# Winding Up of Company in India 2026 by Strike Off or Liquidation

> Source: https://krystal7.com/insights/close-indian-subsidiary-strike-off-or-winding-up
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: Nihal Srivastava
> Published: 10 Sep 2026; updated 01 Oct 2026
> Summary: An Indian subsidiary with no liabilities can close through Form STK-2 for INR 10,000; otherwise it uses voluntary liquidation under IBC section 59.

*Written by Nihal Srivastava, Krystal7 Consultants. Last updated 1 October 2026.*

**A foreign parent can close an Indian subsidiary in two practical ways. A company with no liabilities and no business in the two preceding financial years files Form STK-2. It applies under section 248(2) of the Companies Act, 2013 and pays a fee of INR 10,000. The Registrar at C-PACE then dissolves it by a Gazette notice. A solvent company that must return capital, pay creditors or close sooner uses voluntary liquidation under section 59 of the Insolvency and Bankruptcy Code, 2016.**

This page compares both routes as they stand on 1 Oct 2026: preconditions, timelines, tax, FEMA, staff, registrations and the risks that survive dissolution. INR 1,00,000 is one lakh (100,000).

| Item | Position on 1 Oct 2026 |
|---|---|
| Fast exit route | Strike off on the company's own application, section 248(2) of the Companies Act, 2013 |
| Ground needed for STK-2 | No business or operation in the two preceding financial years (s.248(1)(c)), or no business within a year of incorporation (s.248(1)(a)) |
| Form and government fee (INR) | STK-2, 10,000 |
| Who processes STK-2 | Registrar, Centre for Processing Accelerated Corporate Exit (C-PACE), all India, since 1 May 2023 |
| Core condition | All liabilities extinguished, plus a special resolution or consent of members holding 75% of paid up capital |
| C-PACE processing time | Under two months on average (Press Information Bureau, 11 Aug 2025) |
| Route that returns share capital | Voluntary liquidation, section 59 of the Insolvency and Bankruptcy Code, 2016 (IBC) |
| Voluntary liquidation target | 90 days, or 270 days where creditors approved (regulation 37(1)) |
| Voluntary liquidation in practice | 391 days on average to the final report, across 2,090 closed processes (IBBI newsletter, April to June 2026) |
| Director liability for unpaid income tax | Section 323 of the Income Tax Act, 2025 (old section 179) |

## What are the ways to close an Indian subsidiary in 2026?

A foreign owned Indian company can end its existence in three lawful ways. It can apply to be struck off under section 248(2) of the Companies Act, 2013. It can go into voluntary liquidation under section 59 of the IBC. Or the National Company Law Tribunal (NCLT) can wind it up under section 271 of the Companies Act.

"Winding up" now means less than older guides suggest. The IBC omitted sections 304 to 323 of the Companies Act, the voluntary winding up provisions, with effect from 15 Nov 2016. A solvent company that wants a formal liquidation now uses section 59 of the IBC. Winding up by the NCLT under section 271 suits disputes and fraud cases, not a planned exit.

Strike off works differently. Nobody appoints a liquidator. The company clears everything first, then asks the Registrar to remove its name. Under section 248(5), the company is dissolved when the Registrar publishes the notice in the Official Gazette.

| Route | Law | Best for | Can share capital go back to the parent? | Ends with |
|---|---|---|---|---|
| Strike off on application (STK-2) | Companies Act, s.248(2) | Clean companies with no liabilities, little capital and two years without business | Not through STK-2 itself; profits leave first by dividend | STK-7 notice in the Gazette |
| Voluntary liquidation | IBC, s.59 | Solvent companies with capital to return, assets to sell or creditors to pay | Yes | NCLT dissolution order, s.59(8) |
| Winding up by the NCLT | Companies Act, s.271 | Disputes, fraud, deadlock | Yes, after the liquidation | NCLT order |
| Sale of shares | NDI Rules; FC-TRS | A buyer wants the entity | The buyer pays the parent | Company continues |
| Dormant status | Companies Act, s.455 | A parent that may restart in India | No | Company continues with lighter filings |
| Strike off by the Registrar | Companies Act, s.248(1) | Nobody; it is a penalty outcome | No | Dissolution and director disqualification risk |

Our [company winding up service](/services/company-winding-up.html) runs both main routes.

## When can a company use Form STK-2?

A company can file STK-2 only on a ground listed in section 248(1). The usual ground is no business or operation in the two financial years before the application. The company must also have extinguished all its liabilities. Its members must pass a special resolution, or holders of 75 percent of the paid up capital must consent. It must not have done anything listed in section 249 in the previous three months. It must also have filed its overdue financial statements and annual returns.

Check the ground first. Section 248(2) lets a company apply only on one or more of the grounds in section 248(1). Clause (a) covers a company that failed to start business within a year of incorporation. Clause (c) covers one with no business or operation for the two immediately preceding financial years, and no dormancy application in that period. So a subsidiary that stopped trading on 31 Mar 2026 can file STK-2 from 1 Apr 2028. If the parent wants out sooner, voluntary liquidation has no waiting period.

Liabilities include trade payables, statutory dues, staff dues, tax, GST and amounts owed to the parent. An intercompany payable is still a liability. The parent can waive it, but the waiver can create taxable income. Section 41(1) of the Income Tax Act, 1961 taxed a remitted trading liability that had earlier been deducted. Check the matching provision of the Income Tax Act, 2025 before the parent waives anything, and model the tax first.

Section 249(1) blocks an application if, in the previous three months, the company did any of these things:

1. Changed its name or moved its registered office to another State.
2. Disposed of property or rights for value in the normal course of business.
3. Carried on any activity beyond applying, closing its affairs or meeting a statutory requirement.
4. Applied to the NCLT for a compromise or arrangement not yet concluded.
5. Started winding up under Chapter XX of the Companies Act or under the IBC.

