Explore the intricacies of compulsory strike-off procedures for Indian companies. Uncover the steps for revival and get insights into this critical aspect of company compliance.
The process of striking off a company in India can occur for various reasons, and hence it’s essential to comprehend both voluntary and ROC-mandated strike-off procedures. In this comprehensive guide, we’ll explore the intricacies of compulsory strike-offs, revival processes, and other critical aspects that companies need to be aware of.
Voluntary vs. Mandated Strike Off
Voluntary Strike Off:
This occurs when the owners of a company decide to close a company voluntarily. One such common method is the Fast Track Exit (FTE) mode, which is preferred for its efficiency. However, certain conditions must be met before proceeding with this method, including filing specific forms with the ROC, ensuring nil assets and liabilities, closing bank accounts, and filing the latest income tax return.
However, certain types of companies cannot opt for the FTE scheme, such as listed companies, those facing investigations, and those registered under specific sections of the Companies Act.
Mandated Strike-Off by ROC:
The ROC (Registrar of Companies) can strike off a company under certain conditions, typically when a company fails to meet compliance requirements. These conditions include a company not engaging in any business within one year from its date of incorporation or not conducting any business activity in the two preceding financial years, similar to the conditions observed during LLP company registration.
Additionally, if subscribers to the memorandum haven’t paid their subscription as promised at the time of incorporation and this defect is not rectified within 180 days, the ROC can initiate a strike-off process. Physical inspection by the ROC, revealing the absence of business activity, can also lead to compulsory strike-off.
Procedure for Voluntary Strike-Off
For companies opting for voluntary strike-off, the process involves the following steps:
- Board Meeting: The board of directors must convene a meeting to discuss the closure of the company and approve the calling of an Extraordinary General Meeting (EGM).
- Preparation of Documents: You must then prepare the application for company closure, along with the required documents, affidavits, and consents.
- EGM and Resolution: Following this, the board must convene an EGM and pass a resolution for company closure with a 75% mandate. If the company operates under a Special Act, regulatory body approval is essential before filing for closure.
- Document Execution: All necessary documents should be signed and executed by directors. If the documents are executed in a country other than India, they must be notarized and apostilled.
- Filing with ROC: Once the documents are executed, Form STK-2 along with the required documents must be filed with the ROC for verification and scrutiny.
- Publication: Once verified, the ROC will publish the strike-off status on the MCA portal, in gazettes, and newspapers, similar to the notifications issued during Indian company registration.
Reasons for ROC-Mandated Strike Off
The ROC can initiate compulsory strike-offs for companies that:
– Do not engage in any business within one year of incorporation.
– Do not conduct business activity for two preceding financial years.
– Fail to pay subscriptions promised at incorporation within 180 days.
– Are confirmed by physical verification to be inactive.
Revival After Strike-Off
Companies struck off by either voluntary or ROC-initiated processes can seek revival through the National Company Law Tribunal (NCLT). Companies must file an appeal via Form NCLT-9 within three years from the official strike-off date. Thereafter the NCLT reviews the documents, provides an opportunity for representation, and can order company restoration.
Upon NCLT approval, the ROC restores the company name, removes the strike-off status, and issues a fresh certificate of incorporation. Companies can then complete pending filings and resume business activities.
The Takeaway
All in all, understanding compulsory strike-off procedures in India is crucial for companies to maintain compliance and address any potential strike-off scenarios effectively. Whether it’s a voluntary or ROC-initiated strike-off, knowing about the strike-off process and revival options is essential for businesses to navigate corporate compliance successfully.
Frequently Asked Questions (FAQs):
What are the prerequisites for voluntary strike-off under the Fast Track Exit (FTE) scheme?
Prerequisites include filing Form AOC 4 and Form MGT 7, nil assets and liabilities, a closed bank account, and filing the latest income tax return. Specific conditions apply to certain types of companies.
What types of companies cannot apply for the FTE scheme?
Companies such as listed companies, those facing investigations or charges, and those registered under Section 25 of the Companies Act, 1956, or Section 8 of the Companies Act, 2013, are ineligible for the FTE scheme.
How can a company seek revival after being struck off?
Companies can file an appeal for revival with the National Company Law Tribunal (NCLT) using Form NCLT-9 within three years from the official strike-off date. NCLT reviews the case and, if valid, orders the company's restoration.
