Introduction
Recently, Registrar of Companies took the initiative to close down the Companies which had either failed to commence their business or had failed to file a timely return with it. More than 1 lakh Companies were struck off in on suo-motto basis by the ROC. The idea behind such action was to remove the name of the companies from its list who did not have the intention of doing business in India or to trace the Companies incorporated with the intention of malfunctioning into the Indian economy.
Legal Provision
Section 248-252 of the Companies Act, 2013 read with Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 deal with the removal of names of companies from the Register of Companies. These provisions have been applicable/effective from 26th December 2016. The provisions relating to Strike Off provide an opportunity to the defunct companies to get their names struck off from the records of the ROC.
Modes of Strike Off
As per the Companies Act, 2013 there are two modes of strike off as below:
- Strike off by ROC under Section 248(1) of the Companies Act 2013
- Strike off by Company by its own under Section 248(2) of the Companies Act 2013.
Strike off by ROC under Section 248(1) of the Companies Act 2013
Eligibility Criteria
As per Section 248(1): Where the Registrar has reasonable cause to believe that
- a company has failed to commence its business within one year of its incorporation or
- a company is not carrying on any business or operation for a period of two (2) immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455;
On the above grounds, the ROC shall send notice to the Company informing his intention to remove company’s name from the records.
Procedure for Strike off
- ROC shall send notice in STK-1 to the Company and all the Directors by speed post.
- The notice shall contain the reason for the removal of the name and seek the representative of the Company.
- The Company shall send the required documents and representation within 30 days from the date of the notice.
- On satisfaction of representation, the ROC may drop out the strike off. IF ROC is not satisfied, then it may proceed with a strike off the name of a company.
- The notice for removal of name under sub-section (1) of section 248 in STK-5 shall be published on the official website of MCA, in Official Gazette, English newspaper and one vernacular language at the place registered office is situated.
- ROC shall also intimate to the Authorities regulating the Company about the proposed action of removal or striking off the names of such companies.
- If no cause to the contrary is shown by the company, ROC may on expiry of the time mentioned in the notice strike off the name of the Company and shall be published in Official Gazette.
The following class of companies are excluded from the applicability of the provisions of Strike off
- Companies Registered under Section 8 of the Companies Act, 2013
- Listed companies
- Companies which are delisted for non-complaining of listing regulations or listing agreement or any other statutory laws;
- Vanishing companies;
- Any inspection or investigation is ordered and being carried out against Company
- Companies, where notices have been issued by the Registrar or Inspector and reply, is pending.
- Any prosecution for an offense is pending in any court against the Company;
- Companies whose application for compounding is pending;
- Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
- Any charge satisfaction is pending against Company
Strike off by Company on its own under Section 248(2) of the Companies Act 2013
The Company without prejudicing the provisions of above may by its own by passing special resolution strike off the name of the Company on the grounds mentioned in Section 248(1).
Procedure for Strike Off
- The Company shall hold Board Meeting to get approval from the Board of Directors for striking of a name of the Company and shall approve the notice of EGM.
- The Company shall take approval from Shareholders bypassing the special resolution in General Meeting for such strike off.
- The Company is regulated by any other authority than shall take approval from them.
- After taking approval the Company shall file an application in form STK-2 along with the following documents:
- STK 3: An indemnity bond by every director duly notarized.
- STK 4: An affidavit by every director of the Company.
- Statement of accounts containing assets and liabilities of the company made up for a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
- a copy of the special resolution duly certified by each of the directors of the company or consent of seventy-five percent of the members of the company regarding paid-up share capital as on the date of application;
- A statement regarding pending litigation, if any, involving the company.
- After receiving an application, ROC shall publish a public notice STK-6. Any objection on proposed strike off shall be sent within 30 days.
- After completion of the process as mentioned above, ROC shall strike off the name and dissolve the company by sending notice in the official gazette in form STK-7.
Conclusion
With this, we can conclude that any person who incorporated a Company with the intention to do business or earn a huge profit can get its name struck off if any of the objects are not fulfilled. The process of strike off is time-saving and economical. Further, it will also help to avoid harsh penalties and prosecution imposed on the Company as well as the Directors in case of failure to complete the annual compliance’s.
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