COMPANY CLOSURE SERVICES

Winding Up of a
Company

Legally close your inactive or non-operational company to avoid penalties, protect directors, and ensure future credibility.

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₹10,000

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Section 248

Strike Off

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Introduction

What is Company Winding Up?

Winding up refers to the legal closure of a company under the Companies Act, 2013, ensuring its formal removal from the Ministry of Corporate Affairs (MCA) records.

Voluntary Winding Up

Initiated by the company’s shareholders or directors when the company is no longer active or profitable.

Compulsory Winding Up

Ordered by the National Company Law Tribunal (NCLT) due to non-compliance, financial fraud, or court directives.

Strike Off (Fast Track)

A simplified exit route for eligible inactive companies using Form STK-2 under Section 248.

Legitimacy

Importance of Legally Closing Inactive Companies

Official closure is essential for protecting directors, avoiding perpetual penalties, and maintaining corporate hygiene.

Avoid Legal and Financial Penalties

Even if a company has stopped operations, the MCA still expects annual filings. Non-compliance leads to heavy penalties, late fees, and legal action.

Director Protection

Directors of defaulting companies may face disqualification from holding positions in other companies. Winding up legally clears your name from the records.

Debt and Liability Management

During winding up, all liabilities are settled, which prevents future creditor claims.

Formal Closure in Records

Unless officially closed, the company remains active in government databases, causing confusion during audits, credit checks, or new business registrations.

Ease of Business Exit

A properly closed company does not affect the promoters’ creditworthiness or future ventures.

Necessity

Why Winding Up is Necessary

Exit the corporate system cleanly by resolving liabilities and regulatory obligations before they become permanent risks.

Prevent Future Legal and Financial Liabilities

Even after a company stops doing business, its obligations don’t automatically end. Legal winding up ensures:

All dues are cleared, and liabilities are settled.
Directors and shareholders are protected from future claims or lawsuits.
No surprise notices from the tax department, ROC, or creditors.

Avoid ROC Penalties and Statutory Dues

Inactive companies must still file annual returns, financial statements, and compliance forms with the ROC. Failure to do so results in:

Accumulation of heavy late fees and penalties.
Disqualification of directors under Section 164 of the Companies Act.
Freezing of company’s bank accounts and government registrations.

Winding up removes the entity from the MCA records, permanently halting compliance obligations and associated penalties.

Clear Status for Banks, Creditors, and Stakeholders

An inactive company that is not wound up may appear “active” in government databases, leading to confusion or mistrust. Proper winding up helps:

Provide finality to all stakeholders regarding the company’s closure.
Prevent creditors or vendors from issuing claims or recovery notices.
Ensure clean records for future business ventures and credit applications.

Exit Routes

Types of Winding Up

Explore the different legal routes for company closure in India based on your entity's compliance status.

Voluntary Winding Up by Members

This route is chosen when the company’s shareholders mutually decide to shut down operations, even if the company is solvent. It involves passing a special resolution in a general meeting, appointing a liquidator, settling liabilities, and filing final documents with the ROC. This method ensures orderly closure without external compulsion.

Compulsory Winding Up by Tribunal

Under Section 271 of the Companies Act, 2013, the NCLT may order the winding up of a company if it has defaulted in statutory obligations, carried out fraudulent activities, or failed to commence business within one year of incorporation. It is a court-monitored process initiated by creditors, regulatory authorities, or the company itself.

Strike Off under Section 248 (Fast Track Exit)

If a company has been inactive for more than two consecutive financial years or has not commenced business within one year, it can file for strike-off using Form STK-2. This simplified process is governed by Section 248 of the Companies Act and is ideal for dormant companies with no liabilities. It requires minimal compliance and is cost-effective.

Legal Basis

Legal Framework and Governing Provisions

Closure is governed by specific sections of the Companies Act, 2013 to ensure transparency and accountability.

Companies Act, 2013 – Relevant Sections

Section 248 – Strike off of company name by ROC for inactive companies. Section 271 to 275 – Compulsory winding up by Tribunal. Section 304 to 323 – Voluntary winding up of companies.

MCA and ROC Guidelines for Closure

Use of Form STK-2 for strike-off under fast track exit and forms like MGT-14, GNL-2, and INC-28 for voluntary winding up. Timelines, document requirements, and compliance conditions are specified and updated periodically.

Role of NCLT and Regulatory Authorities

NCLT evaluates petitions, appoints official liquidators, and oversees compulsory winding-up cases. Sector regulators such as SEBI or RBI may be involved for listed companies or NBFCs, and their consent/no-objection may be required before final closure.

Regulatory Compliance

Strict adherence to MCA timelines is mandatory.

Checklist

Required Documents

Complete your documentation to initiate a compliant winding-up process under the Companies Act.

Board Resolution for Winding Up

A certified true copy of the resolution passed by the Board of Directors approving the proposal to wind up the company.

Special Resolution Passed in EGM

A copy of the shareholders’ resolution passed in the Extraordinary General Meeting (EGM) approving the winding-up decision with the required majority.

