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Strike off Section 8 Companies

A Section 8 company is a non-profit entity registered in India under the Companies Act, 2013. It is created for purposes such as promoting art, science, commerce, charity, sports, education, research,

✓The company shouldnot have carried on any business or operation for at least two consecutive financial years,or hasnever commenced business operations.
✓Companies can applyvoluntarilyfor striking off, or theRoC can initiate an involuntary strike-offif it finds the company inactive.
✓Before removing the name, the RoC ensures that there areno pending liabilities, such astax dues, loans, or legal disputes.
✓Once the process is completed, the companysname is deleted from the register, and it ceases to exist as a legal entity.

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What is a Section 8 Company?

<p>A Section 8 company is a non-profit entity registered in India under the Companies Act, 2013. It is created for purposes such as promoting art, science, commerce, charity, sports, education, research, social welfare, religion, or environmental protection.</p>

<p>Unlike other companies, aSection 8 companysmain objective is to use its profits and income to further its charitable goals, and it cannot distribute dividends to its members. These companies are licensed and regulated by the Central Government through theRegistrar of Companies (RoC)under theMinistry of Corporate Affairs (MCA).</p>

<p>Section 8 companies can be registered in any Indian state or Union Territory through the respective RoC office, like RoC Delhi, RoC Mumbai, or RoC Bangalore. While compliance is mostly uniform nationwide, minor regional differences may arise due to state-specific stamp duty, though these are usually smaller than for private limited companies.</p>

<p>Section 248 of theCompanies Act, 2013, governs the striking off of a companys name from the Register of Companies. This applies mainly to companies that areinactive or have never started their business activities.</p>

<p>Key points under Section 248:</p>

<p>In simpler terms, striking off a company is the process of getting its name removed from the ROC. This section provides a simpler, faster, and more cost-effective way to close an inactive or defunct company compared to winding up.</p>

The company shouldnot have carried on any business or operation for at least two consecutive financial years,or hasnever commenced business operations.
Companies can applyvoluntarilyfor striking off, or theRoC can initiate an involuntary strike-offif it finds the company inactive.
Before removing the name, the RoC ensures that there areno pending liabilities, such astax dues, loans, or legal disputes.
Once the process is completed, the companysname is deleted from the register, and it ceases to exist as a legal entity.
Requirements

Eligibility Criteria

1

All registered entities requiring compliance services

Paperwork

Documents Required

✓Board Resolution:A copy of the resolution passed by the Board of Directors.
✓Special Resolution:A copy of the Special Resolution passed by the companys shareholders.
✓Regional Directors Approval Letter:The letter approving the conversion from a Section 8 to a regular company.
✓Statement of Accounts:A statement of assets and liabilities, duly certified by a Chartered Accountant, showing that the company has no assets or liabilities.
✓Affidavit by Directors (Form STK-4):An affidavit, on stamp paper, stating that the company has no business operations.
✓Indemnity Bond by Directors (Form STK-3):A bond, on stamp paper, indemnifying the government against any future claims.
✓Bank Account Closure Proof:A letter from the bank confirming the closure of the companys bank accounts.
✓Identity & Residential Proofs:Self-attested copies of the directors PAN cards and address proofs.
✓MOA & AOA:Copies of the companys:
✓Memorandum of Association
✓Articles of Association
✓Income Tax Returns:Copies of the companys income tax returns filed for the last three years.
✓NOC from Authorities:No Objection Certificatesfrom statutory authorities (usually Income Tax Department), if applicable.
✓Professional Certificate:A certificate from a professional, like a Company Secretary or Chartered Accountant, stating that the company has complied with all legal requirements.
✓Proof of GST Cancellation:A certificate or acknowledgment confirming the cancellation of thecompanys GST registration.
✓Proof of FCRA License Cancellation:If the company hadFCRA registration, proof of its cancellation.
Step by Step

Registration Process

1

Step 1. Mandatory Conversion: The Crucial First Step for Section 8 Companies

Before applying for strike-off, a Section 8 company mustconvert into a registered company, as Section 8 companies have special privileges that do not allow direct strike-off. This conversion ismandatory under Rule 21 of the Companies (Incorporation) Rules, 2014. This conversion is a mandatory prerequisite that allows the entity to proceed with the standard strike-off application. The company must obtain approval from the Regional Director (RD) for this conversion.

2

Step 2. Voluntary Strike Off: Procedure

Follow these steps to complete the voluntary strike-off process: Convene Board Meeting and Pass Resolution:The Board of Directors should call a meeting to discuss the strike-off and pass a resolution approving the closure.Settle All Liabilities:All outstandingdebts, loans, statutory dues, taxes, and pending legal obligationsmust be cleared before initiating the strike-off process.Obtain Shareholder Approval:A special resolution (a resolution passed with at least75% majority) must be passed in a general meeting, formally approving the companys application for strike-off.File Form MGT-14:The company must file the Special Resolution with the Registrar of Companies inForm MGT-14within 30 days of passing the resolution.Submit Form STK-2 to C-PACE:An application for strike-off is filed with the ROC inForm STK-2(Application for Removal of Name) through the C-PACE (Centre for Processing Accelerated Corporate Exit) portal. Include all necessary documents, such as board and shareholder resolutions, financial statements, and a declaration confirming no liabilities. Note:SinceMay 2023, all strike-off applications arehandled centrallyby C-PACE, ensuringfaster processingcompared to the earlier state-wise RoC procedure. Public Notice by C-PACE/ROC:Upon receiving the application, C-PACE issues apublic notice for 30 days, inviting objections from the public. This notice is published on the MCA portal (mca.gov.in) and in the Official Gazette. Note:The RoC publishes a notice of the proposed strike-off inForm STK-5on the Official Gazette and the MCA website, informing the public before the strike-off is finalized. Final Strike Off and Dissolution:Ifno objections are received, the RoCstrikes off the companys namefrom the register, officially dissolving the company. Directors are then relieved from compliance obligations and liabilities, provided all dues have been cleared. Additional Important Points: The company must ensure allbank accounts are closedand any remaining assets are properly disposed of or transferred.Maintain records for a few years, as historical financial or legal responsibilities may still apply even after strike-off.

Pricing

Fees & Charges

Fee ComponentAmount
Professional feesChartered Accountant or Company Secretary charges for preparing the required documents and certificates range from₹10,000 to ₹30,000, depending on the complexity.
Stamp dutyFor affidavits and indemnity bonds, it varies by state but is usually₹500 to ₹2,000 per document.
Benefits

Key Advantages

Avoids Compliance Penalties

It helps the company and its directors avoid penalties for non-compliance with the Companies Act, 2013.

Reduces Costs

It eliminates the recurring expenses of maintaining the company, such as audit fees, professional fees, and annual filing fees.

Frees Directors

It removes the legal and financial liabilities of the directors associated with the defunct company.

Faster Process

The strike-off process is significantly faster and less complex than the winding-up procedure.

Closes Old Financial Records

Ends the need to maintain books of accounts or file tax returns for an inactive company.

Improves Creditworthiness

Clears inactive companies from the founders records, helping maintain a clean business profile for future ventures.

Removes Unnecessary Legal Risks

Avoids risks of the inactive company being misused for fraudulent purposes.

Simplifies Business Structure

Helps promoters focus on active entities without the distraction of adormant company.

Common Questions

Frequently Asked Questions

A Section 8 company may need to be struck off if it is inactive, has achieved its objectives, or finds it difficult to comply with the legal requirements.
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