Step-by-Step Guide
6 Steps
How to Close a Company in India (Full Process Explained)
Complete step-by-step guide to closing a company in India in 2026. Covers voluntary strike-off using Form STK-2, compulsory strike-off by ROC, NCLT winding up, Fast Track Exit mode, dormant company status, and closure procedures for Private Limited, LLP, OPC, and Section 8 companies. Includes GST, PF, tax clearance, and post-closure compliance.
Quick Overview
Estimated Cost
₹15000
Time Required
3 to 6 Months
Total Steps
6 Steps
What You'll Need
Documents Required
- Special Resolution or consent of 75% members for voluntary strike-off
- Statement of accounts (not older than 30 days from the date of application)
- Indemnity bond signed by every director (in prescribed format)
- Affidavit by every director confirming the company has no pending liabilities
- NOC from regulatory authorities (if applicable - RBI, SEBI, IRDA etc.)
- Form STK-2 (Application for Striking Off of Name of Company)
- GST cancellation acknowledgement
- Final income tax return and tax clearance
- NOC from creditors or proof that all liabilities are cleared
- Bank account closure letter or latest bank statement showing nil or minimal balance
Tools & Prerequisites
- Internet access for the MCA V3 portal at mca.gov.in
- Valid Digital Signature Certificate (DSC) for all directors registered on MCA portal
- GST portal access for cancellation of registration
- Income tax e-filing portal access for final return filing
- Chartered Accountant for preparing final accounts and tax clearance
- Company Secretary for drafting resolutions and MCA filings
Closing a company in India is a structured legal process that requires clearing all liabilities, filing pending returns, cancelling registrations, and applying for strike-off with the Registrar of Companies (ROC). Whether you are closing a Private Limited Company, an LLP, an OPC, or a Section 8 Company, the process follows a similar framework with entity-specific variations.
This guide covers all methods of company closure including voluntary strike-off (the most common), compulsory strike-off by ROC, NCLT winding up, and dormant company status. It walks you through the complete process from settling debts and cancelling registrations to filing Form STK-2 on the MCA portal and obtaining the final dissolution order. If you no longer need your company or it has been inactive, closing it properly is essential to avoid ongoing compliance penalties and potential director disqualification.
Why You Should Close an Inactive Company
Many business owners incorporate a company and then let it go dormant without formally closing it. This is a costly mistake. Here is what happens if you leave an inactive company without closing:
- Ongoing filing obligations: Every company must file annual returns (MGT-7A) and financial statements (AOC-4) with the ROC every year, even if there are no transactions. Non-filing attracts penalties of up to 100 rupees per day of delay
- Director disqualification: If annual returns are not filed for 3 consecutive years, all directors face disqualification under Section 164(2)(a) for 5 years. Disqualified directors cannot serve as directors in any other company
- Compulsory strike-off: The ROC can strike off the company on its own, which leaves directors disqualified without any control over the process
- Income tax penalties: Non-filing of income tax returns attracts penalties under Section 234F (late filing fee) and potential prosecution under Section 276CC
- GST non-compliance: If GST registration is not cancelled, the company must continue filing nil returns. Non-filing leads to penalties and eventual suo motu cancellation
If your company has not filed annual returns for 3+ years, your directors may already be disqualified. Check their disqualification status on the MCA portal before initiating any other action. Disqualified directors must file all overdue returns and apply for removal of disqualification before they can serve as directors anywhere.
Choosing the Right Closure Method
| Method | Best For | Timeline | Cost |
|---|---|---|---|
| Voluntary Strike-Off (STK-2) | Companies with no assets/liabilities, inactive for 2+ years | 3-6 months | 15,000-35,000 rupees |
| NCLT Winding Up | Companies with significant debts, creditor disputes, or complex situations | 6-18 months | 1-5 lakh rupees |
| Dormant Status | Companies that may restart business later (not permanent closure) | 1-2 months for status change | 5,000-10,000 rupees |
| Compulsory Strike-Off by ROC | Not recommended - initiated by ROC, leads to director disqualification | 3-6 months (ROC timeline) | No direct cost, but heavy penalties |
For the vast majority of small and medium companies that are simply no longer operational, voluntary strike-off using Form STK-2 is the recommended method. It is the fastest, cheapest, and most straightforward way to close a company. The rest of this guide focuses primarily on this method.
