Strike-Off & Winding Up
Proper closure of defunct companies.
Difference Between Winding Up and Striking Off a Company in India
Overview
If your company is inactive or facing financial losses, you may need to close it down. The two primary ways to do this in India are Striking Off and Winding Up. Understanding the key differences between these processes helps business owners make informed decisions.
What is Striking Off a Company?
Striking off refers to removing a company’s name from the Registrar of Companies (ROC) under Section 248 of the Companies Act, 2013. This is a simpler and quicker process suitable for companies that have been inactive, have no assets or liabilities, and do not wish to continue business operations.
Eligibility Criteria for Striking Off
Criteria | Requirement |
Inactivity | No business operations for the last 2 years OR within 1 year of incorporation. |
No Capital Deposited | Shareholders must not have deposited any capital in the last 6 months. |
Bank Account Closure | The company should have no outstanding liabilities, and its bank account should be closed. |
No Legal Proceedings | The company should not be involved in any pending disputes or litigations. |
No Property or Assets | The company must not own any immovable property or assets. |
Process of Striking Off
Obtain 75% shareholder consent.
Close the company’s bank accounts and surrender licenses.
Prepare a nil asset and liability statement.
File Form STK-2 with the ROC.
If approved, the company is struck off from the official records.
What is Winding Up a Company?
Winding up involves liquidating a company’s assets, settling liabilities, and dissolving the company. It applies to actively operational companies with revenues, assets, and accumulated liabilities.
Types of Winding Up
Type | Description |
Voluntary Winding Up | Initiated by the company itself when it is solvent or unable to continue operations. |
Compulsory Winding Up | Ordered by the National Company Law Tribunal (NCLT) due to insolvency, fraud, or regulatory violations. |
Process of Winding Up
Appoint a Liquidator to oversee the process.
Sell company assets to settle outstanding liabilities.
Distribute remaining funds to shareholders and creditors.
Obtain NCLT approval for dissolution.
Remove the company’s legal existence permanently.
Key Differences: Striking Off vs. Winding Up
Parameter | Striking Off | Winding Up |
Definition | Removal of a defunct company from the ROC register. | Legal closure by liquidating assets and paying off debts. |
Authority | ROC | NCLT |
Initiated By | Company or ROC | Shareholders, Creditors, or NCLT |
Company Status | Must be inactive with no assets or liabilities. | Must be active with assets and liabilities. |
Approval Required | Registrar of Companies (ROC) | Shareholders or court approval required. |
Liquidator Appointed | No | Yes, for selling assets and settling debts. |
Debt Settlement | Not required (no liabilities). | Mandatory. |
Asset Distribution | Not applicable. | Required if assets remain after settling debts. |
Timeframe | Quicker process (3-6 months). | Lengthy process (1-3 years). |
Legal Consequences | Name removed from ROC; can be restored within a specified period. | Company is permanently dissolved and cannot be restored. |
Decision Flowchart: Should You Strike Off or Wind Up?
graph TD;
A[Company Closure Decision] -->|Inactive & No Liabilities| B[Strike Off Process]
A -->|Active with Liabilities| C[Winding Up Process]
B --> D[File Form STK-2 with ROC]
C --> E[Appoint Liquidator & Settle Debts]
FAQ Section
1. What is the primary difference between striking off and winding up?
Striking off is a simple process for inactive companies with no liabilities, while winding up involves liquidating assets and paying off debts before closure.
2. Who is responsible for carrying out these processes?
Striking off: Initiated by the company and approved by the ROC.
Winding up: Managed by a liquidator under NCLT supervision.
3. Can a company be restored after striking off or winding up?
Striking Off: Can be restored within a specified period by applying to NCLT.
Winding Up: Cannot be restored once the company is dissolved.
4. What is the cost of striking off vs. winding up?
Striking Off: Low cost (government fees + CA charges).
Winding Up: Higher cost due to legal and liquidation expenses.
5. Which is faster: striking off or winding up?
Striking off is much faster (3-6 months), whereas winding up can take 1-3 years due to legal and financial procedures.
Why Choose ClientsMaster for Company Closure?
ClientsMaster provides expert consultation to help businesses choose the best closure method, ensuring compliance with legal requirements. Our services include:
Eligibility assessment for striking off or winding up.
Drafting final financial statements.
Tax clearance and compliance handling.
Liaison with ROC and NCLT for approvals.
Complete documentation support.
For expert assistance in closing your company efficiently, contact ClientsMaster today!
123-456-7890
