Form STK-5 is a public notice issued by the Registrar of Companies (RoC) in India under Section 248 of the Companies Act, 2013, to inform stakeholders about the proposed strike-off of a company deemed defunct or non-compliant. It alerts the public, creditors, and other concerned parties, allowing them 30 days to raise objections before the company is officially removed from the register. Grounds for its issuance include failure to commence business, prolonged inactivity, unpaid subscription money, or findings from physical verification.
The notice follows prior intimation to the company via Form STK-1, and if no valid objections are raised, the company is dissolved through Form STK-7. Even after strike-off, liabilities of the company’s officers persist, and restoration through NCLT is possible but complex. Timely compliance or representation is crucial for companies receiving such notices to avoid legal and financial repercussions.
Decoding Form STK-5: The Public Notice for Company Strike-Off in India
Form STK-5, formally known as a “Public Notice,” plays a crucial role in the process of striking off the names of companies from the Register of Companies in India. Issued by the Registrar of Companies (RoC) under the provisions of sub-section (1) and sub-section (4) of Section 248 of the Companies Act, 2013, read with Rule 7 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, this form serves as a critical communication to the public and stakeholders regarding the RoC’s intention to remove a company’s name from its records.
Purpose and Significance of Form STK-5
The primary objective of Form STK-5 is to inform the general public, creditors, directors, shareholders, and any other interested parties about the RoC’s proposed action to strike off a company. This public notice allows any person objecting to the proposed removal to submit their representation to the RoC within a stipulated timeframe. It’s a key step in ensuring transparency and providing an opportunity for stakeholders to protect their interests before a company is formally dissolved.
Grounds for Issuing Form STK-5
The RoC initiates the strike-off process and consequently issues Form STK-5 when it has a “reasonable cause to believe” that a company meets certain criteria indicating it is defunct or inoperative. These grounds, as specified under Section 248(1) of the Companies Act, 2013, typically include:
- Failure to commence business within one year of incorporation: If a company incorporated in India does not begin its business operations within a year of its registration, the RoC may initiate strike-off proceedings.
- Not carrying on business for two immediately preceding financial years and not applying for dormant status: This is one of the most common reasons. If a company has been inactive for two consecutive financial years and has not applied for dormant company status under Section 455 of the Companies Act, 2013, it becomes a candidate for strike-off.
- Non-payment of subscription money by subscribers: If the subscribers to the memorandum have not paid the subscription they undertook to pay at the time of incorporation, and a declaration to this effect has not been filed within 180 days under Section 10A(1).
- Non-carrying on business or operations as revealed by physical verification: Following amendments to the rules, the RoC can also initiate strike-off if a physical verification of the company’s registered office reveals that it is not carrying on any business or operations. This provision aims to address “shell companies” that exist only on paper.
The Process of Issuing and Responding to Form STK-5
- Prior Notice (STK-1): Before issuing STK-5, the RoC typically sends a notice in Form STK-1 to the company and its directors, giving them 30 days to make a representation against the proposed strike-off.
- Publication of STK-5: If no satisfactory reply is received to STK-1, or if the RoC, based on its own assessment (e.g., physical verification), believes the company is defunct, it publishes a public notice in Form STK-5. This notice is published on the official website of the Ministry of Corporate Affairs (MCA), in the Official Gazette, and usually in two newspapers (one English and one in the vernacular language circulating in the district where the registered office is located).
- Period for Objection: Form STK-5 explicitly states that any person objecting to the proposed removal/striking off of the company’s name may send their objection to the RoC’s office address within thirty days from the date of publication of this notice.
- Company’s Opportunity to Reply (even after STK-5): While STK-1 is the primary notice to the company, even after the publication of STK-5, the company and its directors still have the right to file a representation. This is crucial for companies that may have missed STK-1 or were unaware of it. The language of STK-5 allows “any person objecting” to submit a response, which includes the company itself.
- Status Change: Upon the issuance of STK-5, the status of the company typically changes from ‘Active’ to ‘Under the process of striking off’ on the MCA portal.
