Closing a company that is no longer carrying on business is just as important as incorporating one. The Ministry of Corporate Affairs (MCA) provides a simplified mechanism for companies to voluntarily remove their name from the Register of Companies through Form STK-2 under Section 248(2) of the Companies Act, 2013.

For promoters who have incorporated a company but never commenced operations, or businesses that have become inactive over time, the company strike off STK 2 route offers a cost-effective and legally compliant way to close the entity.

In this article, we discuss when a company can apply for strike-off, eligibility conditions, documents required, and the step-by-step filing procedure.

What is STK-2?

Form STK-2 is an application filed with the Registrar of Companies (ROC) by a company seeking voluntary removal of its name from the register maintained by the ROC.

Once approved, the company is dissolved and ceases to exist as a legal entity.

The provision is governed by Section 248(2) of the Companies Act, 2013 and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.

When Can a Company Apply for Strike-Off?

A company may apply for strike-off if:

• It has failed to commence business since incorporation; or
• It is not carrying on any business or operation for the immediately preceding two financial years; and
• It has no intention to continue operations in the future.

The company should have cleared all liabilities before making the application.

Who Cannot Apply for Strike-Off?

A company is not eligible to file STK-2 if, during the previous three months, it has:

• Changed its name
• Shifted its registered office from one state to another
• Disposed of property or rights held by the company outside the ordinary course of business
• Undertaken any activity except those necessary for making the strike-off application
• Applied to the National Company Law Tribunal (NCLT) for compromise or arrangement
• Is under inspection, investigation, or prosecution

Additionally, listed companies and certain regulated entities cannot avail this route.

Pre-Conditions Before Filing STK-2

Before filing the application, ensure that:

1. All Liabilities Are Cleared

The company should have no outstanding creditors, loans, statutory dues, or pending obligations.

2. Bank Accounts Are Closed

All company bank accounts should be closed and balances should be brought to nil.

3. Financial Statements Are Prepared

A statement of accounts reflecting nil assets and liabilities should be prepared and certified by a Chartered Accountant.

4. Shareholders Approve the Proposal

A special resolution must be passed by shareholders or consent of at least 75% of members in terms of paid-up share capital must be obtained.

Documents Required for STK-2 Filing

The following documents are generally attached with Form STK-2:

✔ Indemnity Bond (Form STK-3)

Executed by every director.

✔ Affidavit (Form STK-4)

Declaration from directors confirming eligibility and correctness of information.

✔ Statement of Accounts

Certified by a practicing Chartered Accountant and not older than 30 days from filing.

✔ Special Resolution

Certified copy of shareholders' approval for strike-off.

✔ Statement Regarding Pending Litigations

If applicable.

Step-by-Step Process for Company Strike Off under STK-2

Step 1: Conduct Board Meeting

Approve the proposal for strike-off and authorize a director to undertake the process.

Step 2: Obtain Shareholders' Approval

Pass a Special Resolution in the General Meeting or obtain consent from 75% shareholders.

Step 3: Close Liabilities and Bank Accounts

Ensure all financial obligations are settled and accounts are closed.

Step 4: Prepare Supporting Documents

Arrange affidavits, indemnity bonds, statement of accounts, and resolutions.

Step 5: File Form STK-2 with ROC

Submit the form along with prescribed government fees and attachments.

Step 6: ROC Verification

The ROC reviews the application and publishes a public notice seeking objections, if any.

Step 7: Strike-Off Order

If no objection is received and the ROC is satisfied, the name of the company is removed from the register and a notice is published in the Official Gazette.

Important Consequences of Strike-Off

After strike-off:

• The company ceases to exist as a legal entity.
• The Certificate of Incorporation stands cancelled.
• Business activities cannot be carried out.
• Directors remain liable for any fraud, misconduct, or undisclosed liabilities discovered later.

Therefore, promoters should ensure complete compliance before applying.

Common Mistakes to Avoid

• Filing STK-2 without clearing liabilities
• Using an outdated statement of accounts
• Non-closure of bank accounts
• Incorrect affidavits or indemnity bonds
• Ignoring pending legal proceedings
• Failure to obtain proper shareholder approval

These errors can lead to rejection of the application and delays in closure.

Conclusion

The company strike off STK 2 mechanism provides an efficient route for promoters to close inactive companies and avoid recurring compliance costs. However, the process requires careful preparation of documents, settlement of liabilities, and adherence to the provisions of the Companies Act, 2013.

Businesses that are no longer operational should evaluate whether voluntary strike-off under STK-2 is the most suitable option and complete the procedure in a legally compliant manner to avoid future complications.

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