What is the difference between striking off and winding up a company in India?

Last updated 22 May 2026

Two fundamentally different mechanisms

When founders ask about "closing a company," they are usually referring to one of two legally distinct processes. Strike off is an administrative removal from the MCA register — the company is dissolved by the ROC publishing a notice in the Official Gazette. Winding up is a legal dissolution process where the company's affairs are formally wound up, its assets realised, debts paid, and surplus (if any) distributed to shareholders before the company ceases to exist.

Understanding which applies to your situation is the first step, because applying for the wrong mechanism wastes time, money, and may expose directors to unnecessary legal risk.

Strike off under Section 248 — who it is for

Strike off under Section 248 of the Companies Act 2013 is designed for companies that are genuinely defunct — either they never started business, or they ceased operations at least two years ago and have no outstanding liabilities. It is a voluntary process initiated by the company's directors. The government filing fee is low (Rs 10,000 for most small companies), there is no court involvement, and the process takes three to six months from application to gazette notification.

Section 248 also provides for ROC-initiated strike off — the ROC can suo motu strike off companies that have not filed annual returns for two or more consecutive years. This is involuntary from the company's perspective and is covered in a separate article in this series.

The critical eligibility condition for voluntary strike off is a zero-liability position. The company must have no pending statutory dues (GST, TDS, advance tax), no outstanding bank loans, no unpaid vendor dues, and no pending litigation. Directors sign an indemnity bond at the time of filing, making them personally liable for any undisclosed liabilities that surface after strike off.

Winding up — who it is for

Winding up applies when a company cannot simply be removed from the register — typically because it has assets to be realised, debts to be paid, or is subject to disputes. There are two main routes under Indian law.

Voluntary winding up (also called Members' Voluntary Liquidation or MVL when the company is solvent) is initiated by shareholders and the board. A liquidator is appointed, the company's assets are realised, all creditors are paid in the statutory order of priority, and any remaining surplus is distributed to shareholders. This process is governed by the Companies Act 2013 and typically takes one to three years depending on the complexity of the company's affairs.

Compulsory winding up is ordered by the National Company Law Tribunal (NCLT). This is typically triggered when a company is unable to pay its debts (insolvency), when it is carrying on fraudulent activity, or when winding up is just and equitable. The NCLT appoints an official liquidator, and the process is governed by the Insolvency and Bankruptcy Code 2016 for insolvent companies.

Cost comparison

Strike off costs are predictable and low. The MCA filing fee is Rs 10,000 for most small companies. Add to this the CA fees for preparing the certified statement of accounts, notarisation of the indemnity bond and affidavit (typically Rs 500 to Rs 2,000 depending on state), and any professional fees for handling the process. Total cost for a clean strike off is typically Rs 15,000 to Rs 50,000 depending on the CA firm you engage.

Winding up is substantially more expensive. A liquidator charges professional fees (regulated under the Insolvency and Bankruptcy Board of India regulations for insolvency proceedings, or negotiated for solvent MVL). Legal fees, NCLT filing costs (for compulsory winding up), court appearances, and the time cost of directors — all add up. A straightforward MVL for a small company typically costs Rs 1 lakh to Rs 5 lakh. NCLT-led winding up can cost far more and take several years.

Timeline comparison

Strike off via STK-2: three to six months for a clean application. Voluntary winding up (MVL): one to three years. Compulsory winding up under NCLT: two to five years or more, depending on the complexity of claims and asset realisation.

Who initiates each process

Strike off is initiated by the company's directors by filing Form STK-2. Voluntary winding up is initiated by shareholders passing a special resolution and the board appointing a liquidator. Compulsory winding up is initiated by a petition to the NCLT — this can be filed by a creditor, a shareholder, the ROC, or in some cases the Central Government.

What happens to company assets

In a strike off, the company must have already disposed of all assets or confirmed there are none remaining. Any property belonging to a struck-off company legally vests in the Crown (effectively the Central Government) under Section 250 of the Companies Act. This is why directors must ensure the company has no assets left before applying — any inadvertently retained assets become government property.

In winding up, the liquidator's job is specifically to realise assets and use the proceeds to pay creditors. Shareholders receive the residual amount (if any) only after all creditors are paid. The statutory order of priority is: liquidator's costs first, then secured creditors, then workmen's dues, then government dues, then unsecured creditors, and finally shareholders.

The right choice for most inactive Indian startups

The vast majority of founders who reach out to Shunya's CA team are running companies that simply stopped operating — no revenue, no employees, no active contracts. If these companies also have no outstanding debts (or can clear the debts before filing), strike off is the correct and only route they need. Winding up is reserved for situations involving active assets, creditor disputes, or court-ordered dissolution. Do not let the complexity of winding up deter you from taking action — if your company is genuinely clean, strike off is straightforward.

Summary table

Strike off: Section 248, voluntary by directors, zero liabilities required, no court involvement, three to six months, low cost. Winding up: Companies Act / IBC, involves liquidator and/or NCLT, applies when there are assets or debts, one to five-plus years, moderate to high cost. For dormant or inactive startups — strike off. For companies with assets, debts, or disputes — winding up.

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