Closing an Indian Subsidiary: Strike-Off, Liquidation or Merger (2026)

By Nagavarapu Sudheer, M.Com., F.C.S., L.L.B., Partner, A2 Consultants

Not every Indian entity a foreign group creates is meant to last forever. A project company finishes its work, two subsidiaries end up doing the same thing, or a global restructuring removes India from a product line. Leaving an Indian entity running "just in case" is expensive: it still needs an audit, annual filings, tax returns and resident directors. This guide compares the three main ways to close or consolidate an Indian subsidiary and the steps foreign parents often miss.

Option 1: Strike-off (Form STK-2)

Strike-off under section 248 of the Companies Act, 2013 is the simplest route for a company that has wound down its activities.

• Eligibility: the company has not carried on business for the two preceding financial years (or never started within a year of incorporation), and it has no assets or liabilities left.
• Approvals: a special resolution, or consent of members holding 75% of the paid-up capital.
• Documents: indemnity bonds and affidavits from every director, a statement of accounts showing nil assets and liabilities certified by a chartered accountant, and evidence that bank accounts are closed. Foreign directors' documents must be notarised and apostilled.
• Process: Form STK-2 (government fee Rs 10,000) is processed centrally by the Centre for Processing Accelerated Corporate Exit (C-PACE), which publishes a public notice and invites objections for 30 days before striking the name off.
• Timeline: typically three to six months.

The catch: strike-off does not extinguish liabilities. Directors remain liable, and the company can be restored by the tribunal for up to 20 years if a creditor or the tax department applies. All money must be paid out to the parent before filing, so surplus has to be extracted first.

Option 2: Voluntary liquidation under the IBC

A solvent company with assets, contracts or tax history it wants to close formally can use voluntary liquidation under section 59 of the Insolvency and Bankruptcy Code, 2016.

• Directors make a declaration of solvency; shareholders pass a special resolution within four weeks; if the company has debt, creditors representing two-thirds in value approve.
• An insolvency professional is appointed as liquidator, invites claims, realises assets, pays creditors and distributes the surplus to shareholders.
• The liquidator applies to the NCLT for a dissolution order once the process is complete.
• Timeline: the regulations set completion targets (90 days where there are no creditors, 270 days otherwise), but with tax clearances and the tribunal's order, nine to fifteen months end-to-end is realistic.

It costs more than strike-off, but it gives a clean, court-ordered end, which matters for companies with a tax history, employees or past contracts.

Option 3: Merge it instead of closing it

Where the group has another Indian entity, merging the unwanted company into it is often better than closing it: assets, licences, tax losses (subject to conditions) and employees move across, and there is no liquidation.

Since the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (notified on 4 September 2025), the fast-track merger route under section 233 is available to more group combinations. It now covers, among others, unlisted companies with outstanding borrowings of up to Rs 200 crore each, holding and subsidiary companies where the transferor is unlisted, fellow subsidiaries of the same holding company, and a foreign holding company merging into its Indian wholly-owned subsidiary. Fast-track mergers are approved by the Regional Director instead of the NCLT, which usually shortens the timeline considerably. Approval of 90% of shareholders and nine-tenths of creditors in value is required, and cross-border mergers still need the RBI framework.

Tax and FEMA steps the parent should plan

• Getting money out: before strike-off, surplus must be repatriated through dividends, buyback or capital reduction. In liquidation, the distribution to the parent is taxed partly as a deemed dividend (to the extent of accumulated profits) and the balance as capital gains, subject to treaty relief. See our guide on repatriating profits from India.
• Remittance: payments to the parent go through the AD bank with Form 15CA and, where required, a chartered accountant's certificate in Form 15CB.
• Tax: file all pending returns, close assessments where possible, and settle transfer pricing positions on intercompany balances before starting.
• GST: file final returns and cancel the GST registration; reverse input tax credit on closing stock and capital goods where required.
• FEMA: confirm that all FC-GPR and FC-TRS filings are complete, file the final FLA return, and give the AD bank the dissolution order so the RBI records are updated. Close any ECB with the final ECB-2 return.
• Employees and contracts: settle gratuity, leave encashment and provident fund, terminate leases and notify regulators and licensing authorities.

Which route fits?

Talk to A2 Consultants

A2 Consultants manages closures and group restructurings for foreign-owned Indian companies, from repatriation planning and tax clearance to strike-off, liquidation filings and fast-track mergers. The first conversation is free: book a 30-minute call at www.a2consultants.in or write to sudheer@a2consultants.in.