Form STK-1 is an official notice issued by the Registrar of Companies (RoC) in India under Section 248 of the Companies Act, 2013, to initiate the process of striking off a company’s name from the Register of Companies for reasons such as failure to commence business, inactivity over two financial years, non-payment of subscription money, or findings from physical verification. This notice serves as a show-cause opportunity for the company and its directors to respond within 30 days, providing justifications or evidence to avoid dissolution.
The process involves notifying regulatory authorities, considering representations, publishing public notices, and ultimately issuing Form STK-7 to dissolve the company if no satisfactory cause is shown. Despite dissolution, directors may face ongoing liabilities, disqualification, and restrictions on future incorporation, though the company’s name can be restored by the NCLT within three years. Timely and informed response to Form STK-1 is critical to preserving the company’s legal status and protecting its stakeholders.
Form No. STK-1: The Registrar’s Notice for Striking Off a Company’s Name
The Register of Companies, maintained by the Registrar of Companies (RoC) under the Ministry of Corporate Affairs (MCA) in India, serves as the official record of active companies. However, for various reasons, a company’s name may be removed or “struck off” from this register. One of the primary mechanisms for this removal, when initiated by the RoC, involves the issuance of Form No. STK-1.
This article delves into the intricacies of Form STK-1, its purpose, the grounds for its issuance, the procedure followed, and the critical implications for the company and its stakeholders.
Understanding the Context: Striking Off a Company
Striking off a company’s name from the Register of Companies is a simpler and more cost-effective alternative to formal winding-up proceedings, particularly for companies that are no longer operational or have failed to comply with statutory requirements. Section 248 of the Companies Act, 2013, read with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, empowers the RoC to initiate this process suo motu (on its own motion).
The Role of Form No. STK-1
Form STK-1 is the initial formal notice issued by the Registrar of Companies to a company and its directors, conveying the RoC’s intention to remove the company’s name from the register. It serves as a show-cause notice, providing the company with an opportunity to present its case against the proposed striking off.
Grounds for Issuance of Form STK-1
The RoC may issue Form STK-1 if it has “reasonable cause to believe” that any of the following situations apply to a company:
- Failure to commence business within one year of incorporation: If a company, after being incorporated, has not started its business operations within one year from its incorporation date.
- Not carrying on business or operations for two immediately preceding financial years: If a company has not been carrying on any business or operation for a continuous period of two immediately preceding financial years and has also not applied for the status of a dormant company under Section 455 of the Companies Act, 2013, within that period.
- Non-payment of subscription money by subscribers: If the subscribers to the memorandum have not paid the subscription money they undertook to pay at the time of incorporation, and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under Section 10A(1) of the Companies Act, 2013.
- Physical verification reveals no business operations: If, after a physical verification carried out under Section 12(9) of the Act, it is revealed that the company is not carrying on any business or operations.
Procedure for Issuance and Response to Form STK-1
The process initiated by the RoC involving Form STK-1 generally follows these steps:
- Identification of Defaulter Companies: The RoC identifies companies that meet the criteria for striking off, often through its internal systems and data analysis, or based on non-filing of annual returns and financial statements.
- Issuance of Form STK-1: The Registrar sends a written notice in Form STK-1 to the company and all its directors. This notice is typically sent to their addresses available on record, via registered post with acknowledgment due or by speed post.
- Content of Form STK-1: The notice explicitly states the grounds (reasons) for the proposed removal of the company’s name from the register. It calls upon the company and its directors to submit their representations, if any, along with copies of relevant supporting documents, within a specified period.
- Response Time: The company and its directors are typically given thirty days from the date of receipt of the notice to show cause against the proposed action.
- Simultaneous Intimation to Regulatory Authorities: The Registrar simultaneously informs other relevant regulatory authorities (e.g., Income-tax authorities, Central Excise authorities, GST authorities) having jurisdiction over the company about the proposed striking-off action. These authorities also have an opportunity to raise objections within the stipulated period.