A company that files in breach of section 249 faces a fine of up to INR 1,00,000. The application is withdrawn or rejected once the breach comes to light.

| Precondition | Source | What we check before filing |
|---|---|---|
| A ground under section 248(1): no business or operation in the two preceding financial years, or no business within a year of incorporation | Companies Act, s.248(2) read with s.248(1)(a) and (c) | Date trading stopped; bank statements; no dormancy application in the period |
| All liabilities extinguished | Companies Act, s.248(2) | Nil payables in the ledger and on the GST and TDS portals |
| Special resolution, or consent of 75% of members by paid up capital | Companies Act, s.248(2) | General meeting minutes; MGT-14 within 30 days |
| Overdue financial statements and annual returns filed, up to the year business stopped | Proviso to rule 4(1) of the 2016 Rules | AOC-4 and MGT-7 status on MCA V3 |
| No section 249 event in the last three months | Companies Act, s.249(1) | Board minutes, bank statement, MCA master data |
| Not in a barred category: listed, under inspection or investigation, prosecution or compounding pending, public deposits outstanding, charges unsatisfied, or a section 8 company | 2016 Rules; the declarations in STK-2 | Index of charges, litigation list |
| Regulator's approval for a company under a special Act | Proviso to s.248(2) | Only for regulated entities such as NBFCs |

MCA has amended the 2016 Rules since they were made. We check the current STK-2 form on MCA V3 for the barred list before we start.

The charge test catches many subsidiaries. An old overdraft or bank guarantee often left a charge on the MCA register. File CHG-4 to record its satisfaction before you apply.

## Which documents go with STK-2, and who signs them?

STK-2 goes to the Registrar, C-PACE, with a fee of INR 10,000. Every director signs an indemnity bond in Form STK-3 and an affidavit in Form STK-4. A Chartered Accountant certifies a statement of accounts in Form STK-8, made up to a date within 30 days of filing. A director authorised by the board signs STK-2 with a digital signature certificate (DSC).

| Document | Form | Signed or certified by | Notes |
|---|---|---|---|
| Application | STK-2 | A director authorised by the board | Filed on MCA V3 |
| Indemnity bond | STK-3 | Every director | Notarised; stamp duty under the State stamp law |
| Affidavit | STK-4 | Every director | Notarised; confirms no liabilities and no pending proceedings |
| Statement of accounts | STK-8 | Chartered Accountant in practice | Assets and liabilities as on a date within 30 days of filing |
| Special resolution or 75% consent | Minutes; MGT-14 | Members; company | Required by s.248(2) |
| Statement of pending litigation | Free format | Director | Nil statement if none |

Rule 4 of the 2016 Rules sets the fee and the attachments. We check the attachment list in the live STK-2 form on MCA V3 before collecting signatures, because the rules have been amended since 2016.

Foreign directors cause most of the delay. Each director abroad signs STK-3 and STK-4 before a local notary. We then have the documents apostilled, or legalised at an Indian mission where the country is outside the Apostille Convention. Build three weeks into the plan for this.

Keep the board intact until the end. A director who resigns early drops out of the STK-4 set. The company must also keep a resident director under section 149(3) until dissolution, as our guide on [foreign national directors](/insights/foreign-national-director-indian-company-din) explains.

## How long does strike off take?

C-PACE processes STK-2 applications in under two months on average. The Press Information Bureau reported this on 11 Aug 2025, against more than two years at the old Registrar offices. The work before filing takes longer. Once a subsidiary has completed two financial years without business, we plan about six months from the board decision to the Gazette notice.

The Ministry of Corporate Affairs set up C-PACE by notification S.O. 1269(E) of 17 Mar 2023. C-PACE has processed STK-2 applications since 1 May 2023, in place of the regional Registrars. From 1 May 2023 to 31 Jul 2025, it struck off 38,658 companies on STK-2 applications (PIB, 11 Aug 2025).

After filing, the Registrar issues a public notice in Form STK-6. Section 248(4) requires the notice to appear in the Official Gazette as well. Anyone, including the tax department or a regulator, can object within the time the notice gives. If no cause is shown by then, the Registrar strikes off the name. It publishes Form STK-7 in the Official Gazette (section 248(5)).

| Step | Rule or section | Timing in our plans |
|---|---|---|
| Business stops; final wages and gratuity paid | Code on Wages, s.17(2); Code on Social Security, s.56 | Two working days; 30 days |
| GST cancellation; final return | CGST Act, ss.29 and 45; REG-16; GSTR-10 | REG-16 within 30 days of closure; GSTR-10 within three months of cancellation |
| Two full financial years with no business or operation | Companies Act, s.248(1)(c) | Must pass before STK-2, unless business never started |
| Board decides to file STK-2 | Board resolution | Day 0 |
| Final audit and AGM; AOC-4 and MGT-7 | Companies Act, ss.96, 137, 92 | AOC-4 within 30 days, MGT-7 within 60 days of the AGM |
| Surplus paid out; TDS deposited; Forms 145 and 146 | Income Tax Act, 2025, s.393; rules 218 and 220 | Month 4 or 5 |
| Bank account closed | Bank's process | After the last payment |
| Special resolution; MGT-14 | Companies Act, ss.248(2), 117 | MGT-14 within 30 days |
| STK-2 filed with STK-3, STK-4 and STK-8 | Rule 4 of the 2016 Rules | Month 6, at least three months after any step that is not part of closing |
| STK-6 notice and objections | Companies Act, s.248(4) | The period stated in the notice |
| STK-7 published; company dissolved | Companies Act, s.248(5) | Under two months after filing on average (PIB, 11 Aug 2025) |

The time risk sits outside C-PACE. A query, a missing MGT-7 or a tax objection delays the strike off.

## When is voluntary liquidation the better route?

Voluntary liquidation is better when the parent needs its share capital back. It also fits when the company still has assets to sell or creditors to pay, or when directors will not sign indemnities. It suits a company that stopped trading recently, because section 59 has no two year wait. It needs a solvent company that "has not committed any default" under section 59(1), and most directors must swear a declaration of solvency.

