A company may be formed for carrying on a business to earn profits or can be formed even for non-business purpose. Irrespective of any object carried on by the company, it comes into existence only after incorporation under the Act. On incorporation of a company, the Registrar of Companies (‘RoC’) issues a certificate of incorporation to the company certifying that the company named in the certificate has come into existence from the date of issue of the certificate and its name has been entered in the register of companies maintained by the RoC. Once registered, the name of the company cannot be removed from the register unless it is dissolved by the process of law, either as a result of its winding up or upon its amalgamation with another company. However, section 248 of the Companies Act, 2013 (‘the Act’) provides with a easy and less cumbersome method, namely striking, the name of the company off the register of companies maintained by the RoC.
A company can be closed either by way of strike off or by winding up. If it is by way of strike off, it can be closed either by Registrar or on application made by the company.
Eligibility of one person company for fast track exit
A one person company can also be closed by making an application for strike off to the RoC. Even though the one person company ceases to carry on its business, unless the company makes an application for strike off it is not legally closed and the company may continue to file its annual returns despite closure of the business. Ministry of Corporate Affairs (‘MCA’) issued a Notification dated 26th December, 2016 notifying sections 248, 249, 250, 251 and 252 the of Act (Chapter XVIII). This has replaced section 560 (Form FTE) of erstwhile Companies Act, 1956 (‘the 1956 Act’). The MCA has also introduced Companies (Removal of Names of Companies from the Companies), 2016
Companies that cannot apply for strike off
- Listed companies.
- Company that has delisted due to non- compliance of listing regulations or any other statutory laws.
- Vanishing companies (means a company registered under the Act, listed on stock exchange which has failed to file its returns with the RoC and stock exchange for a consecutive period of 2 years, and not maintaining its registered office at the address notified with the RoC or stock exchange, and none of its directors are traceable).
- Companies where inspection or investigation is ordered and being carried out or actions or such order are yet to be taken up or were complete but prosecutions arising out of such inspection or investigation are pending in the court.
- Companies where notices under section 234 of the 1956 Act or 206 or 207 of the Act, have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 of the Act is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the court.
- Companies against which any prosecution for an offence is pending in any court.
- Companies whose application for compounding is pending.
- Company registered under section 8.
- Company having charge which is pending for satisfaction.
- Company having outstanding public deposits or the company has made default of repayment of the same.
The Company shall not make any application for the strike off of the company if any time in the previous three months the company –
- has changed its name ;
- has shifted its registered office from one State to another ;
- has made a disposal for value of property or rights held by it before ceasing to trade or to carry on business where disposal was for gain in the normal course of business ;
- has engaged in any other activity except the one which is necessary for the purpose of making an application, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement ;
- has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded ;
- is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016.
If the company makes an application in spite of following under the above mentioned situation, then it would be liable to pay a maximum fine of Rs. 1 lakh. For example, a company in business to sell apples could not continue selling apples during that 3 month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored.
Removal of names by the Registrar suo motu
The RoC has the power under section 248 to remove the name of the company from the register of companies under the following grounds-
- Failure to commence business within one year from the date of its incorporation.
- Failure to carry on the business for a period of two immediately preceding financial years and has not made application for obtaining status of dormant company.
Under these situations, the RoC shall send a notice in Form STK-1
- The company within 30 days from the date of receipt of notice should provide reasons for not striking off the company.
- After 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 stand dissolved.
- The liability of every director, manager or other officer exercising any power of management and every member of company dissolved shall continue and may be enforced as if company had not been dissolved.
Removal of names on application made by the company
An application can be made by the company for removal of the name of the company from the register of companies by filing Form STK-2 along with fees of Rs. 5,000. The company needs to comply with the following procedure for making application for striking off the company :
- Calling of Board meeting – Company shall call a Board meeting as per Secretarial Standard 1 in order to pass Board resolution for striking off the company. The Board of directors shall authorise a director to file application for strike off to RoC. The Notice for calling of general meeting shall be placed before the Board of directors for their approval.
- Extinguishment of the liabilities – After passing of Board resolution if there is any liabilities in the company, the company will set off all the liabilities before next step.
- Calling of general meeting – Company will hold the general meeting of members of the company and pass a resolution for strike off of companies with the approval of 75 per cent of members as per paid-up share capital of the company. Company shall file MGT-14 within 30 days from the date of passing special resolution.
- Application for strike off to RoC by company – Application shall be made in e-Form STK-2 (fee Rs. 5,000).
- Place application on the website – The company shall place the copy of the application on the website of the company till the application is disposed of.
- Issue of notice for any objections – The RoC shall after taking into consideration the application made by the company shall issue a public notice in Form STK-6.
- Intimation to authorities for any objections – The RoC shall, simultaneously intimate the concerned regulatory authorities regulating the company, having jurisdiction over the company
- Issue notice of striking off and dissolution of companies – If no objections are received then RoC shall issue a notice of striking off of company and publish the same in Official Gazette in Form STK-7. The copy of notice shall also be placed on the Official website of the MCA.
The company shall on and from the date mentioned in the notice under sub-section (5) of section 248 of the Act cease 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 [section 250].
Any person aggrieved by the strike off order issued by the RoC may file an appeal under section 252 to the Tribunal (NCLT) within a period of three years from the date of the order of the Registrar and if the Tribunal opines that there is absence of grounds on which the order was passed, it may order restoration of the name of the company in the register of companies. The Tribunal shall give a reasonable opportunity of being heard to the RoC, the company and any person concerned. If the RoC is satisfied that the company had been stuck off inadvertently or on the basis of incorrect information furnished by the company or its directors, it may within a period of three years from the date of passing an order file an application before the Tribunal seeking restoration of name of such company. The company shall file a copy of the order passed by the Tribunal with the RoC within 30 days from the date of receipt of the order. Application before the Tribunal can be made by the company, member, creditor or workmen before the expiry of 20 years from the publication of the strike of order in the Official Gazette.
Due to enforcement of sections 248-252 of the Act all the strike off applications will be filed in e-Form STK-2. No application can be filed through FTE mode. There is also little change in process of strike off like there is need to pass special resolution, publication of notice on website of company, etc. The company will be given 30 days from the date of receipt of notice from the RoC unlike before where the company was issued three notices by the RoC for striking off the company. Striking off the company may be preferred mostly by those who have nil or less liability.
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