- Intimation to Other Authorities: Simultaneously with the publication of STK-5, the RoC also informs relevant regulatory authorities such as Income-tax authorities, Central Excise authorities, and Service-tax authorities about the proposed strike-off, inviting their objections within 30 days.
- Final Strike-Off (STK-7): If no objections are received within the stipulated 30 days, or if the objections are not found satisfactory by the RoC, the RoC proceeds to strike off the company’s name from the register. A final notice of dissolution is then published in Form STK-7 in the Official Gazette, and the company stands dissolved from that date.
Legal Implications and Consequences
The issuance of Form STK-5 carries significant legal implications:
Impending Dissolution: It signals the imminent dissolution of the company as a legal entity.
Cessation of Business Operations: Once a company is struck off, it ceases to exist and cannot carry out any business operations.
Liabilities Persist: Importantly, even after strike-off, the liabilities and obligations of the directors, managers, officers, and members typically do not extinguish. They remain liable for any outstanding obligations as if the company had not been struck off.
Disqualification of Directors: Directors of companies struck off for non-compliance may face disqualification from acting as directors in other companies for a certain period.
Freezing of Bank Accounts: Bank accounts of struck-off companies are usually ceased.
Restoration: While a company struck off can be restored by the National Company Law Tribunal (NCLT) within a certain period (e.g., twenty years by creditors or workmen), it is a lengthy and complex process.
Recent Updates and Considerations
The MCA has been actively streamlining the strike-off process to remove defunct or non-compliant companies from the register. Recent amendments and procedural clarifications aim to make the process more efficient while ensuring due process. The inclusion of physical verification as a ground for strike-off highlights the regulatory intent to tackle “shell companies” effectively.
Companies receiving a Form STK-5 notice must take prompt and appropriate action. This may involve:
- Proving Operational Status: If the company is indeed operational, it must submit a strong representation to the RoC with supporting evidence (e.g., financial statements, annual returns, bank statements, operational documents) to demonstrate its active status.
- Voluntary Strike-Off: If the company is genuinely defunct and wishes to formally close, it can consider applying for voluntary strike-off in Form STK-2, provided it meets the eligibility criteria (e.g., cleared all liabilities, filed overdue returns).
- Compliance: Ensuring all overdue filings (AOC-4 for financial statements, MGT-7 for annual returns, etc.) are completed with additional fees is crucial to avoid strike-off if the company intends to continue.
In conclusion, Form STK-5 serves as a critical public declaration by the RoC concerning its intent to remove a company from its register. Understanding its purpose, the grounds for its issuance, and the necessary actions to be taken upon its receipt is paramount for companies and their stakeholders to navigate the regulatory landscape effectively and avoid adverse consequences.
FAQs on Form STK-5
What is Form STK-5?
Form STK-5 is a public notice issued by the Registrar of Companies (RoC) in India, indicating the intention to strike off a company from the official register.
Why is Form STK-5 issued?
It is issued when the RoC believes a company is defunct or non-operational based on specific legal grounds under Section 248 of the Companies Act, 2013.
Who can issue Form STK-5?
The Registrar of Companies (RoC) issues Form STK-5 after assessing the company’s status and finding valid grounds for strike-off.
What legal grounds justify the issuance of Form STK-5?
Grounds include not commencing business within one year of incorporation, inactivity for two consecutive financial years without dormant status, non-payment of subscription money, or findings from physical verification.
What is the purpose of issuing Form STK-5?
It serves to notify the public, creditors, and stakeholders of the proposed strike-off and gives them a chance to raise objections within 30 days.
Where is Form STK-5 published?
Form STK-5 is published on the Ministry of Corporate Affairs (MCA) website, in the Official Gazette, and usually in two newspapers—one English and one vernacular.
What happens after Form STK-5 is issued?
The company’s status changes to “Under the process of striking off,” and stakeholders have 30 days to file objections or representations.
