Uncover the process of reviving struck-off companies, including grounds, appeals, and NCLT procedures. Ensure your company's revival aligns with the Companies Act.
In the realm of corporate governance, the strike-off of a company’s name represents a significant event. It signifies either the temporary closure of operations or the removal of a company’s name from the list of registered entities with the Registrar of Companies (ROC).
Whether this strike-off is voluntary or compelled by the ROC, it brings about substantial legal consequences.
In this comprehensive guide, we will delve into the intricacies of reviving struck-off companies under the Companies Act, exploring the grounds, procedures, and legal aspects associated with this process.
Understanding Strike-Off and Its Consequences
Before we embark on the journey of revival, it’s essential to grasp the concept of company strike-off. When a company is incorporated under the Companies Act, the ROC issues a Certificate of Incorporation, signifying the company’s existence.
Once registered, the company’s name typically remains on the ROC’s list unless legal processes, such as winding up or amalgamation, result in its removal. However, there exists a provision under Section 560 of the Companies Act, of 1956, that allows the ROC to strike off the name of a defunct company from its register.
The Registrar, however, is not obligated to strike off a company’s name, even if an application for such removal is submitted. This discretion ensures that companies are not unjustly struck off without due consideration.
Grounds for Strike-Off by ROC
Section 560 of the Companies Act, 1956, provides the legal framework for the ROC to strike off a company’s name on specific grounds. These grounds include:
Failure to Commence Operations: Companies that fail to initiate operations within one year of incorporation may face strike-off.
Inactivity for Two Financial Years: Companies that remain inactive, conducting no business operations for two consecutive financial years, and do not file essential e-Forms (AOC-4 and MGT-7) are susceptible to strike-off.
Non-Payment of Subscription Money: If subscribers to the memorandum have not paid their subscription money, and no declaration to this effect has been filed (e-Form 20A) within 180 days, strike-off may occur.
No Business Activity: Companies that, upon physical verification, are found not to be conducting any business at their registered office may also be struck off.
While these grounds exist, in practice, ROC often strikes off companies primarily due to non-filing of e-Forms AOC-4 and MGT-7 during the preceding two financial years.
Who Can File an Application for Revival?
The revival of a struck-off company involves legal proceedings and appeals. Various parties can initiate this process:
Persons Aggrieved by ROC’s Order: Any person aggrieved by the ROC’s strike-off order can file an appeal within three years from the date of the order.
ROC: The ROC, upon discovering that a company’s name was struck off inadvertently or due to incorrect information furnished by the company or its directors, can file an appeal within three years.
Company, Members, Creditors, or Workmen Aggrieved: In cases where a company, its members, creditors, or workmen are aggrieved by the strike-off, they can file an appeal within 20 years from the date of the publication of the notice of strike-off in the Official Gazette.
The limitation period for voluntary striking off is twenty years, whereas for compulsory striking off by the ROC, it is three years from the date of the ROC’s order.
Grounds for Revival
When an application for the revival of a strike-off company is submitted, the National Company Law Tribunal (NCLT) considers several critical grounds:
Immovable Property: Whether the company possesses any immovable property.
Compliance with Tax and Regulatory Authorities: Whether the company has complied with income tax, GST, provident fund, and other authorities, apart from the ROC.
Active Transactions: Evidence of active transactions in the company’s bank statements, indicating its ongoing status.
License Renewals: Renewal of licenses on an annual basis, where applicable, such as FSSAI licenses, excise licenses, and more.
Additional Documents: Depending on the circumstances, the NCLT may require additional documents to assess the company’s eligibility for revival.
The Procedure for Company Revival
The process of reviving a struck-off company involves multiple steps and legal documentation. Here’s a simplified overview of the procedure:
Application Filing:
An application must be submitted in the format of NCLT 9, accompanied by a demand draft of Rs. 1000 payable to the Ministry of Corporate Affairs. The application should include various documents, such as an affidavit, orders passed by the ROC, the company’s memorandum of association, audited financial statements, bank statements, and more, similar to the detailed documentation required during online company registration.
Notice to ROC:
A copy of the petition must be provided to the ROC at least 14 days before the scheduled NCLT hearing.
NCLT Hearing:
The NCLT thereafter conducts a hearing to assess the application for revival. If the tribunal deems it appropriate, it may pass an order for the company’s revival.
Post-Revival Compliance:
Upon receiving the NCLT’s order for revival, the company must file a certified copy of the order in Form INC-28 with the ROC within 30 days. Additionally, any pending annual financial statements and annual reports must be submitted to the ROC.
The company is also obliged to comply with all requirements of the Companies Act, 2013, and relevant rules within the directed timeframe.
Conclusion
The revival of a struck-off company represents a legal process that reinstates the company’s status as if its name had never been struck off. It safeguards the interests of all stakeholders and ensures that the company can continue its operations without undue hindrance.
Understanding the grounds, procedures, and limitations for revival is pivotal for any entity seeking to reclaim its corporate identity.
For individuals and companies navigating the complexities of reviving a struck-off entity, legal expertise and guidance are indispensable. Vakilsearch offers comprehensive services that can assist in this process, ensuring that company revival compiles with the Companies Act and that all legal requirements are met seamlessly.