Strike off returns nothing by itself. The company can pay out profits as dividends first, but share capital has no quick exit before STK-2.

| Situation | STK-2 strike off | Voluntary liquidation |
|---|---|---|
| Small share capital (say INR 1,00,000) | Fits; the capital funds closure costs | Costs more than it returns |
| Large share capital | Capital stays trapped | Fits |
| Business stopped less than two financial years ago | Must wait for the s.248(1)(c) ground | No waiting period |
| Debts the company cannot clear before filing | Not allowed | Allowed if solvent and not in default |
| Assets to sell (equipment, IP, a lease) | Sell before filing | Liquidator sells |
| Directors unwilling to sign indemnity bonds | Blocks the route | Directors sign a solvency declaration instead |
| Want a short, fixed process once the company qualifies | Better | Worse |
| Want a tribunal order that closes the file | No | Yes, s.59(8) |

A default rules the route out. A default under the IBC means non payment of a debt that has fallen due. Clear any overdue supplier before the resolution. A company that cannot pay its debts belongs in the corporate insolvency process, which this page does not cover.

## How does voluntary liquidation work, step by step?

A majority of directors first swear a declaration of solvency. Members then pass a special resolution within four weeks and appoint an insolvency professional as liquidator. If the company owes anything, creditors holding two thirds of the debt by value approve within seven days. The liquidator realises assets, pays claims, distributes the surplus and applies to the NCLT for dissolution.

The declaration under section 59(3) says the company will pay its debts in full from its assets. It also says the liquidation is not meant to defraud anyone. It comes with audited accounts for the previous two years, or since incorporation, and a registered valuer's report. Since 25 Feb 2026, the valuer prepares that report in a format the IBBI notifies by circular. Liquidation starts on the date of the members' resolution (section 59(5)).

| Step | Law | Deadline |
|---|---|---|
| Declaration of solvency, audited accounts, valuation report | IBC s.59(3); reg. 3 | Before the resolution |
| Special resolution; liquidator appointed | IBC s.59(3)(c) | Within four weeks of the declaration |
| Creditors' approval, where there is any debt | Proviso to s.59(3) | Within seven days of the resolution |
| Registrar and IBBI told | IBC s.59(4) | Within seven days |
| Public announcement | Reg. 14 | Within five days of appointment |
| Last date for claims | Reg. 14 | 30 days from commencement |
| Preliminary report | Reg. 9 | Within 45 days of commencement |
| Claims verified; decision sent to each claimant | Reg. 29(1) and (2) | 30 days from the last date for claims; decision within seven days (from 2 Jun 2026) |
| Proceeds distributed | Reg. 35(1) | Within 30 days of realisation |
| Termination, if plans change | IBC s.59(5A) to (5C); reg. 42 | Before the s.59(7) application; liquidator intimates within seven days |
| Final report and dissolution application | Regs. 37(1) and 38; IBC s.59(7) | Target 270 days if creditors approved, 90 days otherwise |
| Dissolution order; copy to the Registrar | IBC s.59(8) and (9) | Order when the NCLT decides; copy within 14 days |

The 90 and 270 day figures are targets the liquidator must "endeavour" to meet. By 30 Jun 2026, 2,090 processes had closed with a final report, taking 391 days on average (IBBI newsletter, April to June 2026). By then, 2,684 voluntary liquidations had started and 1,594 had dissolution orders. In one order hosted on the IBBI site, a Chandigarh bench dissolved a company on 16 Apr 2024 after a resolution of 30 Sep 2021.

Tax adds its own clock. Section 322 of the Income Tax Act, 2025 (old section 178) requires the liquidator to notify the Assessing Officer within 30 days of appointment. The officer then has three months to state the tax to set aside. Section 322 yields to the IBC where the two conflict. We still plan the final distribution after that window, because the department can file a claim.

## How does the parent get its money out?

The parent takes profits out by dividend, either before an STK-2 filing or inside a liquidation. Share capital comes out only through voluntary liquidation, an NCLT approved capital reduction, a buy back, or a sale of the shares. Each route has its own approval, FEMA treatment and tax.

| Route | Companies Act | FEMA position | Tax in India (Income Tax Act, 2025) | Main limit |
|---|---|---|---|---|
| Dividend | s.123 | Current account; no RBI approval | 20% plus surcharge and cess (s.207), or treaty rate | Distributable profits only |
| Buy back | s.68 | A non resident sells to the company; agree pricing and the reporting form with the AD bank first | Capital gain from 1 Apr 2026, plus extra promoter tax (s.69) | 25% of paid up capital and free reserves; funded from free reserves, securities premium or a fresh issue |
| Capital reduction | s.66; NCLT order | AD bank remits | Dividend up to accumulated profits (s.2(40)(d)); capital gain on the rest | Tribunal timeline |
| Share sale to a resident | s.56; SH-4 | FC-TRS within 60 days; price not above fair value | Capital gain | Needs a buyer |
| Liquidation distribution | IBC s.59 | AD bank remits proceeds net of tax | Dividend up to accumulated profits (s.2(40)(c)); capital gain on the rest (s.68(2)) | Liquidation cost and time |
| Genuine dues to the parent | Board approval | Current account, or ECB rules for a loan | TDS and transfer pricing | Must reflect real services or a real loan |

### Dividends before an STK-2 filing

Section 123(1)(a) allows a dividend out of profits of earlier years that remain undistributed. Most dormant subsidiaries return their profits this way before STK-2. Two limits need checking.

If the company moved its profits into a general reserve, the second proviso to section 123(1) applies. Rule 3 of the dividend rules of 2014 then caps the draw at one tenth of paid up capital plus free reserves. An interim dividend under section 123(3) also faces a rate cap if the current year shows a loss.

