How to close an Indian subsidiary: strike-off, voluntary liquidation and NCLT winding up
Most dormant foreign-owned subsidiaries close through strike-off under Section 248, filed as Form STK-2, which takes three to six months once every liability is cleared and every filing is current. Where the entity still holds assets or capital that needs to be repatriated to the foreign parent, voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code is the correct route instead — it runs through the National Company Law Tribunal and is the only mechanism that formally distributes capital, not just profit, to shareholders abroad.
| Routes available | Strike-off (STK-2), voluntary liquidation (IBC s.59), compulsory winding up (rare, court-ordered) |
|---|---|
| Strike-off timeline | 3–6 months via C-PACE, once liabilities are nil and filings are current |
| Voluntary liquidation timeline | 90 days from commencement where no creditor claims are filed; 270 days where claims are approved. Often longer in practice. |
| Governing law | Companies Act 2013, s.248–252 (strike-off); Insolvency and Bankruptcy Code 2016, s.59 (voluntary liquidation) |
| Regulators | Registrar of Companies, NCLT, Reserve Bank of India, Income Tax Department |
| Strike-off government fee | ₹10,000 (Form STK-2) |
| Foreign shareholder repatriation | Requires AD bank remittance under FEMA, Form 15CA/15CB |
| Travel to India required | No |
What are the three ways to close an Indian subsidiary?
Indian law provides three exit routes, and they are not interchangeable. Which one applies turns on whether the company has assets or capital still inside it, whether it has creditors, and whether it has been trading at all.
| Situation | Route | Forum |
|---|---|---|
| Dormant subsidiary, nil assets, nil liabilities, no pending litigation | Strike-off under s.248(2) | Registrar of Companies, via C-PACE |
| Solvent entity holding cash, investments or share capital to distribute to the foreign parent | Voluntary liquidation under IBC s.59 | National Company Law Tribunal |
| Company unable to pay its debts, or being wound up on a creditor's petition | Compulsory winding up under s.271–272 | National Company Law Tribunal |
| Registrar has already issued an STK-5 notice for non-filing | Respond within 30 days or the ROC strikes the company off directly | Registrar of Companies |
The distinction most foreign parents miss is the first row versus the second. Strike-off is fast and cheap, but it is built for companies with nothing left inside them. If the Indian entity still holds the original share capital, retained profits, or a bank balance the parent wants back, strike-off is the wrong tool — see the repatriation section below.
Is strike-off the right route for a dormant subsidiary?
Strike-off under Section 248(2) of the Companies Act, 2013 is available to a company that has not commenced business within one year of incorporation, or that has not carried on business for the two immediately preceding financial years. Both conditions require the company to hold no assets and no liabilities at the time of filing, and to have no pending litigation.
This is the route most lean foreign-owned entities use — a holding vehicle that never traded, or an engineering centre that closed down with everything already wound out. It is an administrative removal from the Register of Companies, not a court process, and it is processed through the Centre for Processing Accelerated Corporate Exit.
"Nil assets and nil liabilities" is stricter than it sounds. Share capital sitting in the bank account counts as an asset. A subsidiary cannot simply file STK-2 while still holding the parent's original investment — that capital has to be distributed or otherwise cleared first, and a straightforward dividend does not touch share capital, only accumulated profit. This is the single most common reason a foreign parent's strike-off application stalls.
How does the STK-2 strike-off process work, step by step?
Every overdue Form AOC-4 and Form MGT-7 must be filed before the system accepts an STK-2 application. GST, TDS and Provident Fund dues are settled, and the bank account is closed.
The board resolves to apply for strike-off, and shareholders holding at least 75% by value approve it through a special resolution or written consent.
A statement of accounts not older than 30 days from the application, certified by a Chartered Accountant, is filed as Form STK-8 confirming the nil asset and nil liability position.
The special resolution is filed as Form MGT-14, followed by Form STK-2 itself with the ₹10,000 government fee, through the Centre for Processing Accelerated Corporate Exit.
The Registrar issues a public notice inviting objections. Where none are raised, the company's name is struck off and the closure is published in Form STK-7 in the Official Gazette, at which point the company is legally dissolved.
Directors remain personally liable for pre-closure dues even after strike-off. The process ends the company's legal existence; it does not extinguish claims that arose while it was operating.
When is voluntary liquidation the correct route instead?
Voluntary liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 is available to a solvent company — one that has not defaulted and can pay every debt in full. It replaced the old winding-up-by-court route for solvent companies when the IBC came into force, and it runs through the National Company Law Tribunal rather than the Registrar.
This is the route for a foreign-owned subsidiary that is closing down cleanly but still holds value — cash, investments, or the original share capital — that needs to reach the parent company abroad. A liquidator is appointed, realises and distributes the company's assets in an orderly sequence, and the process ends with a formal NCLT dissolution order rather than a Registrar notice.
How does voluntary liquidation work, step by step?
A majority of directors declare, by affidavit and supported by audited financial statements, that the company can pay its debts in full within the liquidation period and is not being wound up to defraud anyone.
