Voluntary Liquidation

Strike Off / Voluntary Liquidation

For whatever reasons, if you have decided to close your company in India, it is very important that you decide the right format of doing it and understand the cost implication. We will restrict our discussions here to a company which is solvent (can pay it’s debts).

There are two modes to close down your company, one is Strike off (Section 248 of the Companies Act, 2013) and the other is Voluntary winding up (under IBC-Insolvency and Bankruptcy Code, 2016).

The following companies are eligible for opting for strike off:

A company which has failed to commence its business failed to commence its business
A company which is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company.

Situation may arise for strike-off of company where the subscribers have failed to pay for the shares subscribed. To know more about this aspect, see FAQ on Strike off : When Subscription Money is Not Paid.

Voluntary Liquidation

Voluntary liquidation is the most compliant and convenient way of closing down the business both for currently operational or non-operational companies particularly in the following cases where:

the business could not be commenced because of various reasons associated though investments were made in business
the business had commenced but has served its purpose
the legal entity is no more needed but has cash and bank balances or other assets
there are considerable investments in assets but assets are no more required
the value of the assets is significantly higher than existing liabilities of the company and surplus is to be distributed amongst all remaining stakeholders

The provisions of voluntary liquidation of corporate persons (company/ LLP) in India are covered under the Insolvency and Bankruptcy Code and read with Insolvency and Bankruptcy Board of India Voluntary Liquidation Process Regulations.Liquidation (or “winding up”) is a process by which a company’s existence is brought to an end. The Insolvency and Bankruptcy Code is a single window legislative code under which closure of a company has become easier with a well-defined process. The process involves dealing with various Statutory Authorities/ Departments as may have become concerned or relevant for doing business in India. To know more about process of Voluntary Liquidation, see Voluntary Liquidation in India-FAQ.

Though there is also a process of closing down a company after a waiting period of two years of no business operations and after extinguishing all its liabilities by applying (with Nil Assets and Liabilities) to Registrar for strike off/ deregister from Register of Companies but during this waiting period and during the restoration period thereafter, the Directors and Company remain exposed to liabilities/ demands. For a comparative study between Strike off and Voluntary Liquidation, please visit Strike-Off Vs Members’ Voluntary Winding Up.

For taxation aspects during liquidation please visit