Our reading is that a final dividend at the AGM, paid from the profit and loss surplus, avoids both caps. Some auditors read the surplus as a free reserve and apply rule 3 anyway. Take a company with INR 1,00,000 of capital and INR 29,00,000 of surplus. On that stricter view, it could draw only INR 3,00,000 in a year. Agree the reading with your auditor before the board fixes the amount. Our article on [dividends to a foreign parent](/insights/dividend-from-indian-subsidiary-to-foreign-parent) covers the steps.

### Why share capital gets stuck under STK-2

STK-2 itself pays nothing to anyone. The parent gets only what the company pays out before it files. Section 68(1) lets a company fund a buy back only from free reserves, securities premium or a fresh issue. So a loss making company usually cannot use one. A capital reduction under section 66 needs an NCLT order, which a small closing company rarely waits for.

So a subsidiary on the STK-2 route usually spends its last capital on closure costs. That works for INR 1,00,000 of capital, not for INR 2 crore.

Never move capital to the parent as a "loan" before STK-2. A loan to a shareholder with at least 10 percent of the votes is a deemed dividend up to accumulated profits. Section 2(40)(e) of the Income Tax Act, 2025 says so. It can also breach FEMA, and the loan is an asset that blocks STK-2 anyway.

### FEMA on the way out

A dividend is a current account payment, so the bank remits it without RBI approval. The bank needs Form 145 (old Form 15CA) and the accountant's Form 146 (old Form 15CB). Rule 220 of the Income Tax Rules, 2026 does not exempt dividends from them. Our guide to [Forms 15CA and 15CB](/insights/form-15ca-and-15cb-requirements-guide-2026) maps the new numbers.

We found no paragraph on liquidation proceeds in the Master Direction on Foreign Investment in India (updated as on 15 Jun 2026). Paragraph 10.2.2 lets an AD bank remit sale proceeds of a security, net of applicable taxes. The seller must have held it on a repatriation basis, and the sale must meet the pricing guidelines or have RBI approval. We present a liquidation distribution to the bank on the same footing.

Banks still ask for a document set. We send the NCLT order or the liquidator's distribution statement and a Chartered Accountant's certificate on Indian liabilities. We add the tax computation, Forms 145 and 146, and the parent's KYC. Ask your bank for its list early, and see our guide to [repatriating profits](/insights/repatriation-of-profits-from-india-to-a-foreign-parent-the-2026-strategic-guide).

## How is the exit taxed in India?

Section 207 of the Income Tax Act, 2025 taxes a dividend to a foreign parent at 20 percent plus surcharge and cess. A lower treaty rate can apply. In a liquidation, the part paid from accumulated profits is a dividend under section 2(40)(c). The rest is a capital gain under section 68(2), measured against the parent's cost.

The Income Tax Act, 2025 took effect on 1 Apr 2026 and renumbered every provision a closing company touches. The 1961 numbers still apply up to financial year 2025-26 (assessment year 2026-27).

| Topic | Income Tax Act, 1961 | Income Tax Act, 2025 |
|---|---|---|
| Liquidation distribution up to accumulated profits | s.2(22)(c) | s.2(40)(c) |
| Loan or advance to a shareholder | s.2(22)(e) | s.2(40)(e) |
| Buy back | s.2(22)(f), deemed dividend | Clause omitted from 1 Apr 2026; capital gain |
| Shareholder's gain on liquidation | s.46(2) | s.68(2) |
| Rate on dividends of a foreign company | s.115A | s.207 |
| TDS on payments to a non resident | s.195 | s.393(2), Table serial 17 |
| Liquidator's notice to the Assessing Officer | s.178 | s.322 |
| Directors of a private company liable for its tax | s.179 | s.323 |
| Remittance forms; treaty form | Forms 15CA, 15CB; Form 10F | Forms 145, 146; Form 41 |

Three points matter for a parent.

1. A treaty rate needs a tax residency certificate and Form 41. The India US treaty allows 15 percent on dividends to a company holding at least 10 percent of the voting stock.
2. A parent that takes a treaty rate below 20 percent must file an Indian return. Section 207(8) excuses filing only where tax was withheld at the section 207 rate.
3. A capital loss on liquidation carries forward only if the parent files its return on time.

The company's last stub period, from 1 April to dissolution, falls in a tax year whose return is due after the company is gone. Our reading is that section 250 of the Companies Act keeps the company alive to discharge that obligation. We found no official guidance on whether the income tax filing portal accepts a return from a struck off company. So we raise it with the jurisdictional Assessing Officer before STK-2, and keep the directors' DSCs and the portal login active.

## Which tax and FEMA clearances are needed before closing?

India has no general tax clearance certificate that a company must obtain before STK-2. The STK-6 notice gives the tax department a chance to object. In voluntary liquidation, the liquidator notifies the Assessing Officer under section 322. RBI gives no approval to close a subsidiary, but the FEMA reporting trail must be complete.

| Area | STK-2 route | Voluntary liquidation route |
|---|---|---|
| Income tax | No certificate; STK-4 covers tax; department may object to STK-6 | Liquidator's notice within 30 days (s.322); department files a claim |
| TDS | Final quarterly statements and certificates | Liquidator deducts on distributions to the parent |
| GST | REG-16 approved and GSTR-10 filed first | Liquidator completes cancellation |
| FEMA reporting | FC-GPR and FC-TRS history complete | Same, plus the AD bank remittance file |
| FLA return | Due 15 July each year while the company holds FDI at end March (RBI FAQ, updated 1 Jul 2026); file the return for the last 31 March before STK-2 | Same |

RBI's FLA FAQ excuses an entity with no outstanding inward or outward FDI at end March of the reporting year and the previous year. It says nothing specific about a company dissolved before 31 March.

A gap in the FEMA history blocks the final remittance. If an old allotment never reached FC-GPR, the bank will hold the money. Our [FEMA compliance service](/services/fema-compliances.html) fixes that first, and our note on the [FLA return](/insights/fla-return-due-date-fy-2025-26) covers the last filing.

