FAQs on Provisions and
Penalties For ‘Struck Off ‘
Companies

Introduction
 The Ministry of Corporate Affairs (MCA) took strict action in 2017 by “Striking Off”
more than 2 lakh firms as part of the ongoing effort to cleanse the financial sector.
 More than 3 lakh Director Identification Numbers (DINs) were mistakenly
deactivated due to this operation.
 The FAQs here are all about the Provisions and penalties for ‘struck off ‘
companies and the reasons for the company’s dissolution.

What are the Reasons for a Company’s
Dissolution?
 The reasons for the company’s dissolution are listed below-:
• If a company fails to file its compliances on time, it will be fined and the
directors will be barred from founding another company. In this way, it is
preferable to wind up an inactive business to avoid future fines or liability.
• The Companies Act establishes a legal entity known as a private limited
company.
• As a result, a business must maintain frequent compliance throughout its life
cycle. If a company fails to do so then the company can wind up or strike off.
• In comparison to maintaining compliances for a dormant firm, it is actually to
re-establish a company when the time comes.

What are the Modes of “Striking off” a
Company?
Strike off a company by Tribunal
Strike off Voluntary Strike off

What is the Procedure to Strike Off a
Company?
1
Pass a
resolution at a
special
resolution for a
voluntary
decision or
general
meeting for
the AOA
events and a
creditors’
meeting.
2
Declare the
Company’s
solvency for
settling
overdue
obligations.
3
ROC must
receive the
auditor’s
report as well
as a
declaration of
solvency, and
the registered
valuer’s report
(in the case of
a valuation of
the
Company’s
assets).
4
Appoint a
Liquidator to
complete the
process. The
company
needs to start
a winding up
process as
soon as the
resolution date
is passed.
5
The liquidator
will compile a
winding-up
report and
convene a
general
meeting of the
Company to
lay out final
winding-up
accounts.

What are the Penalties for ‘Struck Off ‘
Companies Under Section 166 of the
Companies Act,2013?
• Due to the majority of businesses having been de-registered due to filing delays
with documents like IT returns, the penalty is usually referred to as a “Late Fine.”
• Repeat offenders who disobey the rules face additional penalties.
• According to section 166(7) of the Companies Act 2013, the full-time Directors are
responsible for upholding ethical practices and are subject to punishment if they
don’t.

What are the provisions for the Restoration
and Revival of a Company?
 The provisions for the Restoration and Revival of a company are listed below-:
• A de-registered business, its members, creditors, or employees have 20 years
from the date of notification to file an appeal.
• The affected business or its employees may file an application with the NCLT
within three years of being debarred.

What is the Consequence of Failing to
Follow the Company Act’s requirements?
 A person who fails to follow the
requirements of the Companies Act
or violates the law may be
sentenced for up to six months of
imprisonment, or a fine up to 50,000
rupees, or both.

Can a Firm that has been Dissolved be
Reinstated?
 There are a lot of reasons for the
company’s dissolution and only a
court order will permit a company
that has been struck off due to
voluntary dissolution to be
reinstated.
 Any company that is placed back on
the register is considered to have
continued as if it had never been
struck off and dissolved.

Can a Struck-Off Company Still Trade?
 When a company is struck off, the name will be removed from the company
register and it cannot trade, sell its assets or make payments or even it cannot
even get involved in any other business activities.
 The name of the company would be made available for new companies to use.

What are the Documents Required to Strike
Off the Company’s Name?
 The Company which is likely to be struck off must file an application to the registrar
of the companies, along with the following documents:
• Indemnity Bond duly notarized by all directors (in Form STK 3).
• A certified statement of liabilities by a Chartered Accountant comprising of all
assets and liabilities of the companies.
• CTC of Special Resolution duly signed by every director of the company.

Under Which Circumstances Strike Off
cannot be Done?
• In case a company has not filed 20A (inc. after
2nd Nov 2018)
• One year has not completed since the
incorporation
• For ongoing company i.e having business
transactions in the last 1-2 years
• DIN is deactivated
• Any director is disqualified

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