Defunct Company or Inactive Companies-Fast Track Exit Scheme/Strike Off Companies Under Companies Act 2013 By CA Dhaval Doshi


Dear Professional Colleague,

Many people who have incorporated companies but are not doing any business and thinking of closing down the companies because of the increased compliances and resultant costs involved.

Earlier Companies strike off used to happen as per Section 560 of Companies  Act, 1956.

Ministry of Corporate Affairs (MCA) issued a Notification dated 26th December, 2016 notifying Section 248, 249, 250, 251 and 252 of Companies Act, 2013 (Chapter XVIII). This chapter deals with Removal of Names of Companies from Register of Companies. MCA has appointed 26.12.2016 as effective date for Section 248 to 252.

I ) Method for Striking off the Company

a) Registrar removes the company on suo motto

b) Application made by company for removal of name / Strike off

II) Removal of the Company / Strike off Company by Registrar : ( As per Section 248 )
 
- If company has not commenced its Business since Incorporation and 1 Year has passed;
- If Company is not carrying on any business or operation for a period of two immediately preceding financial years  &  Company has not made any application within such period for obtaining the status of a dormant company under section 455 as per companies Act 2013.
 
III) Procedure for Removal of Company :

a) By Registrar of Company :

  • If Company meets the conditions made in above Point no. II then registrar issues notice.
  • Further, company after extinguishing all its liabilities and having taken authorisation from the member by way of Special Resolution or obtained consent of 75% of its member of the company in terms of paid up share capital as on the date of application for removal of name of the company.
  • Registrar on receipt of such application cause a public notice and which shall be  published in the official gazette for information of general public.
  • The Registrar shall also provide an opportunity of representation to the company and its directors. However, the representation along with the relevant documents have to be submitted within a period of 30 days from the date of notice.
  • At the expiry of the time mentioned in Notice; the registrar may; strike off the name of company from the Register of Companies and on the publication in the Official Gazette, the company stands dissolved.
b) Application made by Company for Removal of Name / Strike off :
 
         Obligation by Company :
  • Call Board Meeting and give authority to director to file the application to ROC;
  • After making application, Company shall extinguish all its liabilities;
  • Company holds General Meeting of member of Company.
  • The Company shall also obtain the consent by way of Special resolution from its members or have to obtain the consent of 75% of the members of the Company in terms of the paid up share capital as on the date of application for removal of its name from the Register of Companies
  • After Passing Special resolution, Company has to file Form MGT-14 within 30 days
         Application made by Company to ROC :
  • File Form No. STK -2 along with Filling Fees Rs. 5000/- with attachment of following documents :
a) Duly Notarised Indemnity Bond in Form No. STK - 3 (by every director)
b) An Affidavit in Form No. STK - 4 ( by every Director of the company)
c) A Statement of accounts certified by the Chartered Accountants
d) A copy of Resolution filed by director of the company
e) Statement regarding pending litigation (if any)

However following type of  companies shall take NOC from the appropriate regulatory authority and attach it  with Form No. STK - 2 
  • Companies which have conducted or have been conducting non-banking financial & investment activities
  • Housing finance companies
  • Insurance companies
  • Companies in the business of capital market intermediaries
  • Companies engaged in collective investment schemes
  • Asset management companies
  • Any other company which is regulated under any other law for the time being in force.
Issue Notice in Form STK - 6:
 
On Receipt of such application in Form STK-2 , Registrar of Company issues public notice in Form No. STK - 6. ROC shall simultaneously intimate to the various authority for having any objection against the company (if any).
 
Notice for Striking off Company STK - 7:
 
If there is no Objection received by the ROC , ROC shall issue  Form STK - 7 and get it published in official gazette and place its copy in the official website of MCA.

IV) Companies which can not get strike off under this provision:
  1. Listed companies
  1. Companies that have been delisted due to non-compliance of listing regulations/listing agreement or any other statutory laws.
  1. Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the court.
  1. Vanishing Companies
  1. Companies, where notices under Section 234 of the Companies Act, 1956 (1 of 1956) or Section 206 or Section 207 of the Act have been issued by the Registrar or inspector and reply thereto, is pending or report under Section 208 has not yet been submitted or follow-up of instructions on report under Section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court.
  1. Companies against which any prosecution for an offence is pending in any court.
  1. Companies whose application for compounding is pending before the competent authority for compounding the offences committed by the Company or any of its officers in default.
  1. Companies which have accepted public deposits which are either outstanding or the Company is in default in repayment of the same.
  1. Company Registered U/s 8 ( Section 25 as per Companies Act 1956).
  1. Companies having charges which are pending for satisfaction.
An application under sub - section (2) of Section 248 on behalf of a company shall not be made if, at an time in Previous 3 Months (As per Section 249 ):
  • If Company has changed its name or shifted registered office from one state to another
  • Is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy code, 2016.
  • has made an application to the tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded
  • has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business.
  • has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement.
  • If any company make application in violation of Section 248, it shall be punishable with Fine Rs. 1 Lacs   
V) Effect of Company Notified as Dissolved ( Section 250 )
 
Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section ceases to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

VI ) Fraudulent Application for Removal of Name ( Section 251 )

If any wrong or False statement of application filed by the company for the object of evading the liabilities of the company or with the intention to deceive the creditors or to defraud any other persons, the persons in charge of the management of the company shall, notwithstanding that the company has been notified as dissolved

(a) be jointly and severally liable to any person or persons who had incurred loss or damage as a result of the company being notified as dissolved, and

(b) be punishable for fraud in the manner as provided in Section 447

(2)Without prejudice to the provisions contained in sub-section (1), the Registrar may also recommend prosecution of the persons responsible for the filing of an application under sub-section (2) of section 248.

VII )  Appeal to Tribunal ( Section 252 )

Any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies.

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