Pre-Closure Checklist: Before Filing for Strike-Off
Before you can file Form STK-2, every item on this checklist must be completed. The ROC will reject applications where these steps are incomplete.
1. Clear All Financial Liabilities
- Pay all vendor and trade creditor dues
- Settle all bank loans, overdrafts, and credit facilities
- Pay all employee salaries, bonuses, and leave encashment
- Settle gratuity for employees with 5+ years of service
- Pay all pending PF and ESI contributions
- Clear all statutory dues (income tax, GST, TDS, professional tax)
- Obtain NOC from all major creditors
2. File All Pending Returns
- File all pending annual returns (MGT-7A) with ROC
- File all pending financial statements (AOC-4) with ROC
- File all pending income tax returns
- File all pending GST returns (GSTR-1, GSTR-3B, GSTR-9)
- File all pending TDS returns
- File DIR-3 KYC for all directors
3. Cancel All Registrations
| Registration | Where to Cancel | Key Requirement |
|---|---|---|
| GST Registration | GST portal (gst.gov.in) | File GSTR-10 (Final Return) within 3 months of cancellation |
| PF Registration | EPFO office | Settle all contributions, transfer/withdraw employee accounts |
| ESI Registration | ESIC office | Settle all premiums, clear employee claims |
| MSME/Udyam Registration | Udyam portal | Cancel the Udyam registration number |
| IEC (Import Export Code) | DGFT website | Surrender IEC after completing all export obligations |
| FSSAI License | FSSAI portal | Surrender food license |
| Shop and Establishment | Local municipal authority | Cancel registration |
| Professional Tax | State government portal | Cancel registration and file final return |
4. Dispose of Assets
- Sell or transfer all fixed assets (equipment, furniture, vehicles)
- Collect all outstanding receivables
- Transfer or assign intellectual property (trademarks, patents, domain names)
- Close all fixed deposits and investments
- Distribute surplus to shareholders in proportion to their holdings
Step-by-Step: Voluntary Strike-Off Process
Step 1: Prepare Final Statement of Accounts
Prepare a statement of accounts showing the company's financial position. This statement:
- Must not be more than 30 days old from the date of filing Form STK-2
- Should show nil or minimal assets (ideally zero after distributing surplus)
- Should show nil liabilities (all debts must be cleared)
- Must be signed by all directors and a Chartered Accountant
Step 2: Pass Special Resolution
Hold an Extraordinary General Meeting (EGM) and pass a Special Resolution (75% majority) approving the voluntary strike-off. The resolution should state:
- The company has not carried on business for the prescribed period
- All liabilities have been settled
- All pending regulatory filings have been completed
- The members authorize the directors to file Form STK-2 for strike-off
If convening an EGM is impractical, obtain written consent from at least 75% of members.
Step 3: Prepare Director Indemnity Bond and Affidavit
Every director must sign:
- Indemnity Bond: On non-judicial stamp paper, agreeing to indemnify any person who suffers loss due to the strike-off. This makes directors personally liable for any undisclosed or future claims
- Affidavit: Confirming that the company has no pending liabilities, no pending litigation, no regulatory proceedings, and all statutory filings are up to date
Step 4: File Form STK-2 on MCA Portal
- Log in to the MCA V3 portal at mca.gov.in
- Navigate to MCA Services > Company Forms > Form STK-2
- Enter the CIN - company details auto-populate
- Fill in details: reason for strike-off, date of last business activity, current status
- Upload required documents:
- Special Resolution or written consent of 75% members
- Statement of accounts (not older than 30 days)
- Indemnity bond signed by every director
- Affidavit signed by every director
- NOC from creditors (or declaration of nil creditors)
- NOC from regulatory authorities (RBI, SEBI, IRDA - if applicable)
- Copy of latest audited balance sheet
- Sign using DSC of all directors
- Pay the government fee of 10,000 rupees
- Submit and note the SRN for tracking
Step 5: Gazette Notification and Objection Period
After the ROC accepts the application:
- The ROC publishes a notice in the Official Gazette
- Interested parties have 30 days to file objections
- If objections are received, the ROC investigates before deciding
- If no objections are received, the ROC proceeds to strike off the company
Step 6: Dissolution
After the 30-day objection period expires without objections, the ROC strikes off the company's name from the Register of Companies. The company stands dissolved. The dissolution is published in the Official Gazette. The company ceases to exist as a legal entity from the date specified in the ROC's order.
