Every business has a beginning and, sometimes, an end. When a company decides to stop operating permanently, it must go through a legal process known as closure.
Closure is not simply shutting down activities; it is a formal procedure under the Companies Act, 2013, where the company’s name is officially removed from the Register of Companies (ROC).
Understanding this process is essential because it helps business owners close their companies legally and cleanly, avoiding future penalties or compliance issues.
⚙️ Meaning of Company Closure
The closure of a company means the voluntary removal of its name from the ROC records.
A company usually opts for closure when it is:
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Not carrying on any business or operations for two consecutive years.
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Free from all liabilities and debts.
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Not facing any ongoing legal disputes.
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Has settled its accounts and completed all necessary filings.
Closure is done under Section 248(2) of the Companies Act, 2013, through Form STK-2.
This process is also known as the Strike-Off or Fast Track Exit (FTE) scheme.
👉 Example:
If a company has been inactive since incorporation and has no bank transactions, it can apply for closure through the ROC using Form STK-2.
📋 Eligibility Criteria for Company Closure
Before applying for closure, the company must meet specific conditions.
| ✅ Requirement | 📌 Description |
|---|---|
| Inactive Status | The company has not been operational for the last two financial years. |
| No Liabilities | All outstanding dues, taxes, and loans are cleared. |
| No Pending Cases | The company is not involved in any legal proceedings. |
| Up-to-Date Filings | Financial statements and annual returns are filed up to the date of closure. |
| Board Approval | Directors have passed a board resolution approving the closure. |
These requirements ensure that only compliant and inactive companies can apply for closure under Section 248(2).
🧾 How Company Closure Works
The closure process involves a few structured steps to ensure the company exits the system lawfully.
1️⃣ Board Resolution:
The directors pass a resolution to approve the closure and authorize a representative to file the application.
2️⃣ Affidavit & Indemnity Bond:
Every director signs an affidavit confirming that the company has no debts and indemnifies the government against future claims.
3️⃣ Filing Form STK-2:
The company submits Form STK-2 to the ROC with supporting documents and the prescribed government fees.
4️⃣ ROC Verification:
The Registrar reviews the application, verifies compliance, and issues a public notice.
5️⃣ Publication of Notice:
A notice of proposed strike-off is published in the Official Gazette and on the MCA website.
6️⃣ Final Order:
After the notice period, the ROC strikes off the company’s name from its register, completing the closure process.
⏳ Average Processing Time: 3–6 months.
⚖️ Legal Reference
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Section 248(2) of the Companies Act, 2013 – Voluntary removal of company name by the ROC.
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Rule 4 of the Companies (Removal of Names of Companies) Rules, 2016 – Procedure for application and publication.
These provisions make closure a lawful, simple, and time-bound process for companies that wish to discontinue business operations.
💡 Conclusion
To sum up, closure of a company is a voluntary legal process that helps inactive or dormant companies exit the system in a clean manner.
Unlike winding up, it is faster, simpler, and cost-effective.
By completing ROC formalities properly, business owners can avoid future penalties and maintain compliance history for future ventures.
If your company is inactive or no longer operating, opting for closure under Section 248 ensures a safe and compliant exit from business obligations.