Strike Off Section 8 Companies
A Section 8 Company is a non-profit entity formed to promote trade, arts, science, education, research, sports, charity, environmental protection, and similar objectives. These companies are prohibited from distributing profits to their members and must use their income to further their objectives.
When a Section 8 Company is struck off, it means the company has been legally dissolved by the Ministry of Corporate Affairs (MCA).
Key Points About Strike Off of Section 8 Companies
- Conversion to a One-Person Company (OPC) is not permitted.
- Upon liquidation, assets are not transferred to shareholders or management but are merged with another Section 8 Company.
Eligibility Criteria for Strike Off
A Section 8 Company can apply for strike-off under the following conditions:
- Non-Commencement of Business – The company has not started operations within one year of incorporation.
- Inactivity for Two Consecutive Years – The company has been inactive for two financial years and has not applied for dormant status under Section 455 of the Companies Act
- Change in Objectives – The company’s original objectives have changed, and it is struggling to achieve the new goals.
Strike Off of Section 8 Companies
Advantages of Striking Off a Section 8 Company
- Quick and Cost-Effective Closure – If the company is inactive and has no creditors, striking off is a fast way to close the entity. The process typically takes three months. However, if the company has creditors, they must receive three months’ notice before applying for strike-off.
- Minimal Cost – Filing the strike-off application with the ROC is cost-effective compared to other closure methods.
- No Investigation of Directors – Once the company is dissolved, there is no formal investigation into the conduct of its directors unless the company is later revived by creditors and goes into liquidation.
- No Compliance Burden – After the company is struck off, there is no requirement to file annual returns, financial statements, or compliance reports with the Registrar of Companies (ROC).
Types of Strike-Off for Section 8 Companies
There are two ways a Section 8 Company can be struck off:
1. Strike Off by ROC (Registrar of Companies)
- The ROC can initiate the strike-off process if the company is inactive.
- A notice (Form STK-1) is sent to the company and its directors.
- The company is required to respond within 30 days with necessary documents.
2. Strike Off by Company (Voluntary Strike Off) )
- The company itself can apply for strike-off by submitting Form STK-2.
- Requires approval through a special resolution, with at least 75% of members’ consent.
- Must complete all legal formalities before applying..
Documents Required for Striking Off a Section 8 Company
- Certified true copy of the special resolution and the notice of the meeting.
- Memorandum & Articles of Association (MOA & AOA).
- Board Resolution approving the strike-off process.
- Compliance Certificate from a CA/CS/CWA confirming legal compliance.
- Statement of Assets & Liabilities, verified by an auditor (within 30 days of application).
- Valuation Report from a registered valuer.
- Financial Statements & Auditor’s Reports of the last two years.
- Power of Attorney from creditors, if applicable.
- Director’s Declaration confirming compliance with regional director’s conditions (if any).
Procedure for Striking Off a Section 8 Company
Step 1: Conduct Board Meeting – Pass a resolution for surrendering the company’s license.
Step 2: Convene a Special General Meeting (SGM) – Obtain shareholder approval for strike-off.
Step 3: File MGT-14 – Submit the special resolution within 30 days along with required documents.
Step 4: Submit INC-18 – File an application with the Regional Director, attaching all supporting documents and fees.
Once approved, the company’s name is removed from the MCA records, and it ceases to exist legally.