- Consideration of Representations: If the company or its directors submit representations, the Registrar is obligated to consider them. If the representations are found satisfactory, the Registrar may decide to drop the striking-off proceedings.
- Further Action if No Satisfactory Cause is Shown: If no representations are received within the given time, or if the representations submitted are not deemed satisfactory by the Registrar, the RoC may proceed with the removal of the company’s name.
- Public Notice (Form STK-5/5A/6): Before finally striking off the name, the Registrar publishes a public notice in Form STK-5, STK-5A, or STK-6 (as applicable) on the official website of the MCA, in the Official Gazette, and usually in a leading English newspaper and a vernacular newspaper in the state where the registered office is located. This public notice invites objections from any interested party within a specified period (typically 30 days).
- Final Striking Off (Form STK-7): Upon the expiry of the time mentioned in the public notice and unless cause to the contrary is shown, the Registrar may strike off the company’s name from the register. A final notice of striking off and dissolution is then published in the Official Gazette in Form STK-7, and the same is placed on the MCA website. On such publication, the company stands dissolved.
Consequences of Removal of Company Name
The striking off of a company’s name has significant consequences:
- Cessation of Company’s Legal Existence: From the date of publication of the notice in the Official Gazette, the company ceases to exist as a corporate entity. Its certificate of incorporation stands annulled.
- Continuation of Liabilities: Importantly, the striking off does not affect the liability of any director, manager, or other officer who was exercising any power of management, or of any member of the company. Their liabilities continue and can be enforced as if the company had not been dissolved.
- Availability of Assets for Liabilities: The assets of the company, even after its dissolution, remain available for the payment or discharge of all its liabilities and obligations.
- Disqualification of Directors: Directors of companies struck off for non-compliance often face disqualification for a certain period, preventing them from being appointed as directors in other companies.
- Restrictions on Future Incorporation: There can be restrictions on incorporating a new company with a similar name, or for the same promoters, if the previous company was struck off for non-compliance.
- Restoration of Name: An aggrieved person (company, member, or creditor) may apply to the National Company Law Tribunal (NCLT) for restoration of the company’s name to the register, usually within three years from the date of the Registrar’s order, if a strong case can be made.
Importance of Responding to Form STK-1
Receiving Form STK-1 is a serious matter for any company. Ignoring this notice can lead to the company’s dissolution and potential liabilities for its directors. It is crucial for companies and their directors to:
- Review the Grounds: Carefully examine the reasons stated in Form STK-1 for the proposed striking off.
- Gather Relevant Documents: Collect all necessary documents and evidence to counter the Registrar’s belief, such as proof of business operations, commencement of business, payment of subscription money, or compliance with annual filing requirements.
- File Timely Representation: Submit a comprehensive and well-reasonsupported representation to the RoC within the stipulated 30-day period. This may involve explaining the reasons for non-compliance, demonstrating ongoing business activities, or providing a plan for future compliance.
- Seek Professional Advice: It is highly recommended to seek the assistance of a company secretary, chartered accountant, or legal professional to understand the implications and prepare an effective response to Form STK-1.
Conclusion
Form STK-1 is a critical instrument used by the Registrar of Companies to ensure that the register of companies accurately reflects active and compliant entities. While it provides an opportunity for companies to rectify their status, it also serves as a strong reminder of the importance of statutory compliance. Prompt and appropriate action upon receiving Form STK-1 is paramount to avoid the dissolution of a company and the personal liabilities that may follow for its management.
FAQs on Form STK-1
What is Form STK-1?
Form STK-1 is a show-cause notice issued by the Registrar of Companies (RoC) to inform a company of the intention to strike off its name from the Register of Companies.
Why is Form STK-1 issued?
It is issued when the RoC has reasonable cause to believe that a company is inactive, non-compliant, or has failed to meet statutory requirements.
Under which law is Form STK-1 governed?
Form STK-1 is governed under Section 248 of the Companies Act, 2013, and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.
What are the grounds for issuing Form STK-1?
Grounds include failure to commence business within a year of incorporation, inactivity for two financial years, non-payment of subscription money, or lack of operations found during physical verification.
