Can I close a company with pending loans or unpaid liabilities?

Last updated 22 May 2026

Why zero liabilities is a hard requirement for STK-2

Section 248(2) of the Companies Act 2013 permits a company to apply for voluntary strike-off only if it has not commenced business, or has ceased all business operations. The MCA interprets "ceased business" to mean the company has wound down all its affairs — including settling every rupee it owes. The STK-2 form itself requires directors to attach a statement of accounts (dated not earlier than 30 days before the application) certified by a Chartered Accountant showing nil assets and nil liabilities.

If the statement shows any liability — even a small one — the ROC will reject the application. There is no partial clearance or partial approval. The company must reach a clean zero before the process can begin.

What counts as a liability

Directors often underestimate how broadly the ROC interprets "liabilities." Here is every category you must clear before filing STK-2:

Bank loans and overdrafts

Any term loan, working capital facility, cash credit, or overdraft sanctioned in the company's name must be fully repaid. The bank must issue a No Objection Certificate (NOC) or a loan closure letter. Even a loan that is technically within its repayment schedule — not yet due — counts as an outstanding liability. You cannot file STK-2 while a loan account remains open.

Vendor dues and trade payables

Outstanding invoices from suppliers, service providers, and contractors are liabilities on the balance sheet. All trade payables must be settled and confirmed. If a vendor cannot be traced or refuses to issue a receipt, a CA can help structure a proper settlement record. Partial payment arrangements are not acceptable — the liability must reach zero.

Employee salary arrears

Any unpaid salaries, bonus, leave encashment, or reimbursements owed to past or present employees are liabilities. These must be paid out before closure. If employees cannot be located, the amount should be transferred to an escrow or held in a separate trust account — consult a CA for the correct treatment.

GST and income tax dues

Outstanding GST (including interest and penalties on late returns), advance tax shortfall, self-assessment tax dues, and any demand raised by the Income Tax department must all be cleared. Directors should obtain a tax clearance certificate or a no-dues confirmation from the relevant tax authority. In practice, the ROC checks MCA21 records and can identify whether tax filings are current — pending filings combined with apparent dues are a red flag that delays approval.

Statutory dues: PF and ESI

If the company ever employed workers covered under the Employees' Provident Fund (EPF) or Employees' State Insurance (ESI) schemes, all contribution arrears — both employer and employee share — must be deposited. EPFO and ESIC each issue a clearance certificate once dues are settled. Without these certificates, the ROC considers PF and ESI liabilities outstanding even if the amounts were never formally assessed.

Pending TDS deposits

TDS deducted but not deposited with the government is both a statutory offence and a liability. All TDS challans must be paid up to date, and TDS returns must be filed for every quarter in which deductions were made. Outstanding TDS interest and late-filing fees must also be cleared before the company's tax position can be considered clean.

What happens if you file with hidden liabilities

Directors who file STK-2 while concealing liabilities are taking a serious legal risk. If a creditor or regulator later discovers that liabilities existed at the time of strike-off, the struck-off company can be restored to the register — and directors can be held personally liable for those debts. The indemnity bond filed as part of STK-2 (on stamp paper, signed by all directors) explicitly confirms that all liabilities have been settled and that directors accept personal liability for any claim that surfaces after strike-off. This bond has legal force. Courts have held directors personally liable under similar indemnity undertakings.

What if a bank loan is written off by the lender?

A "write-off" by a bank is an accounting adjustment on the bank's books — it does not legally discharge the borrower's obligation. The debt technically still exists as a claim against the company even after a write-off. If a company's loan has been written off but not formally settled via a One-Time Settlement (OTS) or a formal discharge letter from the bank, the liability is still legally outstanding. Directors should obtain a written confirmation from the bank — either an OTS settlement letter or a no-dues certificate — before treating the loan as cleared for STK-2 purposes.

The indemnity bond directors sign

Every director of the applicant company must sign an indemnity bond as part of the STK-2 package. The bond is executed on non-judicial stamp paper (typically Rs 100 to Rs 500 depending on the state) and must be notarised. The bond declares that the company has no pending liabilities, that all creditors have been paid, and that the directors will indemnify any person who suffers loss because of an undisclosed liability that surfaces after strike-off.

This is not a formality. It is a personal guarantee from every director. If you sign this bond knowing there are hidden liabilities, you are personally accepting the risk of being sued for those amounts later — with no corporate liability shield to protect you, since the company will no longer exist.

Step-by-step checklist before filing STK-2

Before engaging a CA to file STK-2, go through this liability clearance checklist: obtain bank loan closure letters or NOCs for every credit facility; settle all trade payables and collect receipts; pay all employee dues including final settlement; clear all GST and income tax dues and obtain no-dues certificates; deposit all PF and ESI arrears and obtain EPFO/ESIC clearance letters; deposit all pending TDS and file all pending TDS returns; have a CA prepare and certify a statement of accounts showing nil liabilities dated within 30 days of the planned filing date. Only then should the STK-2 application be prepared.

This article is for general information only. For your specific situation, consult a practicing CA.