After dissolution, download the strike-off order from the MCA portal for your records. This document confirms that the company has been legally dissolved. Keep this along with the indemnity bond and all closure documents for at least 8 years as directors may be called upon to address claims during this period.
Closing an LLP: Key Differences
For closing an LLP, the process is similar but uses Form 24 instead of Form STK-2:
- Obtain consent of 3/4th of partners (by value of contribution) for voluntary closure
- File all pending Form 8 (Statement of Account) and Form 11 (Annual Return)
- Cancel GST, PF, ESI, and other registrations
- File final income tax return
- File Form 24 (Application for Strike Off) on MCA portal
- Government fee: 3,000 rupees (less than company closure)
- Timeline: 2-4 months
For detailed instructions, see our LLP closure guide.
Dormant Company: An Alternative to Closure
If you are not sure whether to permanently close the company, dormant status under Section 455 is an alternative:
- File Form MSC-1 to apply for dormant status
- The company must have been inactive for 2 consecutive financial years
- Dormant companies file only 1 annual return per year (reduced compliance)
- Status lasts for up to 5 years
- Can be reactivated at any time by filing Form MSC-3
- If not reactivated within 5 years, the ROC may initiate strike-off
Choose dormant status if you think there is a reasonable chance of restarting the business in the next 1-5 years. It keeps the company alive with minimal compliance cost. Choose permanent strike-off if you are certain the company will not be needed again. Reincorporating a new company is straightforward with the Private Limited Company registration process, so permanent closure is usually the cleaner option.
Post-Closure Obligations
- Preserve records: Company books and records must be preserved for 8 years from dissolution
- Indemnity bond: Directors remain liable under the indemnity bond for claims arising after closure
- Tax proceedings: Respond to any income tax notices related to the company's pre-closure years
- Surrender PAN: Apply for surrender of the company's PAN with the Income Tax Department
- Inform business partners: Notify all clients, vendors, and partners about the company's dissolution
Common Mistakes to Avoid
- Letting the ROC strike off the company: Compulsory strike-off leads to director disqualification. Always close voluntarily before the ROC acts
- Not filing pending returns before STK-2: The ROC rejects strike-off applications if annual returns and financial statements are not up to date. File all overdue returns first
- Submitting stale statement of accounts: The statement must not be older than 30 days from the filing date. If the ROC takes time to process earlier steps, you may need to prepare a fresh statement
- Not cancelling GST registration: Leaving GST registration active means ongoing filing obligations and penalties. Cancel GST before or immediately after filing STK-2
- Ignoring PF and ESI obligations: Unresolved PF and ESI disputes can surface years after closure and directors are personally liable through the indemnity bond
- Not settling all liabilities: Undisclosed liabilities can lead to the strike-off being challenged and the company being revived by NCLT, with directors bearing the costs
- Forgetting to close bank accounts: Bank accounts left open get frozen after strike-off, creating complications for accessing remaining funds
Conclusion
Closing a company properly is as important as starting one. An inactive company left without formal closure creates ongoing compliance burdens, financial penalties, and director disqualification risks. The voluntary strike-off process using Form STK-2 is the most practical method for most small and medium companies. It typically costs 15,000 to 35,000 rupees (including professional fees) and takes 3 to 6 months.
The critical steps are: clear all liabilities first, file all pending returns, cancel GST and other registrations, prepare fresh accounts within 30 days, get director indemnity bonds and affidavits, and file Form STK-2 on the MCA portal. After the gazette notification and 30-day objection period, the ROC strikes off the company and it stands dissolved.
If you need help with the complete company closure process - from clearing pending filings and cancelling registrations to preparing indemnity bonds and filing Form STK-2 - the IncorpX team handles the end-to-end process professionally.
Frequently Asked Questions
What are the different ways to close a company in India?
