Voluntary vs Involuntary Strike Off Company in India
A company in India can remove itself from the official register voluntarily, or the Registrar of Companies (ROC) can remove it involuntarily. Understanding the difference helps business owners stay compliant and avoid legal trouble.
Voluntary Strike-Off
Under the Companies Act, 2013, a company can voluntarily strike off its name from the Registrar of Companies (ROC) records. This process applies to dormant or inactive companies that do not intend to continue their business operations.
Eligibility for Voluntary Strike-Off
A company can apply for a strike-off if it:
- It never started business after registration.
- It stopped doing business for the last two years.
- It has no legal cases or unpaid debts.
Legal Provision
Section 248(2) of the Companies Act, 2013 provides the procedure for companies to apply for voluntary strike-off.
Process for Voluntary Strike-Off
- Board Approval : The company’s directors agree to close the company.
- Shareholder Approval : At least 75% of the shareholders must agree.
- Clear Dues : The company must pay off any outstanding debts.
- File Application (STK-2) : Submit necessary documents like:
- A statement of accounts showing no assets or liabilities.
- A declaration from directors confirming no pending dues.
- Public Notice : The ROC publishes a notice to allow objections.
- Final Closure : If no objections come up, the ROC removes the company’s name, and it no longer legally exists.
Important Things to Know
- Directors remain responsible for any past issues of the company.
- Once struck off, the company cannot restart unless revived by a court order.
- This is different from liquidation, which is used when a company has assets and debts to settle.
Involuntary Strike-Off
In India, involuntary strike-off happens when the Registrar of Companies (ROC) removes a company’s name from official records because it is not following legal rules. This means the company stops existing legally.
Reasons for Involuntary Strike-Off
The ROC may strike off a company if:
- It doesn’t start business within one year of registration.
- It doesn’t file annual returns or financial statements for two years in a row.
- It isn’t active or running any business.
- It fails to follow government rules under the Companies Act, 2013.
Process of Involuntary Strike-Off
- ROC Sends a Notice (STK-1) : The company and its directors get a warning.
- Company Can Respond : The company has 30 days to prove it is active.
- Public Announcement (STK-5) : If no response, the ROC announces it in newspapers and the government gazette.
- Final Strike-Off (STK-7) : The company’s name is officially removed.
What Happens After Strike-Off?
- The company stops existing legally.
- Directors may have to pay any pending debts.
- The government may take over company assets.
Can a Struck-Off Company Be Restored?
Yes, the company can apply to the National Company Law Tribunal (NCLT) within 20 years to bring it back.
Key Differences between Voluntary and Involuntary Strike-Off
| Feature |
Voluntary Strike-Off |
Involuntary Strike-Off |
| Who Starts It? |
Company directors |
Registrar of Companies (ROC) |
| Why? |
Business closure, inactivity |
Non-compliance with regulations |
| Process |
Board resolution, Form STK-2, public notice |
Non-filing of documents, failure to respond to notices |
| Objections |
Creditors or other stakeholders can object |
Directors can appeal to the National Company Law Tribunal (NCLT) |
| Effects |
Orderly closure, no penalties |
Assets taken over by government, legal consequences for directors |
| Feature |
Simple and penalty-free exit |
Enforced removal due to non-compliance |
Conclusion
If a company wants to close, voluntary strike-off is the best option to avoid complications. If facing involuntary strike-off, taking timely action can prevent serious consequences. Business owners should ensure compliance with the Companies Act, 2013, to avoid legal and financial risks.
Suggested Read :
LLP Strike-Off Procedure
How to Strike off an OPC?
Rules for LLP Strike off
Legal Consequences of Strike Off OPC
LLP Strike-off with inactive bank accounts
1. What is the difference between voluntary and involuntary strike off?
Voluntary strike off happens when a company or LLP decides to close on its own, while involuntary strike off is when the government (ROC) shuts it down due to rule violations.
2. Why would a company choose voluntary strike off?
A company may choose voluntary strike off if it’s no longer running, has no debts, and wants to close legally to avoid future paperwork and penalties.
3. Why does the ROC strike off a company involuntarily?
The ROC may close a company if it doesn’t file annual returns, doesn’t follow rules, or has been inactive for a long time.
4. Can a company be brought back after being struck off?
Yes, a company can apply to the National Company Law Tribunal (NCLT) to restore its status, usually within three years of being struck off.
5. What happens if a company is struck off involuntarily?
The directors may face fines, personal responsibility for unpaid dues, and may not be allowed to start or manage other companies in the future.
January 1, 2025 By Team Ebizfiling
Essential Tips for Drafting a Shareholders’ Agreement A shareholders’ agreement is a critical legal document that establishes the framework for the relationship between shareholders and a company. It outlines the rights, duties, and obligations of shareholders and provides guidelines for […]
February 4, 2025 By Team Ebizfiling
Monthly Compliance Requirements for Private Limited Companies Private limited companies (PLCs) are widely favored for their limited liability, structured ownership, and access to capital. However, operating a private limited company comes with a responsibility to adhere to various legal and […]
December 20, 2024 By Team Ebizfiling
What is the Name Clause of MOA? The MOA is one of the most important documents in company law. It is the fundamental document that defines the company’s structure and legal basis. The MOA has several provisions, but the most […]