Pradhan Mantri Mudra Yojana (PMMY)

What is Form STK-2, and When is it Used?

Form STK-2 is prescribed under Section 248(2) of the Companies Act, 2013, allowing a company to apply for voluntary strike-off. It is used by companies that are:

• Not carrying on any business for the last two consecutive financial years, or
• Have not sought the status of a dormant company, and
• Do not have any outstanding liabilities.

For example, consider a startup that launched operations but never scaled up. Instead of continuing to maintain compliance (like audits, annual filings, and tax submissions) with no business activity, the founders can choose to file Form STK-2 and officially close the company.

What are the Benefits of Filing STK-2?

Filing Form STK-2 provides several benefits:

• Quick and cost-effective closure compared to liquidation.
• Savings on audits and compliance costs that continue even if the company has no operations.
• Faster process – usually completed within a few months.
• Protection of directors and shareholders from future penalties or liabilities.

This makes STK-2 a practical option for small companies and startups that wish to wind up smoothly.

What are the Eligibility Criteria to File STK-2?

Not every company is eligible to file STK-2. The key criteria are:

• Applicable to Private Limited Companies, One Person Companies (OPC), and Unlisted Public Companies.
• The company should have no pending liabilities and must clear all dues before applying.
• The business must not have carried on any activity for at least two consecutive years.
• Board and special resolutions (approved by at least 75% of shareholders) are mandatory.

Companies that are listed, under inspection, or involved in ongoing litigation are not eligible for strike-off.

What Documents Are Required for STK-2?

The following documents must be attached while filing STK-2:

• Board resolution and special resolution approving strike-off.
• Affidavit by directors (Form STK-4) declaring no pending liabilities.
• Indemnity bond by directors (Form STK-3), ensuring liability coverage.
• The company's latest audited financial statements.
• Directors’ PAN, Aadhaar, and digital signatures (DSC).
• Incorporation documents like Certificate of Incorporation, MoA, and AoA.

How to File the STK-2 Form? Step-by-Step Guide

Here’s a step-by-step guide to filing Form STK-2:

1. Board Approval: Conduct a board meeting and pass a resolution for closure.
2. Shareholder Consent: Obtain a special resolution with 75% shareholder approval.
3. Clear Liabilities: Pay off loans, creditors, and statutory dues.
4. Prepare Documents: Collect Forms STK-2, STK-3, STK-4, audited accounts, MoA, AoA, and ID proofs.
5. Online Filing: File Form STK-2 on the MCA portal along with attachments.
6. Pay Government Fee: ₹10,000 is payable at the time of filing.
7. ROC Review: The Registrar verifies documents and issues a public notice.
8. Strike-Off Approval: Once satisfied, the ROC strikes the company name from the register.

Voluntarily Removing Company Name using Form STK-2

Companies can voluntarily apply for strike-off by:

• Clearing all debts and liabilities.
• Passing a special resolution with the approval of at least 75% members.
• Seeking NOC/approval from regulatory bodies (if the company is under their regulation).

Effect of Removing Name from Register of Companies

Once the company’s name is removed under Section 248:

• The company is dissolved and ceases to exist legally.
• The Certificate of Incorporation is cancelled.
• The company cannot carry on any business operations.

However, directors, managers, and shareholders remain liable for any past dues, fraud, or pending obligations as if the company had not been dissolved.

Closing of Company by Filing Form STK-2

The closure process through STK-2 involves:

• ROC verification of pending liabilities.
• Publication of a public notice inviting objections.
• Striking off the company’s name from the register.
• Publishing the strike-off notification in the Official Gazette.

Once published, the company is considered officially dissolved.

What are the Consequences of Not Filing STK-2?

Failing to close an inactive company can lead to several consequences:

• Director disqualification under the Companies Act.
• Heavy penalties and fines for non-filing of annual returns and financial statements.
• Government-initiated strike-off without the company’s consent.
• Restrictions on starting new companies for disqualified directors.
• Continued obligations for tax filings and ROC compliance despite no business activity.

What Challenges Can You Face While Filing STK-2?

Some common challenges include:

• Delays in obtaining tax or GST clearance.
• Errors in affidavits or indemnity bonds.
• Issues with expired DSCs of directors.
• Non-cooperation from shareholders or directors.
• ROC objections due to mismatched or incomplete details.

What is the Cost Involved in STK-2?

The cost of filing Form STK-2 includes:

• Government fee
• Professional charges
• Notary and affidavit charges
• DSC renewal costs, if applicable

What Is ROC Full Form?

ROC stands for Registrar of Companies. It is a government body responsible for regulating and overseeing company registrations and compliance in India. The ROC plays a key role in corporate governance by maintaining company records, approving registrations, and ensuring adherence to statutory requirements.

