Company Law for Startups (Part 5): Closing a Company – Dormant, Strike-Off, Liquidation or Merger
How to close a startup company in India: dormant status, Section 248 strike-off, IBC voluntary liquidation or merger, with a pre-closure checklist and key risks.
A startup that ran out of runway still has a GST registration, a bank account, a landlord and three years of unfiled returns. Walking away is not an option: the company stays alive on the Registrar’s record until it is formally closed, and the filing meter keeps running.
1. Which exit fits?
| Option | Use when | Key condition | Speed and effort |
|---|---|---|---|
| Dormant company (Section 455) | You may restart later | Application for dormant status; file annual return for dormant companies | Light compliance, but the company stays alive |
| Strike-off by the company (Section 248(2), Form STK-2) | No business for the immediately preceding two financial years, and no pending dues | Special resolution or 75% member consent, indemnity bond, affidavit, accounts statement, creditors cleared | Moderate |
| Voluntary liquidation (IBC Section 59) | Solvent company with assets, creditors or ongoing contracts | Declaration of solvency, creditor and member resolutions, liquidator appointed | Longest, most formal |
| Merger or conversion | Business should continue within a group or another entity | Approval route depends on the structure; fast-track merger possible for small and group companies (confirm) | Case specific |
| Do nothing | Never advisable | Late fees, disqualification of directors after three years of non-filing, notices | Cost keeps growing |
2. Pre-closure checklist
ComplianceKart reviews your dues, files pending returns and handles strike-off or liquidation from resolution to gazette notification. See our ROC compliance service.
3. What strike-off does not do
- It does not erase liabilities. Under Section 248(7), the liability of every director, officer and member continues as if the company had not been struck off.
- It does not stop income tax and GST authorities from raising old demands.
- A struck-off company can be revived by the NCLT on application within 20 years (Section 252; confirm).
- The Registrar can also strike off defunct companies on his own under Section 248(1), which can leave directors facing disqualification and surprise notices.
4. Exit planning for foreign-funded startups
If the company received foreign investment, clear FEMA reporting (FC-GPR, FLA) before closure and plan repatriation of residual funds under FEMA. Overseas subsidiaries are covered in our ODI guide.
Why work with ComplianceKart
ComplianceKart is a boutique practice bringing Chartered Accountants, Company Secretaries and advocates under one roof. Think of a multi-speciality hospital: the physician, the radiologist and the pharmacist read from one patient file, so you never carry reports between buildings. Closure involves company law, tax, labour dues and contracts. When one team reads the file, nothing is left unsettled.
Frequently Asked Questions
What is the difference between strike-off and liquidation?
Strike-off removes the company from the Registrar’s record for companies with no business and no liabilities. Liquidation is a formal process for companies with assets or creditors.
Can a company be struck off with pending ROC filings?
File pending returns first; strike-off applications generally require updated filings and statements of accounts (confirm current checklist).
What is a dormant company?
A company for future projects or inactive status, with lighter compliance, under Section 455.
Do directors remain liable after strike-off?
Yes, liability continues as if the company had not been struck off (Section 248(7)).
Can a struck-off company be revived?
Yes, through an NCLT application, within the period allowed by Section 252 (confirm).
Sources
- Companies Act, 2013: Sections 248, 252, 455
- Insolvency and Bankruptcy Code, 2016: Section 59
- Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
Ready to act? Start with our ROC compliance service, check pricing, or contact us.
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Educational article, last updated 11 November 2026. General information, not advice on a specific case. Laws and due dates change; confirm on the date you act. Items marked (confirm) came from secondary sources and need checking against the official text.
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