Funds Left explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A company that wants to close under section 248(2) must first "extinguish all its liabilities". That sentence leaves one practical question open: what do you do with cash or assets that are left after the debts are paid? This guide reads the law as per the Companies Act, 2013 in the Ministry's consolidated text (last updated 29 July 2022) and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 as notified in 2016; later amendments should be checked.
Section 248(2) allows a voluntary strike-off application only after extinguishing all liabilities, with a special resolution or consent of seventy-five per cent of members in terms of paid-up share capital. The 2016 Rules ask for a statement of accounts made up to a day not more than thirty days before the application and certified by a Chartered Accountant. Where real value is left, strike off is usually not the route that returns it in an orderly way: use a dividend, a reduction of capital or a buy-back where the Act allows it, or wind up. Tax on any payout: see our income-tax guides.
What the section requires before the application
Section 248(2) says a company may, "after extinguishing all its liabilities", by special resolution or by consent of seventy-five per cent of members in terms of paid-up share capital, apply to the Registrar for removal of its name on all or any of the grounds in section 248(1). If the company is regulated under a special Act, the approval of that regulator must be enclosed. Section 248(3) says the sub-section does not apply to a Section 8 company.
Section 249(1) then bars the application if, at any time in the previous three months, the company:
- changed its name or shifted its registered office from one State to another;
- disposed of property or rights for value, in the way clause (b) describes, for the purpose of gain in the normal course of business;
- engaged in any activity other than what is necessary or expedient to make the application, decide whether to do so, conclude its affairs or comply with a statutory requirement;
- applied to the Tribunal for sanction of a compromise or arrangement not yet finally concluded; or
- is being wound up under Chapter XX of the Act or under the Insolvency and Bankruptcy Code, 2016.
An application made in violation is punishable under section 249(2) with fine up to one lakh rupees, and under section 249(3) it must be withdrawn or is liable to be rejected once the Registrar learns of it. If you want help with the application itself, see our strike-off service.
Who cannot use the rule 4 route
The proviso to rule 3(1) of the 2016 Rules, as notified, lists companies that "shall not be removed ... under this rule and rule 4". In summary: listed companies; companies delisted for non-compliance; vanishing companies; companies where an inspection or investigation is ordered or its prosecutions are pending; companies with notices under the sections the clause names where the reply or report is pending; companies with a prosecution pending in any court; companies with a compounding application pending; companies with public deposits outstanding or in default; companies with charges pending for satisfaction; and companies registered under section 25 of the 1956 Act or section 8 of the 2013 Act. Check the clause in the rule itself before relying on this summary.
What rule 4 asks for
Rule 4(2) requires a no objection certificate from the regulator for companies such as non-banking financial companies, housing finance companies, insurance companies, capital market intermediaries, collective investment schemes, asset management companies and any other company regulated under another law. Rule 4(3) lists the attachments:
| Attachment | What it says |
|---|---|
| Indemnity bond | Form STK 3, notarised, by every director |
| Statement of accounts | Assets and liabilities, made up to a day not more than thirty days before the application, certified by a Chartered Accountant |
| Affidavit | Form STK 4, by every director |
| Resolution or consent | Special resolution certified by each director, or consent of seventy-five per cent of members in terms of paid-up capital as on the date of application |
| Litigation statement | Pending litigation, if any, involving the company |
Both the bond and the affidavit say the company has no assets and liabilities as on the date. That is the practical reason to return or deal with surplus before you apply: a company holding unspent cash cannot honestly sign those statements. Rule 7(2) adds that the Registrar intimates the income-tax, central excise and service-tax authorities and seeks objections within thirty days; if none arrive within thirty days, it is presumed they have no objection.
Routes for returning money
| Route | Provision | Key conditions as printed |
|---|---|---|
| Dividend | s.123(1) | Only out of profits (current year, or earlier years' profits remaining undistributed), after providing for depreciation under Schedule II, and not from reserves other than the defined distributable reserves; earlier losses and unprovided depreciation must be set off first |
| Reduction of share capital | s.66 | Special resolution and confirmation by the Tribunal; creditors' debts discharged, determined, secured or consent obtained; no reduction if in arrears on deposits; certified copy of the order to the Registrar within thirty days of receiving it |
| Buy-back | s.68 | Authorised by the articles; special resolution (or Board resolution up to the proviso's ten per cent); within twenty-five per cent of the aggregate of paid-up capital and the reserves the section names; debt-to-capital ratio test; fully paid-up shares; completed within one year; declaration of solvency; and no fresh offer within one year of the last |
| Winding up | Chapter XX of the Act, or the Insolvency and Bankruptcy Code, 2016 for voluntary liquidation | A court or code process with a liquidator, outside this article |
For the buy-back detail see our buy-back guide. The Insolvency and Bankruptcy Code route is named here only; this article does not set out its text. A buy-back is also the subject of the buy-back of shares service.
Strike off, voluntary liquidation or reduction: which one
| Question | Strike off (s.248(2)) | Reduction (s.66) | Winding up |
|---|---|---|---|
| Aim | Remove name, company dissolved | Reduce capital, company continues | End the company through a liquidator |
| Surplus value | Must be dealt with before the statements are signed | Returned or cancelled under the order | Distributed through the winding-up process |
| Who approves | Registrar after public notice | Tribunal | As the process requires |
| Directors' exposure | Liability continues under s.248(7); bond and affidavit | Not applicable | Process-based |
| Fit | Dormant company with no assets or liabilities | A continuing company with surplus capital | A company with real assets, disputes or creditors |
Our guide on voluntary strike off versus winding up walks through the contrast in plain terms.
Worked example (invented names)
Sigma Services Private Limited has stopped trading. After paying all creditors, it holds Rs 3,00,000 in the bank and has earlier years' undistributed profits of Rs 5,00,000. Options: it can declare a dividend of Rs 3,00,000 under section 123(1) out of the undistributed profits, because the amount is within them (3,00,000 is less than 5,00,000) and depreciation and losses are dealt with. After payment its bank balance is nil. Only then do the directors sign the statement of accounts and the affidavit. Had the money come from paid-up capital that nobody needed, section 66 would have been the route, with the Tribunal.
Common mistakes
- Applying while the bank account still holds money, then signing "no assets" statements.
- Carrying out a property disposal in the three months before the application, which section 249(1)(b) can catch.
- Paying a dividend out of capital or from unrealised gains.
- Ignoring the public-deposits and pending-charge bars in rule 3(1).
- Assuming the Registrar will not look at tax dues; rule 7(2) sends notice to the tax authorities.
Need help closing a company?
If you are closing a company and are not sure whether the balance sheet is clean enough for strike off, we can review the accounts, prepare the resolution and the forms, and tell you if a different route fits better. See our strike-off service for companies.
Key takeaways
- Section 248(2) needs all liabilities extinguished first.
- The statement of accounts must be made up to a day not more than thirty days before the application.
- The bond and the affidavit both say the company has no assets and liabilities.
- Deal with surplus through dividend, reduction or buy-back where they are available.
- Section 249(1) bars an application after some recent events.
- Winding up suits a company with real assets or disputes.
Read next
- Strike Off a Company Voluntarily: STK-2 Process
- Voluntary Strike Off vs Winding Up
- Closing a Section 8 Company
- Director Liability After a Company Is Struck Off
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.