By Manu Rao | Updated March 2026
Closing a company in India is not as simple as stopping operations. The company continues to exist as a legal entity on the ROC register until it is formally removed. Foreign investors who want to exit India — whether because the venture did not work out, the business was restructured globally, or the project is complete — need to close the Indian entity properly. Failing to do so leaves ongoing compliance obligations, potential penalties, and a dormant entity that complicates future India plans.
India offers two formal closure routes: Strike-Off under Section 248 of the Companies Act 2013 and Voluntary Liquidation under Section 59 of the Insolvency and Bankruptcy Code (IBC) 2016. Each has its own conditions, process, and timeline.
Quick Comparison Table
| Criterion | Strike-Off (Section 248) | Voluntary Liquidation (Section 59, IBC 2016) |
|---|---|---|
| Governing Law | Companies Act 2013, Section 248 + Companies (Removal of Names of Companies from the Register of Companies) Rules 2016 | Insolvency and Bankruptcy Code 2016, Section 59 + IBBI (Voluntary Liquidation Process) Regulations 2017 |
| Eligibility | Company has not commenced business within 2 years of incorporation, OR has not carried on business for 2 preceding financial years | Company has no debt, OR if it has debt, creditors approve the liquidation by 2/3 majority |
| Who Initiates | Company (Form STK-2) or ROC suo motu (Form STK-1) | Company — by special resolution (75% majority) of members + declaration of solvency by directors |
| Liquidator Required | No | Yes — Insolvency Professional registered with IBBI must be appointed as liquidator |
| Public Notice | ROC publishes notice in Official Gazette and on MCA portal — 30-day objection period | Liquidator publishes notice in newspaper — invites claims from creditors/stakeholders |
| NCLT Involvement | No — entirely administrative process through ROC | Final dissolution order from NCLT (or by liquidator's application to ROC if process is clean) |
| Timeline | 3-6 months from STK-2 filing | 6-12 months (can extend if complications arise) |
| Asset Distribution | All liabilities must be settled before filing — no formal asset distribution process | Formal distribution by liquidator — creditors first, then members per priority under IBC |
| Tax Clearance | Not formally required but recommended — pending tax demands can revive the company | Tax clearance should be obtained — liquidator must settle all tax liabilities |
| Post-Closure Liability | Directors/members remain liable for 20 years after strike-off for undischarged liabilities (Section 248(7)) | Clean closure — once dissolved, liabilities are extinguished (subject to proper process) |
| Restoration | Struck-off company can be restored within 20 years by application to NCLT (Section 252) | No restoration — dissolution is final |
| Cost | Government fee: INR 5,000 + professional fees | Liquidator fees + NCLT filing + professional fees — materially higher |
Strike-Off — The Simpler Route
Strike-off is the faster, cheaper way to remove a company from the ROC register. It works when the company has minimal activity, no outstanding debts, and no complex asset structure.
Eligibility Conditions
A company can apply for strike-off under Section 248(2) if:
- It has not commenced business within 2 years of incorporation (did not file INC-20A), OR
- It has not carried on any business or operation for a period of 2 immediately preceding financial years, AND
- It has not made any application for obtaining dormant status under Section 455
Before filing, the company must:
- Close all bank accounts or bring them to nil balance
- Settle all liabilities — vendor dues, employee dues, tax dues
- File all pending annual returns and financial statements with the ROC
- Obtain NOC from regulatory bodies (if in a regulated sector)
Process
- Hold a board meeting and pass a board resolution authorizing the strike-off application
- Obtain consent of at least 75% of shareholders (by value of shares held)
- File Form STK-2 with the ROC, along with: indemnity bond from directors, statement of accounts (not older than 30 days), affidavit by directors confirming no liabilities
- ROC publishes a public notice — 30-day objection window
- If no objections, ROC strikes off the company name from the register
- Company stands dissolved
Timeline: 3-6 months. The main variable is the ROC's processing queue. Some ROCs process faster than others.
The 20-Year Tail
Here is the catch. Under Section 248(7), even after strike-off, the liability of every director, manager, and member of the company continues and can be enforced as if the company had not been struck off. This liability tail extends for 20 years.
If a creditor, the tax department, or any other party discovers an undischarged liability after the company is struck off, they can apply to the NCLT to restore the company (Section 252) and pursue the claim. For foreign investors, this means the closure is not truly final — it is administrative removal with a long liability tail.
