Nobody asks about this at setup, which is when it is worth asking. An India entity that is no longer needed does not quietly stop existing — it keeps accruing filing obligations, penalties and director disqualification risk until it is formally closed.
An Indian company is closed voluntarily through strike off under Section 248(2) of the Companies Act, 2013, by filing Form STK-2 with a government fee of ₹10,000, processed centrally through C-PACE. Liabilities must be extinguished first, members holding at least 75% of paid-up capital must approve, and pending filings must be completed. The commonly quoted “two years of no business” test is a ground for the Registrar to strike a company off on its own motion, not a condition for voluntary closure.
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Quick Summary
| Step | What it involves |
| 1. Clear liabilities | Creditors, loans, employee dues, statutory dues — all of them |
| 2. Complete pending filings | ROC annual filings, income tax returns, GST if registered |
| 3. Close registrations | GST, PF, ESIC, Professional Tax, IEC as applicable |
| 4. Board approval | Resolution approving closure and authorising a director to file |
| 5. Member approval | Special resolution, or consent of members holding ≥75% of paid-up capital |
| 6. Prepare documents | Statement of accounts, indemnity bond, affidavit |
| 7. File STK-2 | Government fee ₹10,000, through C-PACE |
| 8. Wait | No universal timeline; depends on accuracy, history and objections |
💡 TaxKitab Tip Close the bank account last, not first. Every other step needs it — paying off the final creditors, settling statutory dues, receiving any refund, and funding the closure costs themselves. Companies routinely close the account early to “stop the charges”, then discover they cannot pay a ₹40,000 tax demand without reopening it, which a dormant foreign-owned company cannot easily do. Keep it open and funded until the strike off is confirmed.
Strike Off Is Not Automatic
Two different things carry the same name.
Section 248(1) lets the Registrar strike a company off on its own motion, including where it has not carried on business for two immediately preceding financial years and has not applied for dormant status. This is the source of the widely repeated “two years” condition — and it describes something being done to the company, not a route the company elects.
Section 248(2) is the voluntary route the company itself uses. It has its own conditions, and inactivity for two years is not one of them.
Being struck off by the Registrar is not a clean exit. Directors may face consequences, and the company can be restored, so an entity left to be struck off involuntarily has not been dealt with.
What Must Be Cleared First
The application is a declaration that the company has no liabilities. That has to be true.
Creditors and loans. Including intercompany balances with the parent. A payable to the parent is a liability like any other and must be settled or waived, with the waiver documented and its tax effect considered.
Employee dues. Final settlement, gratuity, and anything else outstanding. Since the labour codes came into force, wages on exit run to a two-working-day deadline, covered in full and final settlement.
Statutory dues. Income tax, TDS, GST, PF, ESIC, Professional Tax.
Pending filings. ROC annual filings and income tax returns for every year, including dormant ones. An entity with no revenue still files, as set out in the India entity that files even with no revenue, and those years have to be caught up before closure.
Registrations to Surrender
Each one closes separately and on its own timeline:
GST — cancellation, followed by the final return. A GST registration left active keeps generating return obligations and late fees.
PF and ESIC — closure with the respective authorities.
Professional Tax — surrender of PTEC and PTRC where registered.
Import Export Code, Shop and Establishment registration, and any sector licences.
These are often the longest part of the timeline, and they can be started before the STK-2 while liabilities are being cleared.
Approvals and Documents
Board resolution approving the closure and authorising a director to file.
Member approval — a special resolution, or consent from members holding at least 75% of paid-up share capital. For a wholly-owned subsidiary this is a formality, but it must exist on paper.
Statement of accounts — made up to a date not long before the application, certified as prescribed.
Indemnity bond and affidavit from the directors.
Who Cannot Use the Voluntary Route
Section 8 companies cannot use the ordinary Section 248(2) mechanism.
Section 249 restricts an application where, in the preceding period, the company has changed its name, shifted its registered office between states, disposed of property or rights beyond what is needed for closure, or where there are pending compromise or arrangement proceedings, winding up or insolvency.
Companies under investigation, inspection or prosecution may also be restricted.
Practical consequence: if you are planning to close, do not also restructure, rename or move the registered office in the same period. Sequence it.
The Alternative: Dormant Status
Where the entity may be needed again, Section 455 dormant status is worth considering. It reduces the compliance burden without dissolving the company, which preserves the name, the registrations and the history.
For a group that has paused India rather than exited, this is often better than closing and re-incorporating two years later.
What It Actually Costs
Government fee: ₹10,000 for the STK-2.
Everything else: clearing arrears. Catch-up filings, late fees on pending returns, professional fees for the closure work, and settlement of any outstanding dues. For an entity that has been neglected for three or four years, the arrears usually exceed the closure fee several times over.
The cost of waiting is the point. Each additional year of non-filing adds penalties and makes the eventual closure dearer. An entity you know you will not use is cheapest to close now.
Branch and Liaison Offices Close Differently
A branch, liaison or project office is not a company, so Section 248 does not apply. Closure runs through the AD Category-I bank to the RBI, with the remittance of any remaining assets requiring its own documentation and tax clearance. The structural differences are in subsidiary, branch or liaison office.
Frequently Asked Questions
How long does strike off take? There is no universal period. It depends on the accuracy of the application, the compliance history and whether anyone objects. The catching-up beforehand usually takes longer than the application itself.
Can we close with money still in the bank? Yes, but distribute or deal with it before applying, since the statement of accounts should show the position and the application declares no liabilities. Plan the final distribution and its tax treatment.
What about an outstanding loan from the parent? It is a liability. Repay it, or waive it with proper documentation — and take advice, because a waiver can have tax consequences for the Indian company.
Do directors face anything after strike off? A properly completed voluntary strike off with liabilities cleared is a clean exit. Being struck off involuntarily after years of non-filing is not, and can carry disqualification consequences.
Can a struck-off company be restored? Yes, through an application to the NCLT within the prescribed period. It is expensive and slow, which is a reason to close properly rather than walk away.
Does TaxKitab handle closure? We handle the catch-up filings, registration surrenders, statement of accounts and the ROC work. The statutory audit position for the final years is signed by an independent practising CA, separately appointed.
References
- Companies Act, 2013 — Section 248(1) (Registrar’s power), Section 248(2) (voluntary application), Section 249 (restrictions on application), Section 455 (dormant company), Section 8 (companies excluded from the ordinary route)
- Form STK-2, filed through the Centre for Processing Accelerated Corporate Exit (C-PACE), with a government fee of ₹10,000
- RBI Master Direction on Establishment of Branch Office, Liaison Office and Project Office in India, for closure of those structures
⚠️ Conditions, forms, fees and processing arrangements change. Confirm the current requirements on the MCA portal and with your Indian advisers before applying, and take advice on the tax treatment of any intercompany waiver or final distribution.
Call or WhatsApp: +91 7448200422 | Email: info@taxkitab.com
See our Global Desk page for India entities with a foreign parent, or ROC Compliance for the filings themselves. Get in touch.