Indemnity Bond (Duly Notarised)

Directors must provide an indemnity bond stating that all liabilities have been settled and they indemnify against any future claims.

Affidavit by Directors

A sworn affidavit confirming that the company has no assets, liabilities, or pending legal proceedings and that all statutory compliances have been met.

Statement of Accounts

A financial statement showing the company’s current assets and liabilities, not older than 30 days from the date of application.

Income Tax Return Acknowledgment

A copy of the latest Income Tax Return filed, ensuring there are no pending tax dues.

Bank Closure Certificate

A certificate from the company’s bank confirming closure of its bank accounts.

Application Form (STK-2 for Strike-Off)

The official application form submitted to the ROC for strike-off, duly signed and accompanied by required attachments.

PAN Card of the Company

A copy of the company’s PAN card issued by the Income Tax Department.

Digital Signature Certificate (DSC)

Required for signing and filing e-forms online with the ROC.

Consent Letter from Creditors (if applicable)

If there are creditors, provide NOC/consent letter confirming there are no outstanding dues.

Step-By-Step

Registration Process for Company Winding Up

A simple and structured process to ensure compliant filing with the Ministry of Corporate Affairs (MCA).

Convene Board Meeting and Pass Resolution

The directors must hold a board meeting to formally decide on winding up the company. A resolution is passed to approve the strike-off proposal, authorize one or more directors to handle the process, and fix a date for the Extraordinary General Meeting (EGM) of shareholders.

Settle All Assets, Liabilities, and Taxes

Before proceeding with closure, the company must clear all outstanding dues, including payments to creditors, employees, vendors, and government departments. This includes surrendering GST registration, closing any government contracts, and settling all statutory dues like TDS, EPF, and pending tax payments.

Prepare Affidavits, Bonds, and Financials

All directors must execute and notarize affidavits declaring that the company has no liabilities and is not carrying on any business activity. Indemnity bonds are also required to safeguard against future claims. A statement of accounts not older than 30 days from the filing date must be prepared, certified by a Chartered Accountant.

Conduct General Meeting for Shareholder Approval

An EGM is convened to obtain approval from shareholders through a special resolution (at least 75% of the shareholders in terms of paid-up share capital must agree). The resolution should confirm that the company shall apply for strike-off under Section 248.

File Form STK-2 with ROC for Strike Off

Once internal approvals and documents are in place, Form STK-2 is filed with the ROC along with supporting documents such as indemnity bond, affidavit, financial statement, board and shareholder resolutions, and tax return acknowledgment.

✓

ROC Verification and Final Closure Order

The ROC examines the documents and may seek clarifications. If satisfied, the ROC issues a public notice and, after 30 days, strikes the company’s name from the register and issues the final closure order. The company is then officially dissolved.

Investment

Timeline & Fees

Understand the standard processing duration and government fee structure for official strike-off.

Estimated Duration for ROC Processing

90 - 120 Days

The complete strike-off process generally takes 90 to 120 days from the date of filing Form STK-2, provided all documents are accurate and there are no objections. The ROC may issue queries during review, which can extend the timeline if not responded to promptly. Timely submission and compliance can ensure quicker closure.

Filing Fees and Government Charges

₹10,000 + Professional Charges

To wind up a company via strike-off, the prescribed government filing fee for Form STK-2 is ₹10,000. Apart from this, companies may incur professional charges for preparing documentation, obtaining CA certifications, and legal consultation. There are no additional ROC fees unless there are outstanding penalties or prior non-compliances to be cleared.

Post-Closure

Post-Winding Up Compliance

Final obligations to ensure your records remain clean across all statutory and financial platforms.

Cancel PAN, GST, and Other Licenses

Cancel all associated registrations such as PAN, GSTIN, Shops & Establishment licenses, etc. to avoid future compliance notices or tax-related issues.

Retain Records for 8 Years (As Per Law)

Retain financial records, tax returns, board resolutions, and compliance documents for at least 8 years to respond to any future regulatory or legal queries.

Notify Stakeholders and Financial Institutions

Inform vendors, clients, banks, and employees, and ensure all bank accounts are closed to avoid misuse or unnecessary charges.

Risks

Consequences of Not Winding Up Properly

Failure to officially close defaults can lead to personal liability, director disqualification, and heavy penalties.

Ongoing Penalties & Late Fees

If a defunct or inactive company is not officially closed, it continues to be treated as an active entity by the ROC. This leads to non-compliance penalties, late filing fees, and annual return dues, even if no business is being conducted.

Personal Liability & Prosecution

Directors and shareholders may be held personally liable for statutory non-compliances. The ROC may disqualify directors under Section 164, initiate prosecution, and issue notices for compliance failures.

MCA/ROC Record Impact

Non-closure reflects poorly in ROC and MCA records, making it difficult to register new companies or LLPs. Defaulting directors may appear on the MCA blacklist, limiting future business opportunities.