About ROC Filing

ROC filing refers to the mandatory submission of financial statements and annual returns by companies to the Registrar of Companies. Under the Companies Act of 2013, all registered entities must comply with ROC filings to ensure proper documentation of their financial activities and operational status. Failure to comply can result in penalties, fines, or legal action.

Why ROC Filings Are Necessary?

ROC filings serve multiple purposes:

• Ensuring Legal Compliance: Companies must file returns and financial statements as mandated by law.
  
• Transparency & Financial Accountability: Stakeholders, including investors and creditors, rely on these filings to assess a company’s financial health.
  
• Regulatory Oversight: The government uses ROC filings to monitor corporate activities and prevent fraudulent practices.
  
• Avoiding Penalties: Late or non-compliance can result in heavy fines and even disqualification of directors.
  

Functions of ROC

The Registrar of Companies performs several key functions:

• Approves and registers new companies.
  
• Maintains company records and statutory filings.
  
• Monitors corporate compliance and governance.
  
• Regulates financial disclosures and annual returns.
  
• Handles company dissolution and winding-up processes.
  

Who Is Responsible For ROC Filings?

The responsibility for ROC filings lies with Company Directors, Company Secretaries & Auditors.

Failure to comply with ROC filing requirements can lead to penalties, disqualification of directors, and even company deregistration. Hence, the combined responsibility of directors, company secretaries, and auditors ensures the company remains legally compliant and operational.

ROC Filing Process: A Step-By-Step Guide

Step 1: Preparatory Board Meeting

Auditors and company officials prepare financial statements and reports.

Step 2: Subsequent Board Meeting

The Board of Directors reviews and approves the financial statements.

Step 3: Annual General Meeting (AGM)

Shareholders review and finalise financial reports and pass resolutions. The approved documents are submitted to the ROC.

Documents Required For ROC Filing

• Financial Statements (AOC-4): Balance sheet, profit & loss account, cash flow statement.
  
• Board’s Report: Overview of company operations, risk management policies.
  
• Annual Return (MGT-7): Company details, shareholding pattern.
  
• Auditor’s Report: Assessment of financial statements.
  
• Shareholder Resolutions: Approvals related to finances, and director appointments.
  
• Director Disclosures: Details of director interests and compliance declarations.
  

Due Date For ROC Filing

Key deadlines for different ROC filings include:

• AOC-4 (Financial Statements): Within 30 days of AGM
  
• MGT-7 (Annual Return): Within 60 days of AGM
  

ROC Filing Fees

ROC filing fees vary depending on company type, share capital, and document type. Fees may range from a few hundred to several thousand rupees.

The ROC fees for filing forms, including AOC-4 and MGT-7, are as stated below:  

Amount of Penalty Levied On Late ROC Filing

• Delay in AOC-4 filing: ₹100 per day
  
• Delay in MGT-7 filing: ₹100 per day
  
• Persistent non-compliance may lead to company strike-off and director disqualification.
  

Company Registration by ROC

The Registrar of Companies (ROC) oversees the incorporation and regulation of companies under the Companies Act, 2013. Registering a company involves multiple steps, from obtaining name approval to compliance with statutory requirements post-incorporation. Below is a detailed breakdown of the process:

Step 1: Name Approval

Before registering a company, select a unique name and submit it for approval through the SPICe+ (Simplified Proforma for Incorporating a Company Electronically) Part A form on the Ministry of Corporate Affairs (MCA) portal.

Step 2: Submission of Incorporation Documents

Once the name is approved, the company must prepare and file the necessary incorporation documents. This is done through the SPICe+ Part B form on the MCA portal.

Step 4: Compliance with the Companies Act

After incorporation, the company must comply with several regulatory requirements, including:

• Opening a Business Bank Account
  
• Issuing Share Certificates
  
• Declaration of Business Commencement (INC-20A)
  
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ROC Refusal For Company Registration

The ROC may refuse registration due to:

• Non-compliance with legal requirements.
  
• Similarity with existing company names.
  
• Incomplete or incorrect documentation.
  
• Business activities not aligning with statutory provisions.
  

To avoid rejection, ensure proper documentation, follow name guidelines, and meet statutory conditions.

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Role of ROC After Registration of a Company

Once a company is registered, the Registrar of Companies (ROC) continues to play an important role in ensuring that the company complies with legal and regulatory requirements.

1. Monitoring Compliance with Statutory Requirements

After incorporation, companies must adhere to various statutory requirements to maintain legal standing. The ROC monitors compliance by ensuring that companies:

• Hold board meetings and general meetings as per legal requirements.
  
• Maintain statutory registers, including those related to shareholders, directors, and financial records.
  

2. Ensuring Timely Filing of Annual Returns & Financial Statements

The ROC mandates companies to submit annual filings to ensure financial transparency and accountability. Key filings include:

Mandatory ROC Filings:

1. AOC-4 (Financial Statements)
   
2. MGT-7 (Annual Return)
   
3. DIR-3 KYC (Director KYC Compliance)
   
4. INC-20A (Declaration of Business Commencement)
   

3. Overseeing Corporate Governance & Legal Transparency

The ROC plays a significant role in ensuring that companies maintain good corporate governance practices, such as:

• Ensuring fair and transparent financial reporting.
  