There are four main methods to close a company in India: (1) Voluntary strike-off under Section 248 - the most common method, initiated by the company itself using Form STK-2 when it has no business operations and minimal or no liabilities. (2) Compulsory strike-off by the ROC - the ROC initiates this when the company has not filed annual returns or financial statements for 2 or more consecutive years. (3) Voluntary winding up through NCLT under Sections 304-323 - for companies that want to formally wind up their affairs through a tribunal process. (4) Dormant company status under Section 455 - not technically closure, but allows inactive companies to remain registered with minimal compliance.
What is Form STK-2?
Form STK-2 is the prescribed form on the MCA portal for applying for voluntary strike-off of a company's name from the Register of Companies. It is filed under Section 248(2) of the Companies Act 2013. The form requires details of the company, its current status, reasons for seeking strike-off, a statement confirming no business has been carried on for 2 or more years, and declarations from all directors. Required attachments include Special Resolution, statement of accounts, indemnity bond, and director affidavits.
What is the eligibility for voluntary strike-off?
A company is eligible for voluntary strike-off if: it has not commenced business within 1 year of incorporation or has not carried on any business for 2 immediately preceding financial years. The company must have no assets or liabilities (or nominal ones). All pending filings with the ROC must be completed. There should be no pending litigation against the company. If the company has operated as a listed company, additional conditions from SEBI may apply.
Can a company with liabilities be struck off?
No, a company with significant unpaid liabilities cannot be struck off. All liabilities must be settled before filing Form STK-2. The directors must submit an affidavit confirming no pending liabilities. If the company has debts it cannot pay, the options are: settle the debts first and then apply for strike-off, or apply for NCLT winding up where the tribunal supervises the distribution of assets to creditors. Minor liabilities (under a few thousand rupees) can sometimes be managed through the indemnity bond.
What happens to the assets of a company being closed?
All assets must be disposed of or distributed before strike-off. Fixed assets are sold and the proceeds are used to pay liabilities. After paying all creditors, any remaining surplus is distributed among shareholders in proportion to their shareholding. Bank accounts should be closed with balances distributed. Intellectual property (trademarks, patents) should be assigned or surrendered. Any assets remaining undistributed at the time of strike-off are deemed to be the property of the government (bona vacantia).
How long does the company closure process take?
The timeline depends on the method: Voluntary strike-off (Form STK-2) typically takes 3 to 6 months from filing to dissolution. This includes ROC processing time (2-4 weeks), gazette publication and 30-day objection period, and final order. NCLT winding up takes 6 to 18 months depending on complexity. Pre-closure activities (clearing liabilities, filing returns, GST cancellation) typically take 1-3 months before the strike-off application can even be filed.
What is the government fee for Form STK-2?
The government fee for filing Form STK-2 is 10,000 rupees. This is a flat fee regardless of the company's authorized capital. Additionally, there may be fees for filing overdue annual returns and financial statements before the strike-off application (since all pending filings must be completed). Professional fees for CA and CS assistance typically range from 10,000 to 25,000 rupees depending on the complexity.
What is an indemnity bond and who signs it?
An indemnity bond is a legal document signed by every director of the company at the time of filing Form STK-2. Through this bond, directors jointly and severally agree to indemnify and reimburse any person who is affected by the strike-off. If any creditor or third party comes forward with a valid claim after the company is dissolved, the directors who signed the bond are personally liable to settle that claim. The bond must be on non-judicial stamp paper of the prescribed value.
Do all directors need to agree to close the company?
For Form STK-2, the application requires DSC of all directors and every director must sign the indemnity bond and affidavit. However, the shareholders authorize the closure through a Special Resolution (75% majority). If some directors do not agree, the remaining directors and shareholders can still proceed if they have the required majority. Non-cooperating directors may create practical difficulties though, especially since their DSC and affidavit are technically required on Form STK-2.
What happens to the company's PAN and TAN after closure?
After the company is struck off, the PAN and TAN should be surrendered to the Income Tax Department. File an application for surrender of PAN using the prescribed form. The PAN becomes inactive and cannot be used for any financial transactions. If the company is revived later (an unlikely scenario), a new PAN application would be needed. Surrender the PAN only after all final tax returns have been filed and all tax demands have been resolved.
How do I close a Private Limited Company?