Voluntary Liquidation — The Thorough Route
Voluntary liquidation under the IBC provides a more formal, legally clean closure. A court-supervised process ensures all debts are settled, assets are distributed, and the company is dissolved with finality.
Eligibility
The company must either:
- Have no debt — the majority of directors make a declaration of solvency (verified by auditor's report) stating the company has no debt or will be able to pay its debts in full within 12 months, OR
- Have debts but obtain approval from creditors representing at least 2/3 in value of the company's debt
For foreign-invested companies with no outstanding debts, the first route is standard.
Process
- Directors make a declaration of solvency (attaching auditor's report on company's assets and liabilities)
- Members pass a special resolution (75% majority) to voluntarily wind up the company
- Members appoint an Insolvency Professional (IP) registered with IBBI as the liquidator
- Liquidator takes charge of the company's assets and affairs
- Liquidator publishes notice in newspaper within 5 days — invites claims from stakeholders
- Liquidator files Form 11 with IBBI within 7 days of appointment
- Liquidator settles all claims, distributes assets per priority (secured creditors → employee dues → unsecured creditors → members)
- Liquidator prepares final accounts and files application for dissolution with the ROC/NCLT
- NCLT passes dissolution order (or ROC dissolves if no NCLT intervention needed under the revised process)
- Company stands dissolved — final and irreversible
Timeline: 6-12 months. The liquidator must complete the process within 12 months of appointment unless IBBI grants an extension.
Clean Closure
The key advantage of voluntary liquidation is finality. Once the NCLT (or ROC under the streamlined process) orders dissolution, the company ceases to exist. Unlike strike-off, there is no 20-year liability tail for directors and members — the formal liquidation process is designed to identify and settle all claims during the process itself.
For a foreign parent company that wants to close its India chapter with certainty — no lingering liabilities, no risk of restoration, no future claims — voluntary liquidation is the cleaner route.
Tax Considerations During Closure
Whichever route you choose, the company must settle its tax position before closure:
- Income tax: File all pending returns. Get a no-objection or clearance from the Assessing Officer if possible (not mandatory for strike-off, but strongly advisable).
- GST: Cancel GST registration. File final GST return. Reverse any input tax credit on closing stock.
- TDS: File all pending TDS returns. Pay any outstanding TDS liability.
- RBI: Report the liquidation/strike-off to the AD Bank. Repatriate remaining funds to the foreign parent after tax clearance. The repatriation requires Form 15CA and 15CB for certification.
The repatriation of capital on closure is permitted under FEMA. The foreign investor can take back their original investment plus accumulated profits (after Indian taxes). The AD Bank processes the outward remittance based on the CA certificate and tax compliance documents.
Repatriation of Funds to Foreign Parent
For a foreign-invested company being closed:
- Capital repatriation follows FEMA rules — the foreign parent can receive the winding-up proceeds
- The Indian company's CA issues Form 15CB (tax determination certificate)
- The company files Form 15CA online with the Income Tax Department
- The bank processes the outward remittance after verifying the certificates
- Capital gains on the shares held by the foreign parent (if any value remains) are taxed under Section 46 of the IT Act — distribution on liquidation is treated as a transfer, and the excess over cost is capital gains
Which Route Should You Choose?
Choose Strike-Off if:
- The company has been dormant for 2+ years
- There are no outstanding liabilities
- You want a faster, cheaper closure
- You are comfortable with the 20-year liability tail (i.e., you are confident all liabilities are truly settled)
Choose Voluntary Liquidation if:
- The company has been active recently (does not meet the 2-year inactivity requirement for strike-off)
- You want a legally final closure with no liability tail
- The company has assets to distribute to shareholders
- The foreign parent wants a clean exit from India with no residual risk
- You are willing to invest the time and cost of a formal process
For most foreign investors closing an Indian subsidiary, we recommend voluntary liquidation. The additional cost is justified by the finality it provides. A struck-off company that gets restored 5 years later — because of a forgotten tax demand or a dormant creditor claim — creates problems for the foreign parent that could have been avoided.
Closing your Indian entity? Contact Beacon Filing — we manage the entire closure process, from board resolutions to fund repatriation, and coordinate with the liquidator, ROC, and tax authorities.