## What happens to employees, GST and other registrations?

Staff get final wages within two working days under section 17(2) of the Code on Wages, 2019, which names closure expressly. Gratuity follows within 30 days. GST ends with REG-16, the officer's REG-19 order and the GSTR-10 final return. Every other registration needs its own surrender.

The four labour codes took effect on 21 Nov 2025, with central rules on 8 May 2026. Section 74 of the Industrial Relations Code, 2020 requires 60 days' notice to the appropriate government before an undertaking closes. Its proviso exempts small undertakings by worker count, so check the threshold in the India Code text before relying on it. Section 75 gives workers closure compensation. Under Chapter X, an industrial establishment with 300 or more workers needs the government's prior permission to close.

Section 2(zr) leaves managers, administrative staff and supervisors earning above INR 18,000 a month out of "worker". Leave them out of the count. Our guide to the [new labour codes](/insights/new-labour-codes-foreign-owned-companies-india) covers final settlements.

Section 29(5) of the Central Goods and Services Tax Act, 2017 (CGST Act) claws back input tax credit on stock and capital goods. It pays the credit or the output tax on those goods, whichever is higher. Circular No. 69/43/2018-GST asks officers to accept a complete application and issue REG-19 within 30 days. A late GSTR-10 costs INR 100 a day under section 47, capped at INR 5,000, and State GST adds the same.

| Registration | How it ends | When |
|---|---|---|
| GST | REG-16, REG-19, then GSTR-10 | REG-16 within 30 days of closure; GSTR-10 within three months of the later of cancellation date and order date |
| TAN | Final Forms 138, 140 and 144 and certificates. The online TAN change request on the Protean TIN site cancels only an extra TAN kept beside the one in use, so for a single TAN we write to the TDS Assessing Officer | After the last deduction |
| PAN | No routine online cancellation for a company; we write to the Assessing Officer | After dissolution |
| EPF and ESI | Last ECR and ESI contribution, then a written closure intimation with the closure date to each regional office; ask each office for its current checklist | After the last wage month |
| Professional tax; shops and establishments | Final return and surrender under State law | When the office closes |
| IEC; Udyam | Deactivation on the DGFT portal; cancellation on the Udyam portal | Before STK-2 |
| STPI or SEZ unit | Exit approval from the authority | Before STK-2 |
| Bank accounts | Closure letter | After the last payment |

Keep one bank account open until the last payment clears.

## What liability stays with directors after closure?

Dissolution does not end personal exposure. Section 248(7) keeps the liability of every director and officer "as if the company had not been dissolved". Section 323 of the Income Tax Act, 2025 makes directors of a private company liable for its unrecoverable tax. Section 89 of the CGST Act sets a similar rule for GST.

| Exposure | Source | Who it reaches | How to reduce it |
|---|---|---|---|
| Continuing liability | Companies Act, s.248(7) | Directors, officers with management powers, and members | Clear every liability; keep evidence |
| Fraudulent application | Companies Act, s.251, punishable under s.447 | Persons in charge of management | Truthful STK-4 and statement of accounts |
| Indemnity to the Registrar | STK-3 | Each director | Sign only after the ledger is clean |
| Unrecoverable income tax, with penalty, interest and fees | Income Tax Act, 2025, s.323 | Directors during the relevant tax year | Pay all tax before filing |
| Unrecoverable GST | CGST Act, s.89 | Directors during the period of the dues | File GSTR-10 and pay dues |
| Disqualification after a Registrar strike off | Companies Act, s.164(2) | Directors of a company in filing default | Use the voluntary route |

Section 250 keeps a dissolved company alive for one purpose. It can still realise amounts due to it and discharge its liabilities. The defence under section 323 is narrow. A director escapes only by proving the non recovery was not due to their gross neglect, misfeasance or breach of duty.

## Can a struck off company be revived?

Yes. Section 252(1) lets any person aggrieved by a dissolution appeal to the NCLT within three years. Section 252(3) lets the company, a member, a creditor or a workman apply within 20 years of the Gazette notice. The Tribunal restores the name if the company was in business or restoration is otherwise just.

The Registrar can also apply within three years if it struck off a company by mistake. After restoration, the company files the order with the Registrar within 30 days and catches up on missed returns. A parent that may return to India should compare dormancy with closure first.

An NCLT order under section 59(8) of the IBC is harder to reopen. An aggrieved person appeals to the National Company Law Appellate Tribunal within 30 days under section 61, extendable by 15 days.

The Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026) is pending. Clause 74 would amend section 248. The Lok Sabha received the Bill on 23 Mar 2026 and referred it to a Joint Committee. It was not law on 1 Oct 2026, so this page applies the Act as it stands. Check the Act as passed before relying on any change to strike off, restoration or dormancy.

## Should the subsidiary go dormant instead of closing?

Choose dormancy when the parent may restart in India and wants to keep the entity, its PAN and its bank account. Section 455 of the Companies Act lets an inactive company apply for dormant status. Choose closure when the parent has left India for good, because a dormant company still files returns and keeps directors.

Section 455 calls a company inactive when it has no business or operation, or no significant accounting transaction, for the last two financial years. A company that has filed no financial statements and annual returns for two years also counts. Registrar fees, legally required payments, share allotments under the Act and office upkeep are not significant transactions. The company applies in Form MSC-1 and files a yearly return in Form MSC-3.

Section 455(5) requires a dormant company to keep its minimum directors and file its documents. Section 455(6) has the Registrar remove one that stops complying from the register of dormant companies. A parent planning STK-2 should not apply for dormancy in the meantime. Clause (c) of section 248(1) needs two years with no dormancy application. Our [dormancy service](/services/company-dormancy.html) compares the yearly cost with closing.