• Verifying changes in directorship.
  
• Monitoring mergers, acquisitions, and corporate restructuring processes.
  

Final Thoughts

Incorporating a company is just the beginning, ongoing compliance with ROC filings is key to sustaining a business.

Ignoring ROC filings can lead to fines, legal troubles, and even business deregistration while maintaining compliance opens doors to credibility, funding, and seamless operations. The choice is clear- businesses that prioritise regulatory adherence set themselves up for long-term success, while those that neglect it risk costly consequences.

Frequently Asked Questions

Overview of One-Person Company Registration

A One-Person Company (OPC) is a business entity that allows a single individual to establish a company with limited liability. Unlike traditional business structures, OPCs provide entrepreneurs with a legal framework that protects personal assets while offering the flexibility of single ownership. This model bridges the gap between sole proprietorship and traditional multi-member companies.

Eligibility Criteria for the Incorporation of One-Person Company

To register an OPC in India an individual must be an Indian resident and can be both the director and shareholder. The company requires a minimum authorised share capital of ₹1 lakh, and the proposed company name must be unique. Also, the individual can be a member of only one OPC and they should not have any criminal record.

One-Person Company Registration Steps

OPC registration process has following steps:

Step 1: Initial Preparation

Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) using the MCA portal. Select a unique company name that complies with Companies (Incorporation Rules) 2014.

Step 2: Nominee Appointment

Identify and secure consent from a nominee who can become a director in case of the original promoter's incapacitation. Ensure the nominee meets legal and professional eligibility criteria.

Step 3: OPC Documentation

Compile essential documents including proof of registered office, director identification, address proof, and business plan. Maintain the mandatory minimum authorized capital of ₹1 lakh.

Step 4: Online Registration

Complete registration through the MCA portal by uploading the required documents, verifying DIN, and submitting all necessary forms.

Step 5: Certificate and Compliance

Receive the Certificate of Incorporation within 3-5 days after verification. Subsequently, maintain ongoing regulatory compliance like annual filings and adherence to OPC-specific requirements.

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Documents Required for One-Person Company Registration

• Identity proof (PAN card, Aadhaar card)
• Residence proof (utility bills, bank statements)
• Proof of registered office (rent agreement or ownership documents)
• Nominee consent documents
• Digital Signature Certificate

Timelines for OPC registration

You can obtain their Digital Signature Certificate (DSC) and Director Identification Number (DIN) within one day. The Certificate of Incorporation typically takes between 3 to 5 days to process. From start to finish, the entire incorporation process can be completed in approximately 10 days.

Post-Incorporation Formalities for OPC

After registering an OPC company, you must complete several key steps as highlighted below:

• Open a dedicated company bank account and deposit share capital within 60 days.
• Issue share certificates to shareholders within two months as proof of ownership.
• Register for GST if goods or service supply exceeds thresholds.
• Maintain statutory registers to document company activities.
• Prepare for annual tax return filing and ensure ongoing regulatory compliance.

Features of One-Person Company (OPC)

1. Single Ownership: Allows a single individual to form a company, providing complete control and ownership under Section 3(1)(c) of the Companies Act.
2. Innovative Nominee System: Requires a nominee who can take over company ownership in case of the original member's death or incapacitation, ensuring business continuity.
3. Flexible Management: Permits 1-15 directors, with minimal administrative complexity and no minimum paid-up capital requirement.
4. Limited Liability Protection: Separates personal assets from business risks, offering entrepreneurs crucial financial security.
5. Simplified Compliance: Provides a streamlined approach to business registration and management, making corporate structure accessible to individual entrepreneurs.

Advantages of One-Person Company Registration

• One of the biggest advantages of an OPC company is that the OPC structure provides a separate legal entity status that helps protect the individual's personal assets from business liabilities.
• This model enables easier fundraising opportunities, as banks and financial institutions typically prefer lending to registered companies over sole proprietorships.
• OPCs also provide a clear path for business continuity through the mandatory nominee appointment, ensuring the potential for perpetual succession.
• The simplified management structure allows for quick decision-making.

Disadvantages of OPC

While One-Person Companies present numerous benefits, they also come with certain limitations that you should carefully consider:

• The OPC structure is primarily suitable for small business operations, with strict restrictions on expanding ownership or raising additional capital.
• There are notable limitations on business activities, particularly prohibiting non-banking financial investment activities.
• The close alignment between ownership and management can create potential challenges, as the sole member may have unchecked control over business decisions.
• As the business grows, the OPC model may become restrictive, potentially requiring a transition to a more complex business structure.

Frequently Asked Questions