Striking off of a company means that the company has been removed from the official register of businesses by the relevant regulatory authority, generally for failing to meet specific legal and financial obligations.

1. Critical Consequences of Striking Off of a Company

2. Introduction
• Striking off of a company means that the company has been removed from the official register
of businesses by the relevant regulatory authority, generally for failing to meet specific legal and
financial obligations.
• A striking off of a company can have a substantial impact because it can no longer do business
or participate in legal agreements. Furthermore, the government may confiscate or sell the
corporation’s assets or property to pay off creditors.
• The Companies Act, 2013 (Act) specifies numerous methods for dissolving a business, such as
striking off, winding up, merger, and so on.

3. Impact on Shareholders
• Striking off of a company by the RoC indicates that it has been disregarded and is no longer listed on the
official register of corporations. The company’s shareholders may suffer as a result of this.
• The shares’ value will drop sharply, if not completely, in value. The corporation will no longer be owned by
its shareholders, and they won’t be able to sell their shares or get dividend payments. For shareholders,
especially those who own a big number of shares or have made sizable financial investments in the
company, this could mean a significant financial loss.

4. Impact on Creditors
A creditor is a person or organization to
whom the company owes money. Striking
off means that the creditor can no longer
claim the money it owed from the
company because it no longer exists. This
can be especially devastating for small
businesses or individuals who are relying
on the payment to keep their own
operations running.
In addition, if a company is struck off while
it still owes money to creditors, the
creditors may not be able to recoup their
losses through liquidation or receivership.

5. Options for
creditors to
recover their
losses in case
of striking off
of a company
• One option is to pursue legal action against the company’s
directors for wrongful trading or misfeasance. This can be a
complex and time-consuming process, and there is no
guarantee that the creditors will be able to recover their
losses in this way.
• Another option is to make a claim through the
government’s insolvency service. This is a process where
creditors can claim money they are owed from a
government fund that is set up to compensate them in the
event of a company’s insolvency. However, the fund may
not have enough money to cover all of the creditors’ losses,
and the process can take a long time.

6. Impact on
Other
Stakeholders
Striking off of a company can have a significant and lasting impact
on stakeholders of the company such as –
Creditors are one group of stakeholders who can be greatly affected
by the striking off of the company. They are individuals or
organizations that are owed money by the company.
Shareholders are another group of stakeholders who can be impacted by the
striking off. They may lose the value of their investment in the company, as
well as any dividends or other returns they were expecting. Shareholders
may also be unable to sell their shares or claim any money back from the
company.
Customers and suppliers can also be impacted by a striking off of the
company. Customers may not be able to claim refunds or compensation for
goods or services they have purchased from the company.

7. Options for other stakeholders to recover
their losses in case of striking off of a
company –
• Creditors can make a claim through the government’s insolvency service, or pursue legal action against the
company’s directors for wrongful trading or misfeasance. Employees may be able to make claims through
the government’s Employment Insurance scheme.
• Shareholders may be able to claim compensation through the government’s shareholder protection scheme.
However, these options may not be able to fully compensate the stakeholders for their losses, and the
process can take a long time.
• It is essential for stakeholders to be aware of the risks of engaging with a company, and to take steps to
protect themselves in the event that the company is struck off.

8. Impact on Employees
• Upon striking off a company, its employees may lose access to benefits like retirement
plans, health insurance, and other perks that were provided by the company. This can
cause additional financial stress and uncertainty for employees, especially if they have
dependents who rely on these benefits.
• Employees may also experience emotional distress and uncertainty as a result of losing
their jobs. This can include feelings of insecurity, anxiety, and depression.
• They may also struggle to find new employment, especially if the company has a poor
reputation or if there is a downturn in the job market.

9. Options for
employees
to recover
their losses
in case of
striking off
of a
company
• Employees may be able to make claims through the
government’s Employment Insurance scheme. They
may also be able to pursue legal action against the
company’s directors for wrongful dismissal or other
employment-related issues. However, these options
may not be able to fully compensate employees for
their losses, and the process can take a long time.
• Striking off a company can bring emotional turmoil
and uncertainty for employees. It is crucial for
employees to be aware of the risks of working for a
company, and to take steps to protect themselves in
the event that the company is struck off.

10. Conclusion
The RoC can screen out non-operating
firms that were formed to siphon off funds
thanks to the strike off provisions. In the
recent last few years, it has accomplished
this. By submitting an application to the
RoC, these regulations also give
management the ability to close entities
that are no longer necessary.
In comparison to other methods of
business dissolution, the process for
removing a company’s name from the
Register kept by the RoC on an application
by the firm itself involves far less time and
money. The liabilities of the members,
directors and managers outlined above do
not end with the dissolution of the
company under this section. Even after
their collapse, they still owe debts.

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