## What does each route cost, and what can go wrong?

STK-2 costs a government fee of INR 10,000 plus professional work, notary and stamp charges. Voluntary liquidation adds a liquidator, a registered valuer, newspaper notices, an audit and the NCLT stage. The larger costs are trapped capital and the two year wait under STK-2, and time under liquidation.

| Item | STK-2 strike off | Voluntary liquidation |
|---|---|---|
| Government fee | INR 10,000 for STK-2 | MCA filing fees; NCLT fee on the s.59(7) application |
| Professional work | Chartered Accountant certificate, secretarial work, final audit | Insolvency professional, registered valuer, auditor, counsel |
| Directors' paperwork | STK-3 and STK-4 from every director | Solvency declaration by a majority |
| Time | Two inactive financial years, then months | More than a year on the IBBI average |
| Money trapped | Share capital beyond closure costs | None beyond costs |
| Main legal risk | Rejection, or later restoration by a creditor or the tax department | A claim larger than the assets, which ends solvency |
| Personal risk | STK-3 indemnity; s.248(7); s.323 | A false solvency declaration; s.323 |

## What changed in 2026

Section 248 of the Companies Act did not change in 2026. Section 59 of the IBC did. Since 26 May 2026, members can terminate a voluntary liquidation before the dissolution application.

| Date | Change | Instrument | Effect on a closing subsidiary |
|---|---|---|---|
| 25 Feb 2026 | Valuation report for the solvency declaration follows a format the IBBI notifies by circular | IBBI/2025-26/GN/REG137, explanation to reg. 3(1)(b)(ii) | New report format |
| 23 Mar 2026 | Corporate Laws (Amendment) Bill introduced; clause 74 would amend section 248 | Bill No. 85 of 2026 | Pending; not law on 1 Oct 2026 |
| 1 Apr 2026 | New tax law; Forms 145 and 146 replace 15CA and 15CB | Income Tax Act, 2025; Income Tax Rules, 2026 | Liquidator s.322; directors s.323; liquidation gain s.68(2) |
| 1 Apr 2026 | Buy back taxed as a capital gain, with extra promoter tax | Finance Act, 2026; s.69 | Buy back costs more as an exit |
| 15 Apr to 15 Sep 2026 | CCFS-2026 relief window for pending MCA filings | MCA General Circulars 01/2026 (24 Feb 2026), 03/2026 and 04/2026 | Closed; late AOC-4 and MGT-7 now carry full additional fees, and STK-2 costs the full INR 10,000 |
| 8 May 2026 | Central rules under the four labour codes | G.S.R. 342(E) to 345(E) | Final wages in two working days |
| 26 May 2026 | Members can terminate a voluntary liquidation before the dissolution application | IBC (Amendment) Act, 2026 (Act 6 of 2026, assent 6 Apr 2026), s.59(5A) to (5C) | A parent can stop a liquidation if plans change |
| 2 Jun 2026 | Claims updating (reg. 28A), seven day claim decisions (reg. 29(2)), Board formats, and the termination procedure (reg. 42) | IBBI/2026-27/GN/REG148, notified 1 Jun, published 2 Jun 2026 | Faster claim decisions; a defined exit from a liquidation |
| 15 Jun 2026 | Master Direction on Foreign Investment updated | RBI | Paragraph 10.2 on sale proceeds; we found nothing specific on liquidation |

The termination power matters most. Before 26 May 2026, section 59 gave a parent that changed its mind mid liquidation no route back.

## Worked example

### Scenario A, a dormant subsidiary with INR 30,00,000 cash and a GST registration

IndiaCo Private Limited is wholly owned by a Delaware company, US Parent Inc. It has 10,000 shares of INR 10: US Parent holds 9,999 and a nominee holds one. IndiaCo stopped business on 31 Mar 2024 and has had no staff since December 2023. It carried on no business or operation in 2024-25 or 2025-26, and never applied for dormant status. So it meets the section 248(1)(c) ground for an STK-2 filed during 2026-27.

| Audited balance sheet at 31 Mar 2026 | INR |
|---|---|
| Cash at bank | 30,00,000 |
| Share capital | 1,00,000 |
| Retained earnings, in the profit and loss surplus | 29,00,000 |
| Liabilities | Nil |

The profits sit in the profit and loss surplus, not a general reserve. On our reading, rule 3 does not cap a final dividend, and IndiaCo's auditor agrees. We assume closure costs of INR 1,50,000, which IndiaCo pays before it closes its account. A director pays the STK-2 fee and notary charges later (step 11). Your own budget will differ.

| Cash out of IndiaCo | INR |
|---|---|
| Final dividend, INR 285 a share on 10,000 shares | 28,50,000 |
| Closure costs (assumed) | 1,50,000 |
| Total | 30,00,000 |

| US Parent's dividend (INR) | Treaty rate, 15% | Act rate, 20% plus 4% cess |
|---|---|---|
| Gross on 9,999 shares | 28,49,715 | 28,49,715 |
| Tax withheld | 4,27,457 | 5,92,741 |
| Net remitted | 24,22,258 | 22,56,974 |

The treaty rate saves INR 1,65,284. No surcharge applies, because the dividend is below INR 1 crore. US Parent needs an IRS residency certificate (Form 6166) and Form 41 before payment. It must then file an Indian return, because 15 percent is below the section 207 rate.

After the payments, IndiaCo's cash is nil. Retained earnings fall to minus INR 1,00,000, which offsets the share capital. The capital paid part of the closure, and none of it reached US Parent.