Can the company respond after receiving Form STK-5?
Yes, even after STK-5 is issued, the company and its directors can submit representations or objections to the RoC.
What should a company do upon receiving Form STK-5 if it is active?
It should promptly provide proof of operations—such as financial records and returns—to the RoC to contest the strike-off.
What if a company misses responding to Form STK-1 but sees Form STK-5?
The company can still respond to Form STK-5 as it invites objections from “any person,” including the company itself.
What is the objection period for Form STK-5?
Stakeholders have 30 days from the date of publication to submit their objections to the RoC.
Can other authorities be involved in the strike-off process?
Yes, the RoC also informs authorities like the Income Tax, Central Excise, and Service Tax departments, inviting their objections.
What is the next step after Form STK-5 if no objections are raised?
If no valid objections are received, the RoC proceeds with the final strike-off and issues Form STK-7, dissolving the company.
What are the consequences of a company being struck off?
The company ceases to exist legally and cannot conduct business, though liabilities of directors and officers may still persist.
Do directors face disqualification after strike-off?
Yes, directors of companies struck off for non-compliance may face disqualification from serving in other companies.
Can a struck-off company be restored?
Yes, a company can apply for restoration through the National Company Law Tribunal (NCLT), though it is a time-consuming process.
Are bank accounts of struck-off companies affected?
Yes, the bank accounts of struck-off companies are typically frozen following the dissolution.
What is Form STK-7?
Form STK-7 is the final notice of dissolution published by the RoC after the strike-off process is complete.
Can a company opt for voluntary strike-off?
Yes, companies can voluntarily apply for strike-off using Form STK-2 if they meet eligibility criteria, such as no liabilities and updated compliance.
How can companies prevent being struck off?
By ensuring regular compliance, filing all statutory returns, maintaining active operations, and responding promptly to RoC notices.
Is physical verification a valid reason for issuing Form STK-5?
Yes, recent amendments allow the RoC to initiate strike-off if physical verification shows the company is non-operational.
Does the issuance of Form STK-5 indicate immediate dissolution?
No, it indicates intent to strike off. Actual dissolution occurs later, after the objection period and final issuance of Form STK-7.
What documents can be used to prove active status?
Documents include financial statements, bank statements, income tax returns, GST filings, and any records of ongoing business operations.
Is receiving Form STK-5 common during compliance drives?
Yes, especially during government drives to clean up shell companies or inactive entities from the register.
What is Form STK-1?
Form STK-1 is a prior notice sent to the company and its directors, allowing them to respond within 30 days before Form STK-5 is issued.
Form No STK-5 for Public Notice. Form STK-5 substituted by the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022.
FORM No. STK – 5
PUBLIC NOTICE
[Pursuant to sub-section (1) and sub-section (4) of section 248 of the Companies Act, 2013 and rule 7 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
(Address of RoC)
Public Notice No.—– Date:
Reference:
In the matter of striking off of companies under section 248 (1) of the Companies Act, 2013, of M/s.___________, M/s.___________, M/s.___________
1. Notice is hereby given that the Registrar of Companies has a reasonable cause to believe that, –
(i) the following companies have not commenced business within one year of their incorporation, namely:-
M/s._______________________ (Indicates Names of Companies);
M/s._______________________
(ii) the following companies have not been carrying on any business or operation for a period of two immediately preceding financial years and have not made any application within such period for obtaining the status of dormant company under section 455, namely:-
M/s._______________________ (Indicates Names of Companies);
M/s._______________________
(iii) in the following companies, 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, namely:-
M/s._______________________ (Indicates Names of Companies);
M/s._______________________
and, therefore, proposes to remove/ strike off the names of the above mentioned companies from the register of companies and dissolve them unless a cause is shown to the contrary, within thirty days from the date of this notice .
2. Any person objecting to the proposed removal/ striking off of name of the companies rom the register of companies may send his objection to the office address mentioned here-in-above within thirty days from the date of publication of this notice.
Registrar of Companies.
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