Within four weeks of the solvency declaration, shareholders approve the liquidation and appoint an insolvency professional as liquidator. Where the company has creditors, approval from those holding two-thirds of the debt is required within seven days.
The liquidation commencement date is fixed, the company ceases business except as needed to wind up, and the liquidator publishes a public announcement inviting stakeholder claims.
The liquidator collects amounts owed to the company, settles verified claims in the statutory order of priority, and distributes what remains to shareholders — including, for a wholly owned subsidiary, the foreign parent.
Where no creditor has filed a claim, the final report is due within 90 days of the liquidation commencement date; where creditors' claims were approved, within 270 days. The application goes to the NCLT together with the final report.
The Tribunal reviews the liquidator's report and, where satisfied, orders the company dissolved. The order is filed with the Registrar, and the company ceases to exist from that date.
The 90- and 270-day figures are the statutory targets, not guarantees. IBBI's own data shows a substantial share of voluntary liquidations run well past a year, and the regulator has identified delayed foreign remittances and pending tax refunds as recurring causes — both of which are exactly the friction points a foreign-owned subsidiary is most likely to hit.
When does compulsory winding up by the NCLT apply?
Compulsory winding up under Sections 271 and 272 of the Companies Act, 2013 is a court-ordered process, typically initiated on a creditor's petition where a company cannot pay its debts, or on grounds such as fraud or conduct prejudicial to the public interest. It is comparatively rare for a foreign-owned subsidiary, because most enter this position through business failure rather than a deliberate decision to exit — and by that stage the company is usually insolvent rather than solvent, which pulls the case toward the Corporate Insolvency Resolution Process rather than a straightforward winding-up petition.
If your subsidiary is heading toward insolvency rather than a planned exit, that is a distinct process with its own timelines and creditor dynamics, and the guidance on this page does not cover it.
How do you repatriate capital to the foreign parent on closure?
Any remittance abroad on winding up is a foreign exchange transaction and falls under FEMA, regardless of which closure route is used. The authorised dealer bank handling the remittance requires two things before it will process the transfer: a Chartered Accountant's certificate in Form 15CB confirming the nature of the remittance and that applicable tax has been accounted for, and Form 15CA filed by the remitter on the income tax portal.
This is where the distinction between strike-off and voluntary liquidation matters commercially, not just procedurally. Strike-off has no built-in mechanism for distributing the company's remaining capital to shareholders — by the time STK-2 is filed, the company is required to already hold nil assets, so any capital return has to happen beforehand through a separate route such as a capital reduction under Section 66 of the Companies Act, which itself requires NCLT approval. Voluntary liquidation, by contrast, is built around exactly this: the liquidator's statutory distribution waterfall is the formal, FEMA-compliant mechanism for returning the entity's full value, including original share capital, to the foreign parent.
Foreign parents commonly assume any leftover cash can simply be wired out once the company stops trading. It cannot, without either a capital reduction or a formal liquidation process behind it. Decide the exit route based on what still needs to leave the company, not on which route sounds administratively simpler.
What tax and regulatory clearances are needed before closing?
| Item | Action |
|---|---|
| Statutory audit | Completed through the final trading period; audited accounts support the solvency declaration or the STK-8 statement |
| Income tax return | Filed for the final period, including any transfer pricing disclosure if intercompany transactions occurred |
| GST registration | Application for cancellation, with final return filed |
| Tax deducted at source | Final deposit made and return filed; Form 16/16A issued to any remaining employees |
| Provident Fund and Employees' State Insurance | Final contributions deposited; establishment closure intimated |
| Import Export Code | Surrendered with DGFT if one was held |
| Bank accounts | Closed before or as part of the STK-8 statement; retained through the liquidation process where liquidation is the route |
| Foreign Liabilities and Assets return | Final FLA return filed with the Reserve Bank of India reflecting the closure |
→ Statutory audit and ROC compliance · Monthly accounting and tax
The mistakes we see most often
1. Filing STK-2 while share capital is still on the balance sheet
The application is rejected or queried because the company does not genuinely have nil assets. The capital needs a separate exit route before strike-off can proceed — most often a capital reduction, which itself needs NCLT approval and adds months to a process the parent expected to be quick.
2. Choosing strike-off because it sounds simpler, then discovering it cannot return capital
Strike-off is administratively lighter than liquidation, so parents default to it without checking whether the entity still holds value to distribute. Decide the route by what needs to leave the company, not by which process looks easier on paper.
3. Letting annual filings lapse instead of closing formally
A dormant subsidiary that simply stops filing, rather than going through strike-off, risks the Registrar issuing an STK-5 notice and striking it off under Section 248(1) rather than 248(2) — a distinction that carries a five-year director disqualification risk under Section 164(2)(a) if annual returns were missed for three consecutive years. Filing STK-2 voluntarily avoids this entirely.
