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Striking off a business entity, such as a Limited Liability Partnership (LLP) or a Private Limited Company, is a formal procedure under the Ministry of Corporate Affairs (MCA) in India. This process legally dissolves the entity, removing its name from the official register, and is applicable when the entity is no longer operational or intends to cease its business activities. Understanding the detailed procedures and legal provisions is critical for compliance and to avoid future liabilities.

Striking Off a Limited Liability Partnership (LLP)

- Legal Provisions

The process for striking off an LLP is governed by Section 75 of the Limited Liability Partnership Act, 2008, read with Rule 37 of the Limited Liability Partnership Rules, 2009.

- Conditions for Strike Off

An LLP can apply for striking off if it:

• Has not commenced business: Since its company incorporation.
• Is not carrying on any business or operation: For a period of one year or more.

Procedure for Voluntary Strike Off

Resolution by Partners: Convene a meeting of all partners to pass a resolution approving the strike-off application. Ensure that all partners consent to this decision.

Settlement of Liabilities: Before proceeding, the LLP must clear all its liabilities, ensuring there are no outstanding debts or obligations.

Preparation of Documents: Gather the necessary documents, including:

Statement of Accounts: Certified by a Chartered Accountant, reflecting nil assets and liabilities, not older than 30 days from the date of application.

• Affidavit: Signed by all designated partners, declaring that the LLP has no liabilities and is not involved in any litigation.

• Indemnity Bond: Executed by all designated partners, stating they will settle any unforeseen liabilities even after the LLP is struck off.

• Consent of Partners: A document evidencing the consent of all partners for the strike-off.

• Filing Form 24: Submit the application for strike-off using e-Form 24 on the MCA portal, along with the aforementioned documents.

• Public Notice: Upon receipt of the application, the Registrar will publish a notice on the MCA website and in the Official Gazette, allowing the public to raise objections within one month.

• Striking Off and Dissolution: If no objections are received within the stipulated period, the Registrar may strike off the LLP's name from the register and publish a notice of dissolution in the Official Gazette.

Post Strike Off Implications

Even after the LLP is struck off, the liability of the partners continues and can be enforced as if the LLP had not been dissolved.

Striking Off a Private Limited Company

- Legal Provisions

The procedure for closure of  Private Limited Company is outlined in Section 248 of the Companies Act, 2013, along with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.

- Conditions for Strike Off

A company can apply for strike off if it:

• Has not commenced business: Within one year of its incorporation.
• Is not carrying on any business or operation: For two immediately preceding financial years and has not applied for dormant status.

- Procedure for Voluntary Strike Off

• Board Meeting: Conduct a Board Meeting to pass a resolution approving the proposal to strike off the company and to authorize a director to proceed with the formalities.

• Settlement of Liabilities: Ensure all liabilities are settled, and obtain a No Objection Certificate (NOC) from creditors, if any.

• Shareholders' Approval: Convene an Extraordinary General Meeting (EGM) to pass a special resolution for strike off, requiring the consent of at least 75% of shareholders in terms of paid-up share capital.

• Filing of Form MGT-14: File the special resolution with the Registrar in Form MGT-14 within 30 days of passing the resolution.

• Filing of Form STK-2: Submit the application for strike off in Form STK-2, along with the following documents:

  • Indemnity Bond (STK-3): Executed by every director.

  • Affidavit (STK-4): By every director, stating that the company has no liabilities and is not involved in any litigation.

  • Statement of Accounts (STK-8): Certified by a Chartered Accountant, showing nil assets and liabilities, prepared up to a date not more than 30 days before the date of application.

  • Copy of Special Resolution: Duly certified by each director.

  • NOC from Regulatory Authority: If applicable.

• Public Notice: The Registrar will publish a notice in the Official Gazette and on the MCA website, inviting objections from the public within 30 days.
• Striking Off and Dissolution: If no objections are received, the Registrar will strike off the company's name from the register and publish a notice of dissolution in the Official Gazette.

- Post Strike Off Implications

After the company is struck off, it ceases to exist as a legal entity. However, its liabilities and obligations continue to be enforceable against its directors and members.

Frequently Asked Questions (FAQs)

- Can an LLP or company with outstanding liabilities apply for strike off?

No, all outstanding liabilities must be settled before applying for strike off. The entity must be free from any debts or obligations.

- What happens if objections are raised during the public notice period?

If objections are raised, the Registrar will examine them. If the objections are found to be valid, the strike-off process may be halted, and the entity may need to address the issues before reapplying.

- Can a struck-off entity be restored?

Yes, an application can be made to the National Company Law Tribunal (NCLT) for restoring the name of the entity within a specified period, usually three to five years from the date of strike off, depending on the circumstances.

- Are there any penalties for not filing annual returns before applying for strike off?

Yes, failure to file annual returns and financial statements can attract penalties. It's advisable to file all overdue returns before applying for strike off to avoid such penalties.

- Can an entity apply for strike off if it has ongoing legal proceedings?

No, entities with ongoing legal proceedings are not eligible for strike off. All legal matters must be resolved before applying.

- Is the strike-off process the same across all states in India?

Yes, the strike-off process is governed centrally by the Ministry of Corporate Affairs (MCA) and applies uniformly across all states in India. However, regional Registrars of Companies (ROC) may have specific procedural preferences or document scrutiny practices, so it’s advisable to consult the local ROC or a professional before proceeding.

Key Differences Between Strike Off for LLP and Private Limited Company

Important Tips Before You Apply for Strike Off

• Maintain Transparency: Declare all business closures, liabilities, and financial standings honestly to avoid future complications.
• Hire a Professional: Involve a Chartered Accountant or Company Secretary to ensure accurate filings.
• Clear Bank Accounts: Close all bank accounts in the entity’s name and obtain a no-dues certificate.
• Preserve Documents: Keep a copy of all filings, approvals, and Gazette notifications for at least 8 years for legal reference.

Conclusion

Closure of  LLP or a Private Limited Company is a structured and regulated process under the MCA rules. Whether due to inactivity or business closure, ensuring compliance with the stipulated legal provisions, correct documentation, and timely application is essential. The process allows businesses to formally wind up operations while ensuring accountability and transparency in the legal ecosystem. For a smooth strike-off experience, it’s always best to plan ahead, consult professionals, and follow the MCA guidelines meticulously.