Who issues Form STK-1?
The Registrar of Companies (RoC) under the Ministry of Corporate Affairs (MCA), Government of India.
How is Form STK-1 delivered to the company?
It is sent via registered post or speed post to the company’s registered address and to its directors’ addresses on record.
What is the response time given in Form STK-1?
Companies and directors are given 30 days from the receipt of Form STK-1 to respond and show cause why the company should not be struck off.
What should a company do upon receiving Form STK-1?
It should review the reasons cited, gather relevant supporting documents, and submit a well-supported response within the 30-day timeframe.
Can a company ignore Form STK-1?
No, ignoring Form STK-1 can lead to the company’s dissolution and legal consequences for directors and officers.
What happens if the company fails to respond to Form STK-1?
If no response is given or the explanation is unsatisfactory, the RoC may proceed with striking off the company’s name from the register.
What is the next step after Form STK-1 is issued?
The RoC may issue a public notice (Form STK-5/5A/6), informing the public and other regulatory bodies of the proposed strike-off, seeking objections within 30 days.
What is Form STK-7?
Form STK-7 is the final notice of striking off and dissolution, published in the Official Gazette once the company is officially removed from the register.
What are the consequences of a company being struck off?
The company ceases to exist legally, and its certificate of incorporation is annulled, although liabilities of directors and officers continue.
Can the name of a struck-off company be restored?
Yes, an aggrieved party (company, member, or creditor) can apply to the NCLT for restoration within three years from the date of dissolution.
Does striking off absolve directors of liabilities?
No, directors and officers remain liable for company obligations as if the company had not been dissolved.
Are the company’s assets lost after striking off?
No, the company’s assets remain available for discharging its liabilities even after dissolution.
Can directors of a struck-off company become directors elsewhere?
They may face disqualification for a certain period, restricting them from being appointed as directors in other companies.
Is professional help recommended when receiving Form STK-1?
Yes, companies are advised to consult a company secretary, chartered accountant, or legal expert to prepare an appropriate and timely response.
Can regulatory authorities object to the strike-off?
Yes, authorities like the Income Tax Department, GST authorities, and others can object within the notice period.
Can Form STK-1 be challenged?
Yes, if there are valid reasons, a company can challenge the striking off process through proper representation or legal recourse via NCLT.
What is the importance of compliance in avoiding Form STK-1?
Timely compliance with statutory filings and maintaining business operations help companies avoid being flagged for striking off.
What is the role of physical verification in this process?
RoC may conduct physical verification under Section 12(9) to determine if a company is operating from its registered office and carrying out business.
Can a company struck off due to STK-1 re-incorporate with the same name?
Usually not, especially if the strike-off was due to non-compliance. Restrictions may apply to using the same name or re-incorporation by the same promoters.
Form No. STK-1
Notice by Registrar for removal of name of a company from the register of companies
[Pursuant to sub-section (1) of section 248 of the Companies Act, 2013 and rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016]
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
Office of the Registrar Of Companies, …….. (State)
(Address of ROC)
letter No.————— Dated:————
Reference:
In the matter of M/ s.____________ In the matter of Companies Act, 2013
To,
_______________
_______________
(1) Pursuant to sub-section (1) of section 248 of the Companies Act, 2013, notice is hereby given that as per available record,-
- the company has failed to commence its business within one year of its incorporation;
- the company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455;
- the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under sub-section (1) of section 10A.
(tick whichever is applicable)
(2) Therefore, on the basis of aforesaid ground(s), I intend to remove the name of company from the register of companies and request you to send your representation along with copies of the relevant documents, if any, within thirty days from the date pf receipt of this notice.
(3) Unless a cause to the contrary is shown within the time period above mentioned, the name of the above mentioned company shall be liable to be removed from the register of companies. However, the directors of the company shall be liable for appropriate action under the Act.
Registrar of Companies
To
The Company/ All Directors
Mailing address as per record available in Registrar of Companies Office
Copy to all directors : [in case the notice issued to the company only]
Refresh Page