4. Not accounting for intellectual property before dissolution
Trademarks, patents and other IP registered in the Indian company's name become bona vacantia — ownerless property that vests in the government — once the company is dissolved. Any IP the group wants to keep must be assigned to another entity before the strike-off or the liquidation dissolution order takes effect, not after.
5. Underestimating how long remittance can take
IBBI's own published data on voluntary liquidations shows delayed foreign remittances as one of the most common reasons cases run past their statutory timeline. Start the Form 15CA/15CB process and confirm the AD bank's documentation requirements early, rather than treating it as a final administrative step.
When you need professional help
Deciding which route applies, and gathering the board minutes, resolutions and accounts that support it, is work most finance teams can start themselves with a clear checklist. Where it becomes genuinely technical is in three places: certifying the nil-asset position for STK-8 in a way the Registrar will accept without query, structuring a capital reduction or liquidation waterfall so the parent's original investment is returned cleanly, and coordinating the Form 15CA/15CB certification with the authorised dealer bank so the remittance is not held up at the final step.
A liquidator in a voluntary liquidation must be an insolvency professional registered with the IBBI, independent of the company and not its statutory auditor of the preceding five years — this is a role your existing accountant cannot simply take on.
Frequently asked questions
What is the difference between strike-off and voluntary liquidation?
Strike-off under Section 248 is an administrative removal from the Register of Companies for a dormant entity with nil assets and nil liabilities. Voluntary liquidation under Section 59 of the IBC is a court-supervised process through the NCLT for a solvent company that still holds assets or capital to distribute to shareholders before it is dissolved.
How long does it take to close an Indian subsidiary?
Strike-off typically takes three to six months once liabilities are cleared and filings are current, processed through C-PACE. Voluntary liquidation has a statutory target of 90 days where no creditor claims are filed, or 270 days where claims are approved, though a meaningful share of cases run longer, often due to delayed foreign remittances.
Can we simply wire out the remaining cash and stop filing?
No. Any outbound remittance is a foreign exchange transaction under FEMA and requires a Chartered Accountant's certificate in Form 15CB and a Form 15CA filing before the bank will process it. Stopping filings without formally closing the company also risks a Registrar-initiated strike-off and director disqualification.
Does strike-off return our original share capital to us?
Not directly. Strike-off requires the company to hold nil assets at the point of filing, so share capital has to be dealt with beforehand — typically through a capital reduction, which needs NCLT approval. Voluntary liquidation is built to do this directly, through the liquidator's statutory distribution to shareholders.
What happens to trademarks or IP registered in the Indian company's name?
They become bona vacantia — ownerless property vesting in the government — once the company is dissolved. Any IP the group wants to retain must be formally assigned to another entity before strike-off or the liquidation dissolution order takes effect.
Are directors still liable after the company is struck off?
Yes. Strike-off ends the company's legal existence but does not extinguish liabilities that arose while it was operating. Directors and members remain answerable for pre-closure dues, and the company can be restored by the NCLT under Section 252 if a claim later surfaces.
Who can act as liquidator in a voluntary liquidation?
An insolvency professional registered with the Insolvency and Bankruptcy Board of India, who is independent of the company and has not served as its auditor in the preceding five years. The liquidator is appointed by the shareholders, or with creditor approval where the company has creditors.
Do we need to cancel our GST registration separately?
Yes. GST cancellation is a separate application with its own final return, and it should be completed as part of the pre-closure clearances regardless of which exit route is used — it is not automatically triggered by strike-off or by the NCLT dissolution order.
What if the Registrar has already sent an STK-5 notice?
An STK-5 notice gives 30 days to file a written objection with supporting evidence. If no objection is filed, the Registrar proceeds to strike the company off under Section 248(1) directly, which carries a higher director disqualification risk than a voluntary filing under Section 248(2).
Is compulsory winding up relevant to a solvent subsidiary that is simply closing down?
Rarely. Compulsory winding up under the Companies Act is a court-ordered process, typically triggered by a creditor's petition or an inability to pay debts. A solvent subsidiary closing by choice uses strike-off or voluntary liquidation instead; compulsory winding up applies to companies in financial distress.
Discuss closing your Indian subsidiary with a chartered accountant
A senior consultation covers which exit route fits your entity's asset position, the repatriation mechanism for any remaining capital, and a realistic timeline for the clearances involved.
Request a senior consultation- Source: Ministry of Corporate Affairs — Companies Act, 2013, s.248–252; Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
- Source: India Code — Insolvency and Bankruptcy Code, 2016, s.59
- Source: Insolvency and Bankruptcy Board of India — Voluntary Liquidation Process Regulations, 2017, and Discussion Paper on Streamlining the Voluntary Liquidation Process
- Source: Income Tax Department — Form 15CA/15CB
- Source: Reserve Bank of India — FEMA remittance and reporting requirements
Rohit Lohade is a Chartered Accountant and India entry specialist at KRPR & Associates. With 15+ years of experience, he has assisted 250+ international companies — including global brands — incorporate and operate in India. He currently serves as Resident Director for multiple foreign-owned Indian subsidiaries.