1. 20 Apr 2026: IndiaCo files REG-16. It kept its GSTIN after it stopped trading and filed nil returns, so it owes no late fees.
2. 5 May 2026: the officer issues REG-19, so GSTR-10 is due by 5 Aug 2026.
3. 15 Jul 2026: IndiaCo files GSTR-10, owing nothing as it holds no stock or capital goods. It also files its FLA return for 2025-26 on FLAIR.
4. 24 Sep 2026: the AGM adopts the 2025-26 accounts and declares the dividend.
5. 28 Sep 2026: US Parent files Form 41, a Chartered Accountant issues Form 146, and IndiaCo files Form 145 and pays.
6. 7 Oct 2026: IndiaCo deposits the TDS under rule 218(2).
7. 23 Oct 2026: IndiaCo files AOC-4, within 30 days of the AGM.
8. 30 Oct 2026: IndiaCo files its 2025-26 income tax return. A company with no transfer pricing report must file by 21 Nov 2026. CBDT Circular No. 07/2026 moved that date from 31 Oct 2026 under section 139(1) of the Income Tax Act, 1961.
9. 31 Oct 2026: IndiaCo files Form 144 for July to September under rule 219.
10. 20 Nov 2026: IndiaCo files MGT-7, within 60 days of the AGM.
11. 30 Nov 2026: IndiaCo pays the last costs and closes its bank account. A director pays the STK-2 fee and notary charges personally and waives repayment in writing, so IndiaCo owes nothing.
12. 1 Dec 2026: members pass the special resolution; MGT-14 follows on 5 Dec 2026.
13. 4 Jan 2027: IndiaCo files STK-2 with an STK-8 statement as at 31 Dec 2026. That is more than three months after the dividend payment, which keeps section 249 out of the way.
14. March 2027: at the average C-PACE pace PIB reported, STK-7 could appear in the Gazette.

IndiaCo files no accounts for 2026-27. They are not due before STK-2, and the rule 4(1) proviso asks only for overdue filings up to the year business stopped. Its tax year 2026-27 return falls due after dissolution, which is the stub period point above.

### Scenario B, the same cash with INR 2 crore of share capital

Change one fact. IndiaCo's share capital is INR 2,00,00,000 and it has accumulated losses of INR 1,70,00,000. Cash is still INR 30,00,000, with no liabilities.

There is no distributable profit, so no dividend. Under STK-2, the cash has no lawful way back to US Parent.

Voluntary liquidation returns it. Assume liquidation costs of INR 6,00,000 for the arithmetic, leaving INR 24,00,000 to distribute. With no accumulated profits, nothing is a dividend under section 2(40)(c). Under section 68(2), US Parent has a capital loss of INR 1,76,00,000 against its cost. The liquidator should obtain a Form 128 certificate or a Form 146 computation before remitting.

| Outcome for US Parent | STK-2 | Voluntary liquidation |
|---|---|---|
| Cash received (INR) | Nil | 24,00,000 |
| Indian tax | Nil | Nil, as there is no gain |
| Time to dissolution | Months, once the two year ground is met | More than a year on the IBBI average |

A third option is to sell the shares to an Indian buyer at no more than fair value, with FC-TRS within 60 days.

## Common mistakes

1. **Filing STK-2 too soon after trading stops.** Section 248(2) needs a ground in section 248(1), usually two financial years without business. Fix: wait out the two years with clean filings, or use voluntary liquidation.
2. **Filing STK-2 with money in the bank.** The statement of accounts shows assets and invites a query. Fix: pay out or spend the cash, then close the account before the STK-8 date.
3. **Sending capital to the parent as a loan.** It is a deemed dividend under section 2(40)(e). The loan itself also blocks STK-2. Fix: use voluntary liquidation or a capital reduction.
4. **Letting the Registrar strike the company off.** The filing default behind such a strike off usually disqualifies the directors under section 164(2). Fix: clear the backlog through our [compliance rescue team](/compliance-rescue) and apply yourself.
5. **Skipping the overdue AOC-4 and MGT-7.** The rule 4(1) proviso requires them up to the year business stopped. Fix: file them before the special resolution.
6. **Forgetting GST.** A live GSTIN draws late fees and a tax objection. Fix: file REG-16 within 30 days of closure and GSTR-10 within three months.
7. **Letting the resident director resign early.** The company breaches section 149(3), and STK-4 needs every serving director. Fix: keep the board unchanged until STK-7.
8. **Claiming a treaty rate without Form 41.** The lower rate fails on review. Fix: collect the residency certificate and Form 41 before payment.
9. **Starting voluntary liquidation with an unpaid debt.** Section 59(1) bars a company in default. Fix: pay every overdue creditor before the declaration.
10. **Leaving the FEMA trail incomplete.** The bank will not remit while an old FC-GPR is missing. Fix: regularise the filing first.

To have us test which route fits your subsidiary, send the latest audited balance sheet and shareholding through our [contact page](/contact).

## Checklist

1. Compare share capital, reserves, liabilities and the parent's timeline, and choose the route.
2. Confirm the STK-2 ground: two financial years with no business or operation, or no business within a year of incorporation.
3. Pass a board resolution to stop business and approve the plan.
4. Pay final wages within two working days and gratuity within 30 days, and file the last PF and ESI returns.
5. File REG-16 within 30 days of closure, then GSTR-10 within three months of cancellation.
6. Collect receivables, sell assets and settle every liability, including intercompany dues.
7. Record satisfaction of any open charge through CHG-4.
8. Hold the final audit and AGM, then file AOC-4 and MGT-7 for the year business stopped and any later year due.
9. Agree the dividend reading with the auditor, declare the dividend, collect Form 41 and the residency certificate, and file Forms 146 and 145.
10. Deposit the TDS by the 7th of the next month and file the quarterly statement.
11. File the last FLA return and close any gap in FC-GPR or FC-TRS history.
12. Surrender the IEC, Udyam, professional tax and shops registrations, and any STPI or SEZ approval.
13. Pay the final costs and close the bank account.
14. Pass the special resolution and file MGT-14 within 30 days.
15. Collect notarised STK-3 and STK-4 from every director, apostilled where signed abroad.
16. File STK-2 with the INR 10,000 fee and an STK-8 statement dated within 30 days.
17. Keep the company's records after STK-7, because liability survives under section 248(7).

