A company that has stopped trading, owes nothing and owns nothing can usually be closed by asking the Registrar to strike its name off, using Form STK-2. A company that still has assets to sell or debts it can pay in full goes through voluntary liquidation under section 59 of the Insolvency and Bankruptcy Code, with an insolvency professional as liquidator. Winding up by the Tribunal under the Companies Act is the route for specific situations, such as fraud or long-term non-filing, and is rarely the right choice for an owner who simply wants out.
The choice is mostly made for you by the company’s balance sheet. Here is how the three compare, and what to clear before you start. One practical point comes up on both voluntary routes: strike-off needs overdue annual filings brought up to date first, and voluntary liquidation needs recent audited accounts. If yours are behind, our ROC filing service prepares the missing AOC-4 and MGT-7 forms and files them for you.
The three routes side by side
| Point | Strike-off (STK-2) | Voluntary liquidation (IBC s.59) | Winding up by Tribunal (CA s.271) |
|---|---|---|---|
| Who decides | Registrar of Companies | Members and creditors; NCLT passes the final dissolution order | National Company Law Tribunal |
| Suits a company that | Has no liabilities left and is not carrying on business | Is solvent and has assets to realise or debts it can pay in full | Falls within a section 271 ground, such as fraud, five years of non-filing, or “just and equitable” reasons |
| Who runs it | The directors | An insolvency professional appointed as liquidator | A company liquidator appointed by the Tribunal |
| Main approvals | Special resolution, or consent of 75% of members by paid-up capital | Directors’ declaration of solvency, special resolution, and two-thirds of creditors by value if there is any debt | Tribunal order on a petition |
| Relative effort | Lowest | Moderate to high | Highest |
A company that cannot pay its debts is a different case altogether: that is insolvency, dealt with under Part II of the IBC, not voluntary closure.
Strike-off: who qualifies
Under section 248(2) of the Companies Act, 2013, a company may apply to the Registrar to remove its name only after extinguishing all its liabilities, and only on one of the grounds in section 248(1). In practice the common ground is that the company has not carried on business for the two preceding financial years, or never commenced business.
The company must also not have done any of the following in the previous three months (section 249):
- changed its name, or shifted its registered office from one state to another;
- disposed of property or rights for value, other than what was needed to close down;
- carried on any activity beyond what is needed to apply for strike-off, wind up its affairs or meet a statutory requirement;
- applied to the Tribunal for a compromise or arrangement that is still pending; or
- been in winding up under the Companies Act or the IBC.
An application made in breach of these conditions is punishable with a fine of up to ₹1,00,000, and the Registrar rejects it once the breach comes to light.
A company registered under section 8 cannot use this route; section 248(3) excludes it.
Overdue filings come first
Since May 2023, the strike-off rules say a company shall not file STK-2 until it has filed its overdue financial statements and annual returns up to the end of the financial year in which it stopped business. If the Registrar has already begun strike-off action, all pending returns must be filed first; and once the Registrar has issued the notice for publication under section 248(5), the company can no longer apply at all.
For many dormant companies this backlog is the real work, and it has to be finished before the application can even be made.
What strike-off does and does not end
- On publication of the Registrar’s notice in the Official Gazette, the company stands dissolved (section 248(5)).
- Before striking off, the Registrar must be satisfied that provision has been made for any amounts due to or by the company (section 248(6)).
- The liability of directors, officers and members continues after dissolution and can be enforced as if the company still existed (section 248(7)).
- If the application was made to evade liabilities or defraud creditors, the people in charge become jointly and severally liable (section 251).
- An aggrieved person can appeal to the Tribunal within three years of the Registrar’s order (section 252).
Voluntary liquidation: for solvent companies with something to wind down
Section 59 of the Insolvency and Bankruptcy Code, 2016 lets a corporate person that “has not committed any default” liquidate itself. For a company, the main steps are:
- A majority of directors make a declaration, verified by affidavit, that the company has no debt or will be able to pay its debts in full from the sale of its assets, and that it is not being liquidated to defraud anyone.
- The declaration is backed by audited financial statements for the previous two years (or since incorporation) and a registered valuer’s report on the assets, if any.
- Within four weeks, members pass a special resolution to liquidate and appoint an insolvency professional as liquidator.
- If the company owes any debt, creditors holding two-thirds of the debt by value approve the resolution within seven days.
- The Registrar and the Insolvency and Bankruptcy Board are told within seven days.
- The liquidator realises assets, pays creditors and distributes the balance to members, then applies to the NCLT, which passes a dissolution order.
The IBC (Amendment) Act, 2026 is bringing in changes to section 59, including a maximum period of one year for completing a voluntary liquidation and a way for members to end one by special resolution. These take effect on dates the Central Government notifies, so check the current position with the liquidator before you start.
Winding up by the Tribunal
Section 271 lists the situations in which the Tribunal may wind up a company on a petition. They include a special resolution by the company itself, acts against the sovereignty or security of India, fraud in the company’s affairs, default in filing financial statements or annual returns for five consecutive financial years, and cases where the Tribunal thinks winding up is just and equitable.
For a small owner-managed company this route is slower and costlier than the other two, which is why it is usually reached only when the Registrar or a third party starts it.
What to settle before you apply
Whichever route you take, clear the outside world first. A company that still has open registrations or a bank balance is not “free of liabilities” in the sense strike-off requires.
- GST: apply to cancel the GST registration, pay any tax due on closing stock or assets, and file the final return the GST law requires after cancellation.
- Income tax and TDS: file pending returns and close out TDS deposits and statements, so no demand surfaces after dissolution.
- Employees: settle dues, and close PF, ESI and professional tax registrations where they exist.
- Bank: pay the last bills, then close the company’s bank accounts so the final statement shows nil balances.
- Creditors and contracts: pay or settle every creditor, and end leases and supplier agreements in writing.
- Licences: surrender trade, shop and other local licences held in the company’s name.
Keep the closing papers. Because liability survives dissolution, proof of what was paid and cancelled is your answer to any later query.
Complianto (complianto.in), operated by Mentorcorp Private Limited, is a private consultancy and is not affiliated with any government body. We do not issue official documents. We charge a professional fee for application assistance and advisory services. Applicants can apply directly to the government without our fees via the official portals: MCA (mca.gov.in), Income Tax (incometax.gov.in), GST (gst.gov.in), MSME (udyamregistration.gov.in), FSSAI (foscos.fssai.gov.in), Startup India (startupindia.gov.in), and IP India (ipindia.gov.in).
This article is general information, not legal or tax advice.
