Strike-Off Rules Tightened: Why Listed and Delisted Companies Cannot be Removed#
Section 248 of the Companies Act, 2013, provides a relatively painless mechanism for defunct companies to shut down. If a company hasn't commenced business, or has not been carrying out business for two preceding financial years (and hasn't applied for 'Dormant' status), the Registrar of Companies (ROC) can strike its name off the register. Alternatively, the company itself can voluntarily file Form STK-2 to get struck off.
However, recent amendments have drastically tightened the rules to prevent this mechanism from being used as an escape route by errant promoters.
The Blockade for Listed and Delisted Companies#
Through recent notifications updating the Companies (Removal of Names of Companies from the Register of Companies) Rules, the Ministry of Corporate Affairs (MCA) has explicitly barred certain categories of companies from being struck off, either voluntarily or by the ROC.
1. Listed Companies#
This has always been the rule. A company whose securities are currently listed on a recognized stock exchange (BSE, NSE) cannot apply for strike-off under Section 248. They must undergo the formal winding-up or insolvency process if they wish to shut down.
2. The New Target: Forcibly Delisted Companies#
The critical amendment targets companies that were listed but were subsequently delisted due to non-compliance with listing regulations or other laws.
- The Loophole Closed: Previously, promoters of companies that got kicked off the stock exchange for failing to file financials or hiding data would wait a few years and then quietly file an STK-2 to strike off the company, wiping the slate clean and burying the corporate entity.
- The New Rule: A company that has been delisted on account of non-compliance of listing regulations or listing agreement or any other statutory laws cannot be struck off.
3. Vanishing Companies#
Companies categorized as "vanishing companies" (those that raised funds from the public and subsequently failed to file returns and whose directors are untraceable) are strictly prohibited from the strike-off route.
Why the Strictness?#
The government’s intent is clear: Accountability. If a company raised public money and then violated stock exchange rules to the point of being forcibly delisted, the promoters cannot simply dissolve the company and walk away.
By blocking the strike-off route, the MCA ensures that these companies remain on the active register. This leaves the corporate entity—and its directors—exposed to ongoing investigations by SEBI, the Serious Fraud Investigation Office (SFIO), and the Enforcement Directorate (ED). It forces them toward the scrutiny of the Insolvency and Bankruptcy Code (IBC) or formal winding up, where liquidators can trace the assets and hold management accountable.
For tax professionals and company secretaries, the message is clear: the STK-2 fast-track exit is strictly reserved for genuinely defunct private companies with clean slates, not for burying corporate governance failures.