To close a Private Limited Company: (1) Clear all liabilities and settle all debts, (2) File all pending annual returns and financial statements with ROC, (3) Cancel GST registration and other registrations, (4) File the final income tax return, (5) Pass a Special Resolution (75% majority), (6) Every director signs indemnity bond and affidavit, (7) File Form STK-2 on MCA portal with all attachments, (8) ROC publishes gazette notice and allows 30 days for objections, (9) If no objections, company is struck off and dissolved. Timeline: 3-6 months.
How do I close an LLP?
To close an LLP: (1) Settle all debts and liabilities, (2) File all pending Form 8 and Form 11, (3) Cancel GST and other registrations, (4) File the final income tax return, (5) Pass a resolution with consent of at least 3/4th of partners (by value), (6) Every designated partner signs an indemnity bond and affidavit, (7) File Form 24 (Application for Strike Off) on MCA portal, (8) ROC publishes gazette notice (30-day objection period), (9) If no objections, LLP is struck off. Government fee for Form 24 is 3,000 rupees. Timeline: 2-4 months.
How do I close an OPC?
The process to close a One Person Company (OPC) is essentially the same as closing a Private Limited Company: use Form STK-2 on the MCA portal. Since an OPC has only 1 member, the sole member passes the Special Resolution. The sole director signs the indemnity bond and affidavit. All other steps - clearing liabilities, filing pending returns, cancelling GST, filing final tax return - are the same. The government fee is 10,000 rupees.
How do I close a Section 8 Company?
Closing a Section 8 (not-for-profit) Company requires prior approval from the Central Government (Regional Director) before filing Form STK-2. The company must demonstrate that all funds and grants have been utilized for the stated objectives, and any remaining assets must be transferred to another Section 8 company or similar trust/society with similar objects. The company cannot distribute surplus to members. Additional scrutiny is applied since Section 8 companies often received tax exemptions and government grants.
What is dormant company status?
Dormant company status under Section 455 of the Companies Act is for companies that have no significant business operations but want to remain on the Register of Companies. Instead of closing the company, you apply for dormant status by filing Form MSC-1. Dormant companies have reduced compliance - they need to file only one return per year. The status can continue for up to 5 years. After that, the company must either become active or apply for strike-off. Dormant status is useful when you plan to restart the business later.
What GST compliance is needed before closing a company?
Before closing: file all pending GST returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C if applicable), apply for cancellation of GST registration through the GST portal, file GSTR-10 (Final Return) within 3 months of cancellation - this shows details of closing stock, input tax credit to be reversed, and final tax liability, pay any outstanding GST dues, and obtain the cancellation order. Do not apply for company strike-off until the GST cancellation is completed.
What income tax filings are required before closure?
File all pending income tax returns for prior years, file the final income tax return for the year of closure (up to the date of cessation of business), pay any outstanding advance tax, self-assessment tax, or demand, ensure there are no pending assessments, appeals, or proceedings with the Income Tax Department, obtain tax clearance if required, and file the return even if there is no income - a nil return is needed. Failure to file returns can delay the strike-off process.
Do I need to close PF and ESI registrations?
Yes, if the company was registered under PF (Provident Fund) and ESI (Employees' State Insurance), you must: settle all pending PF contributions and ESI premiums, file final returns with EPFO and ESIC, transfer employee PF accounts to their new employer or process withdrawals, apply for surrender of registration with both authorities, and obtain the clearance certificate. Employee gratuity must be settled if employees have completed 5+ years. Do not skip this step - PF and ESI authorities can raise claims even after company closure.
What happens to company employees during closure?
Employees must be given adequate notice as per their employment contracts and labour laws. Pay all pending salaries, bonuses, and leave encashment. Settle gratuity (if employee has completed 5 years). Transfer or close PF and ESI accounts. Issue relieving letters and experience certificates. If 100+ workers are being retrenched, prior government approval is required under the Industrial Disputes Act. Provide Form 16 (TDS certificate) for the final year.
Can a struck-off company be revived?
Yes, a struck-off company can be revived within 20 years of the date of dissolution. The application for revival is filed with the NCLT (National Company Law Tribunal) under Section 252. The applicant (member, creditor, or workman) must show that the company was carrying on business at the time of strike-off, or that it is just and equitable to revive the company. The NCLT may order the company to be restored to the Register of Companies with conditions. However, revival is a time-consuming and expensive process.
