or as part of the strike off process.

For comprehensive governance compliance before closure, refer to our corporate governance checklist.

Comparative Timeline and Cost

Our End-to-End Process at Virtual Auditor

We manage company closures across India — from dormant shell companies to operational businesses requiring full NCLT winding up. Our process includes:

1. Compliance audit: We review all pending ROC, tax, and statutory filings and complete them
2. Liability settlement: We negotiate and settle outstanding dues with creditors, tax authorities, and employees
3. CA certification: CA V. Viswanathan (IBBI/RV/03/2019/12333) personally certifies the statement of nil assets and liabilities
4. Filing and follow-up: We file STK-2 (or the NCLT petition) and follow up with the ROC or Tribunal until the final order
5. Post-closure: We handle PAN cancellation, TAN surrender, GST cancellation, and bank account closure

For company secretary services related to winding up or strike off, visit our company secretary services page. For valuation requirements during winding up, see our valuation services. To understand our fee structure, check our pricing page.

Also read: Company Secretary & Secretarial Services Guide

Frequently Asked Questions

What is the difference between winding up and strike off?

Winding up under Section 270 involves a formal NCLT-supervised process to liquidate assets and settle liabilities. Strike off under Section 248 is a simpler administrative process to remove a defunct company (with nil assets and liabilities) from the Register of Companies. Winding up suits companies with outstanding debts and assets; strike off suits dormant or shell companies.

How long does the Section 248 strike off process take?

The complete strike off process typically takes 3-6 months from the date of filing Form STK-2. This includes the mandatory 30-day notice period by the ROC and 30 days for objections from creditors or the public.

Can a struck-off company be restored?

Yes. Under Section 252, an application for restoration can be filed before the NCLT within 20 years from the date of the Official Gazette publication. The applicant must file all pending returns and pay all outstanding fees and penalties.

What are the grounds for compulsory winding up under Section 271?

The grounds include: special resolution by the company; acting against sovereignty and integrity of India; fraudulent conduct of affairs; failure to file financial statements or annual returns for five consecutive years; and the Tribunal finding it just and equitable to wind up.

Is a CA certificate required for filing STK-2?

Yes. A practising Chartered Accountant or Company Secretary must certify that the company has no assets and no liabilities. This certificate, along with a notarised indemnity bond from all directors, is mandatory for Form STK-2.

What happens to pending liabilities after strike off?

Under Section 248(7), the liability of every director, manager, and member continues even after the company is struck off. Creditors can pursue personal claims against directors, and the NCLT may order restoration if creditors demonstrate outstanding liabilities.

What are the fees for filing STK-2?

The government fee is Rs 5,000 for companies with authorised share capital up to Rs 10,00,000 and Rs 10,000 for higher capitalisation. Professional certification fees and any pending ROC filing fees apply additionally.

Virtual Auditor — AI-Powered CA & IBBI Registered Valuer Firm
Valuer: V. VISWANATHAN, FCA, ACS, CFE, IBBI/RV/03/2019/12333
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