Strike Off of Section 8 Companies

A Section 8 Company is a not-for-profit company registered under the Companies Act, 2013, for objectives such as education, social welfare, science, art, environmental protection, and other charitable purposes. When such a company is no longer required or meets the applicable conditions for closure, its name may be removed from the Register of Companies through the prescribed strike-off process.

Reasons for Strike Off

A Section 8 Company may be considered for strike off in circumstances such as:

1. Voluntary Closure: The company is no longer carrying on activities or has fulfilled its objectives.

2. Non-Compliance: Failure to comply with applicable filing and statutory requirements may lead to regulatory action.

3. Inactivity: The company has remained inactive and meets the conditions prescribed for removal of its name.

4. Regulatory Non-Compliance: Breach of applicable requirements or conditions governing the company may result in regulatory action.

5. Other Legal or Regulatory Grounds: The Registrar or competent authority may initiate proceedings where permitted under applicable law.

Process of Striking Off a Section 8 Company

Strike off is governed primarily by Section 248 of the Companies Act, 2013 and the applicable rules.

1. Voluntary Strike Off

Where eligible, the company may apply for removal of its name by:

• Board Approval: Directors approve the proposal for strike off.

• Members’ Approval: The required members' resolution and approvals are obtained.

• Settlement of Liabilities: Applicable liabilities and statutory obligations are addressed before filing.

• Filing Form STK-2: The prescribed application is submitted to the ROC along with required documents, declarations, and supporting records.

• ROC Review and Notice: The ROC examines the application and follows the prescribed notice and publication process before passing the final order.

2. Strike Off by ROC

The Registrar of Companies (ROC) may initiate removal proceedings where the company falls within the circumstances prescribed under Section 248.

The process generally includes:

• Issuance of notice to the company and its directors.

• Opportunity to submit an explanation or representation.

• Publication of the prescribed notice.

• Removal of the company's name from the Register of Companies if the requirements are satisfied.

Consequences of Strike Off

Once the company is struck off:

• The company generally ceases to operate as a registered company, subject to statutory provisions.

• Its ability to carry on business and undertake transactions is restricted.

• Directors and officers may remain liable for obligations arising under applicable law, and disqualification can arise in specified circumstances.

• Outstanding legal proceedings may continue where permitted by law.

• Assets and liabilities are dealt with in accordance with the Companies Act and applicable rules.

Note: A Section 8 Company has additional regulatory considerations because of its not-for-profit status. Before applying for strike off, the company should review its assets, liabilities, grants, donations, tax registrations, and other statutory obligations.