What is the difference between strike-off and winding up?
Strike-off is a simpler, faster, and cheaper process suitable for companies with minimal or no assets and liabilities. It is an administrative process handled by the ROC. Winding up is a more complex process involving the NCLT, appointment of a liquidator, realization of assets, payment of creditors in order of priority, and distribution of surplus. Winding up is appropriate for companies with significant assets and liabilities that need supervised distribution. Most small companies use strike-off.
What is compulsory strike-off by ROC?
The ROC can initiate strike-off on its own under Section 248(1) if the company has not filed annual returns or financial statements with the ROC for 2 or more consecutive financial years, or the ROC has reasonable cause to believe that the company is not carrying on business. The ROC sends a notice to the company and publishes it in the Official Gazette. If no response is received within 30 days, the ROC strikes off the company. Directors of such companies face disqualification under Section 164(2).
What is the effect of director disqualification due to non-filing?
If a company is struck off by the ROC due to non-filing, all directors at the time of non-filing are disqualified under Section 164(2)(a) for a period of 5 years. Disqualified directors cannot be appointed as directors in any other company. To avoid this, it is better to voluntarily close the company (after filing all pending returns) rather than let the ROC strike it off for non-compliance. Already disqualified? You need to apply for removal of disqualification.
Can a company be closed if it has pending litigation?
A company with pending litigation cannot easily be struck off. The ROC typically rejects strike-off applications if there are active court proceedings by or against the company. The options are: settle or resolve the litigation before applying for strike-off, wait for the litigation to conclude, or apply for NCLT winding up where the tribunal can supervise the process including resolution of pending cases. Disclose all pending litigation in the director affidavit - concealment can lead to the directors being held liable.
What about the company's intellectual property (trademarks, patents)?
Trademarks, patents, copyrights, and other IP owned by the company must be addressed before closure. Options include: transfer or assign the IP to another entity or individual (execute an assignment deed), license the IP before closure, or let them lapse if they have no commercial value. Trademarks can be transferred using Form TM-P with the Trademark Registry. If IP is not transferred before strike-off, it becomes bona vacantia (government property). Plan IP disposition early in the closure process.
What is the cost of closing a company in India?
Total costs typically range from 15,000 to 50,000 rupees depending on the company type and complexity: government fee for Form STK-2 is 10,000 rupees (for companies) or 3,000 rupees (for LLPs), filing fees for overdue annual returns and financial statements (varies based on delays), CA fees for final accounts and tax filing (5,000-15,000 rupees), CS fees for resolution drafting and MCA filing (5,000-15,000 rupees), stamp paper for indemnity bond (100-500 rupees), and GST cancellation compliance costs (2,000-5,000 rupees).
What is the Fast Track Exit (FTE) mode?
The Fast Track Exit (FTE) mode was introduced to simplify closure for defunct companies. Under FTE, companies that have never commenced business or have not been operational for the prescribed period can apply for faster strike-off. The process is similar to regular strike-off but with expedited processing. The FTE scheme has been merged with the regular Section 248 procedure in recent years, but the concept of expedited processing for clearly defunct companies continues through simplified compliance requirements.
What happens to the company's bank accounts?
All bank accounts should be closed before or immediately after the strike-off. Steps: withdraw or transfer all balances, clear any pending cheques or auto-debits, close all fixed deposits and recurring deposits, return any bank guarantees, repay any overdraft or CC facilities, and submit the company's checkbooks, debit cards, and internet banking tokens. Obtain a bank account closure confirmation letter. If the account remains open after strike-off, the bank may freeze it due to the company's dissolved status.
Do I need to publish a newspaper advertisement for closure?
For a voluntary strike-off under Section 248, the ROC handles the gazette notification. You do not need to publish a newspaper advertisement. However, for NCLT winding up, the tribunal may direct the company to publish advertisements in newspapers inviting creditor claims. Some companies voluntarily publish a newspaper notice informing the public of the intended closure to preempt any objections, though this is not mandatory for STK-2 applications.
What if the ROC rejects the Form STK-2 application?