## Frequently Asked Questions

### What is the difference between strike off and winding up?
Strike off under section 248 of the Companies Act, 2013 removes a company's name after the company has cleared its own liabilities, without a liquidator. Winding up is a supervised liquidation, either voluntary liquidation under section 59 of the IBC or winding up by the NCLT under section 271. A liquidator sells assets, pays creditors and distributes the surplus before a tribunal order ends the company.

### What is the STK-2 fee in 2026?
The government fee for Form STK-2 is INR 10,000 under rule 4(1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. MCA's Companies Compliance Facilitation Scheme, 2026 closed on 15 Sep 2026, so no scheme fee relief applies to an application filed now. Notary, stamp duty and professional fees are extra.

### Can a company that stopped trading this year file STK-2?
Usually not. Section 248(2) allows an application only on a ground in section 248(1). The usual ground, clause (c), needs no business or operation in the two financial years immediately before the application. A company that stopped trading on 31 Mar 2026 can apply from 1 Apr 2028. Voluntary liquidation under section 59 of the IBC has no such wait.

### What is C-PACE?
C-PACE is the Centre for Processing Accelerated Corporate Exit. The Ministry of Corporate Affairs set it up by notification S.O. 1269(E) of 17 Mar 2023. It has processed STK-2 applications since 1 May 2023, with all India jurisdiction. The Press Information Bureau reported on 11 Aug 2025 that it processes applications in under two months on average.

### Can a foreign parent close its Indian subsidiary without travelling to India?
Usually yes. Directors abroad sign STK-3 and STK-4 before a local notary and have them apostilled. A director with an Indian DSC signs STK-2 online. The parent votes on the special resolution through an authorised representative under section 113 of the Companies Act. Indian professionals can handle bank closure and GST cancellation under authority letters.

### Can a company with an active GST registration file STK-2?
It should not. An active GSTIN usually means returns are still due, and the STK-4 affidavit confirms there are no liabilities. The tax authorities can also object to the STK-6 notice. Cancel first through REG-16 under section 29 of the CGST Act, obtain the REG-19 order, and file GSTR-10 under section 45 before STK-2.

### Does a company need an income tax clearance certificate to close?
No general certificate exists for a strike off. The company pays its tax and TDS, and each director confirms nil liabilities in STK-4. In voluntary liquidation, section 322 of the Income Tax Act, 2025 requires the liquidator to notify the Assessing Officer within 30 days of appointment. The officer then has three months to state the tax to set aside.

### Can a voluntary liquidation be stopped once it starts?
Yes, since 26 May 2026. Section 59(5A) of the IBC, added by the IBC (Amendment) Act, 2026, lets members pass a special resolution before the dissolution application is filed. Where the company owes debt, creditors holding two thirds by value must approve within seven days. Regulation 42 requires reasons, treatment of liquidation costs and a no prejudice declaration. Termination takes effect when the liquidator tells the Registrar, which ends the liquidator's term.

### Is a declaration of solvency needed for STK-2?
No. The declaration of solvency belongs to voluntary liquidation under section 59(3) of the IBC. For STK-2, each director signs an indemnity bond in Form STK-3 and an affidavit in Form STK-4 instead. A Chartered Accountant certifies the statement of accounts in Form STK-8. Both routes still need a special resolution of members.

### What happens to money left in a struck off company's bank account?
Section 250 of the Companies Act says a dissolved company ceases to operate except to realise its dues and discharge its liabilities. Its certificate of incorporation is deemed cancelled. Banks freeze the account, and the parent has no simple claim. Recovering the money usually needs restoration under section 252, so close the account before filing STK-2.

### Are directors liable after a company is struck off?
Yes. Section 248(7) keeps each director's liability alive as if the company had not been dissolved. Section 323 of the Income Tax Act, 2025 makes directors of a private company liable for its unrecoverable tax, penalty, interest and fees for the years they served. Section 89 of the CGST Act does the same for GST. Section 251 adds liability for a fraudulent application.

### How is a liquidation distribution taxed for a foreign parent?
The part paid from accumulated profits is a dividend under section 2(40)(c) of the Income Tax Act, 2025. It is taxed at 20 percent under section 207, or at the treaty rate. The rest is a capital gain under section 68(2), measured against the parent's cost. The liquidator withholds tax under section 393(2) before the money leaves India.

### Is FC-TRS needed when a subsidiary is struck off?
Our reading is no. FC-TRS under FEMA 395/2019-RB reports transfers of shares between a resident and a non resident. Dissolution cancels the shares, and nobody transfers them. FC-TRS applies only if shares move before closure, such as a sale to an Indian buyer, within 60 days. A clean FC-GPR history still matters for the final remittance.

### Can the Registrar reject an STK-2 application?
Yes. Common causes are a missing section 248(1) ground, a section 249 breach, missing overdue filings, an open charge, an objection to the STK-6 notice or defective attachments. Section 248(6) also requires the Registrar to be satisfied that the company has provided for its dues and liabilities. After a rejection, fix the gap and apply again.

### What is the late fee for a missed GSTR-10?
Section 47 of the CGST Act charges INR 100 a day for a late final return under section 45, capped at INR 5,000. The State GST law adds an equal amount. If GSTR-10 stays unfiled, the officer issues a notice in GSTR-3A and can then assess the tax under section 62, as Circular No. 69/43/2018-GST explains.

### How long does voluntary liquidation take in practice?
Regulation 37(1) of the IBBI (Voluntary Liquidation Process) Regulations, 2017 asks the liquidator to finish within 90 days, or 270 days where creditors approved. The 2,090 processes closed with a final report by 30 Jun 2026 took 391 days on average (IBBI newsletter, April to June 2026). The NCLT's dissolution order under section 59(8) can add months after that.

## Sources

- Income Tax Department (Companies Act text), Section 248 of the Companies Act, 2013, Power of Registrar to remove name of company from register of companies, read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-248-69
- Income Tax Department (Companies Act text), Section 249 of the Companies Act, 2013, Restrictions on making application under section 248 in certain situations, read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-249-69
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