Find an in-depth analysis that explores the process of striking off a company's name from the Registrar of Companies (ROC) and the rules and regulations governing it.
Overview
In the world of business, companies come and go, and sometimes, it becomes necessary to strike a company off the official records. This process, governed by Section 248 of the Companies Act, 2013, deals with the removal of a company’s name from the Registrar of Companies (ROC).
In this detailed analysis, we will delve into the intricacies of company strike-offs and explore the rules and regulations that accompany them.
Understanding Section 248: Power of Registrar to Remove Company Name
Section 248 of the Companies Act, 2013 outlines the circumstances under which the ROC can initiate the process of striking off a company’s name from the Register of Companies. Let’s delve into the key provisions of this section:
Grounds for Removal
The Registrar can consider removing a company’s name if there’s reasonable cause to believe that:
- The company has failed to commence its business within one year of its Date of Incorporation (DOI).
- The company is not carrying on any business or operation for a continuous period of two immediately preceding financial years and has not applied for the status of a dormant company under Section 455.
- The subscribers to the Memorandum of Association (MOA) have not paid the subscription as required at the time of incorporation, and no declaration to this effect has been filed within 180 days of the DOI.
- The company is not carrying on any business or operations, as confirmed through physical verification under Section 12(9).
Special Resolution for Removal
Under Section 248(2), a company can apply for the removal of its name from the ROC by passing a special resolution or obtaining consent from 75% of its members based on paid-up share capital. This application must specify the grounds for removal as per Section 248(1).
Exceptions and Regulations
There are exceptions to Section 248(2):
- Companies registered under Section 8 are not eligible to apply for removal under this section.
- Companies regulated under special Acts must obtain approval from the relevant regulatory body before applying for removal.
Public Notice and Dissolution
Once the application is received, the Registrar issues a public notice and waits for objections, if any, for 30 days. If there are no valid objections, the Registrar can strike off the company’s name from the ROC. The dissolution of the company is then published in the Official Gazette.
Protection of Creditors and Liability
Before striking off a company’s name, the Registrar must ensure that adequate provisions have been made to meet the company’s liabilities and obligations. Directors and officers’ liabilities continue even after dissolution.
Tribunal’s Authority
Section 248(8) clarifies that the power of the Tribunal to wind up a company whose name has been struck off from the ROC remains unaffected.
Restrictions and Penalties (Section 249)
Section 249 imposes restrictions on making an application under Section 248. An application cannot be made if, in the previous three months, the company has:
- Changed its name or shifted its registered office from one state to another.
- Made disposals of property or rights held for gain or engaged in activities not necessary for applying for removal.
- Applied to the Tribunal for a compromise or arrangement not yet concluded.
- Initiated winding-up proceedings or is under the Insolvency and Bankruptcy Code.
Violation of Section 248(1) can result in a fine of up to Rs. 1,00,000.
Effects of Company Dissolution (Section 250)
When a company is notified as dissolved under Section 248, it ceases to operate as a company, similar to the process observed in company registration online. The Certificate of Incorporation is deemed canceled, except for the purpose of realizing the company’s dues and fulfilling its liabilities.
Fraudulent Application for Removal (Section 251)
Section 251 deals with fraudulent applications. If it’s found that a company applied for removal to evade liabilities, deceive creditors, or commit fraud, the individuals responsible for the company’s management can be held liable and face punishment for fraud.
Appeal to Tribunal (Section 252)
If a person is aggrieved by the Registrar’s order to strike off a company’s name, they can file an appeal with the Tribunal within three years. The Tribunal can order the restoration of the company’s name if it finds the removal unjustified.
Rules for Removal on Suo-Motu Basis
In addition to the provisions of the Companies Act, the Companies (Removal of Names of Companies from the ROC) Rules, 2016 provide further guidance on the removal of company names. These rules specify categories of companies that cannot be removed, including listed companies, companies undergoing investigations, and those facing prosecutions.
The Process of Removal
The removal process involves sending notices to directors, providing reasons for removal, seeking objections, and publishing public notices. The rules also require companies to file specific forms, including an indemnity bond, financial statements, and an affidavit.
Looking for expert assistance with company strike-off, MCA incorporation, or annual filing? Connect with Vakilsearch for affordable corporate legal services.
FAQs
Can a company be struck off if it hasn't commenced business within one year of incorporation?
Yes, if a company fails to start its business within one year of incorporation, it can be considered for removal from the ROC.
What happens to a company's liabilities after its name is struck off?
Even after removal, the company's assets remain available to pay off its debts and obligations.
Can a company be restored after its name is struck off?
Yes, under certain conditions and with the Tribunal's approval, a company's name can be restored to the ROC even after removal.