The ROC may reject the application if: the statement of accounts is older than 30 days, there are pending annual filings (returns or financial statements not filed), there are pending liabilities disclosed in the accounts, the indemnity bond or affidavit is defective, regulatory NOCs are missing (if the company is regulated by RBI, SEBI, IRDA, etc.), or objections are received during the 30-day gazette period. Address the deficiencies and refile. Professional assistance from a CA/CS can minimize rejection risk.
What post-closure obligations remain for directors?
Even after strike-off, directors have certain continuing obligations: honour the indemnity bond if any creditor raises a valid claim, preserve company records and books for 8 years from the date of dissolution (statutory requirement), respond to any income tax proceedings related to the company's pre-closure period, and cooperate if the company is ordered to be revived by NCLT. Directors remain personally liable for any fraud or misrepresentation committed during the company's existence.
Can I close a company that has never started business?
Yes, this is the simplest scenario for closure. If the company was incorporated but never commenced any business activity, the closure is straightforward. The statement of accounts shows nil or minimal transactions (only incorporation expenses). The Special Resolution confirms no business was conducted. The entire process may be completed in 2-3 months. This is common for companies that were incorporated speculatively or where the business plan did not materialize.
What is NCLT winding up and when is it needed?
NCLT winding up under Sections 271-323 of the Companies Act is a tribunal-supervised process for closing a company. A petition is filed with the NCLT, a liquidator is appointed, assets are realized, creditors are paid in statutory order of priority, and surplus is distributed to shareholders. This method is needed when: the company has significant debts it cannot pay, there are disputes between shareholders about closure, the company needs court supervision for orderly winding up, or when strike-off is not possible due to pending litigation. It is more expensive and time-consuming (6-18 months).
What is the order of priority for paying creditors during winding up?
The statutory order under the Companies Act is: (1) Winding up costs and liquidator fees, (2) Secured creditors (banks with mortgage/charge on assets), (3) Employee dues (wages for 24 months, accrued holiday pay, PF contributions), (4) Government taxes (income tax, GST, property tax, municipal dues), (5) Unsecured creditors (trade creditors, vendors, service providers), (6) Preferential shareholders, (7) Equity shareholders. Any surplus after paying all creditors is distributed to equity shareholders.
What happens to ongoing contracts when a company is being closed?
Ongoing contracts should be completed or terminated before closure. Options: fulfill all remaining obligations under the contract, negotiate an early termination with the counterparty (may involve termination fees), assign the contract to another entity (with the counterparty's consent), or breach the contract (exposes the company and directors to damages claims). Address all contracts before filing for strike-off. Undisclosed contracts that surface after closure can be enforced against directors through the indemnity bond.
Can a partnership firm or sole proprietorship be struck off?
The MCA strike-off process (Form STK-2, Form 24) applies only to companies and LLPs registered with the MCA. To close a sole proprietorship, cancel all registrations (GST, MSME, trade license), file final tax returns, and close bank accounts. To close a partnership firm, execute a dissolution deed, file it with the Registrar of Firms, cancel registrations, settle all liabilities, and file final tax returns. These are simpler processes since proprietorships and firms are not regulated by MCA.
What happens to the company's registered office lease after closure?
The lease or rental agreement for the registered office must be terminated or allowed to expire. If there is a lock-in period, you may need to pay the remaining rent or negotiate early termination. Obtain the security deposit refund from the landlord. Remove the company's name board and signage from the premises. If the company owned the property, it must be sold or transferred before strike-off. Any property remaining with the company at the time of strike-off vests in the government.
Do I need to deregister from any other authorities?
Yes, deregister or cancel registrations with: GST portal (cancel registration), EPFO and ESIC (surrender PF and ESI codes), Shops and Establishments Act (cancel registration with local municipal body), Professional Tax (cancel registration), Import Export Code (surrender IEC if held), FSSAI (cancel food license if applicable), Drug License (surrender if applicable), Factory License (surrender if applicable), and any other sector-specific registrations. Obtain cancellation acknowledgements for all.
What is the gazette notification and objection period?
After the ROC accepts the Form STK-2 application, the ROC publishes a notice in the Official Gazette stating that the company will be struck off unless objections are received within 30 days. This gives creditors, regulatory authorities, and any interested party the opportunity to object. If objections are received, the ROC investigates and may reject the strike-off application. If no objections are received within 30 days, the ROC proceeds to strike off the company's name from the Register.
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