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Strike off Public Limited Company

After demonetization, Ministry of Corporate Affairs is taking strict actions against the shell companies and non-compliant companies which have not filed the financial statements and annual return with the Registrar of Companies. Last year, Ministry of Corporate Affairs struck off more than 2 lakh companies and more than 3 lakh Directors are disqualified by them under section 248(1) and 164(2)(a) of Companies Act, 2013. In 2018, Govt. action continued to strike off companies was still there in order to clean the corporate structure of the country.

Provision of Registrar of Companies

Section 248 and Section 455 as per the Companies Act, 2013

Under Section 248 of the Companies Act, 2013 that manages the authority of Registrar to eliminate name of company from register of companies :

Section 248(1) - Where the Registrar considers logical cause to believe that –

A company cannot start its business within 1 year of its incorporation

A company is not running any operation or business for tenure of immediately preceding 2 financial years and has not created any application within such time for getting the position of a dormant company under section 455.

He should send a notice to the company and all the directors of the company, about his intention for removing the name of the company from the register of companies and requesting them for sending their representations along with copies of the pertinent documents, if any, within a time of 30 days from the date of the notice.

Thus, though the public notice issued by the Registrar of Companies stated the reference of Section 248 of the Act, it is important to note that the supposed Section allows the Registrar of Companies for striking the names of the Companies in 2 cases only.

Section 455 - Dormant Status

Where a company is made and registered under this Act for a future assignment or to keep an asset or intellectual property and has no important accounting transaction, such a company or an inactive company may apply to the Registrar in such way as may be recommended for getting the dormant status of a company.

"Inactive Company" is such a company that

Failed to continue its operation or business or has not done any vital accounting transaction in the last 2 financial years

or

Has not filed annual returns

or

Financial statements throughout the last 2 financial years

So, according to Section 455(4), if a company has not filed financial statements or annual returns for 2 consecutive financial years, the Registrar shall issue a notice to that company and include the name of such company in the register stated for dormant companies.

At present, Registrar of Companies throughout the country has been educated to recognize inactive companies that has not filled statutory returns for last 2 years and also not taken dormant status under section 455. Therefore, Registrar of Companies is issuing show cause notices to such Companies fallen u/s 248(1)(c). Notice is mandatory to show cause within 30 days regarding why the company should not be struck off. If reply is not filed within 30 days, Registrar of Companies will take suitable action against the company and the associated Directors.

Vacation of office of Directors

Section 164(2) - No individual who is or has been a director of a company that :

Has not filed financial statements or annual returns for any constant time of 3 financial years

or

Cannot repay the deposits acknowledged by it or to redeem any debentures on the due date or pay interest thereon or pay interest due thereon or pay any dividend declared and such failure to pay or redeem persisting for 1 year or more, shall be suitable to be re-appointed as a director of that company or appointed in other company for a tenure of 5 years from the date on which the said company cannot do so.

Section 167(1) - The office of a director shall become unoccupied if he sustains any of the disqualifications mentioned in section 164.

Procedure of Revival of Company

Section 252(1) Appeal by Anybody – Within 3 years

Section 252(3) Appeal by Members/Company/Workman/ Creditors – Within 20 years

Preparing Petition

The petition under Section 252(3) for restoring name of struck Company must be filed with the Tribunal (NCLT). The petition should be filed in Form No. NCLT-9.

Submission of Petition with ROC

A copy of the petition must be provided on the Registrar of Companies and on such other individuals as the Tribunal may direct, not less than 14 days before the date set for hearing of the application.

Hearing by Tribunal

Tribunal shall attend to the Petitioner and Respondent (ROC). It will also take note of the observations/objections obtained, if any. After hearing both the parties, if it satisfies, it can order to restore name of company in the record of the Registrar of Companies.

Directions by Tribunal

Where the Tribunal gives an order to restore the name of a company in the register of companies, the order shall express that :

The applicant should give a certified copy of the order to the Registrar of Companies within 30 days

On such delivery, the Registrar of Company performs, in his official name and seal, publishes the order in the Official Gazette

The applicant needs to pay to the Registrar of Companies his costs of, and occasioned by, the petition or application, if not the Tribunal directs otherwise and

The company should file pending financial statements and annual returns with the Registrar and fulfil the needs of the Companies Act, 2013 and rules created there within such time as may be focussed by the Tribunal.

Order Filing with Registrar of Companies

The Company should file the copy of order in form INC-28 with the Registrar of Companies within 30 days from the date of the order.

Publishing order in Gazette

The Registrar of Companies accomplishes in his official name and seal, publishes the order in the Official Gazette.

Pending documents filing with Registrar of Companies

The company should file pending financial statements and annual returns with the Registrar and satisfy the needs of the Companies Act, 2013.

What is the position of Assets and Liabilities of Company after strike off?

The responsibility of every manager, director or other officer, who was using any authority of management and of every member of the company dissolved under sub-section (5), should carry on and may be implemented even after strike off.

Another considering factor for a company whose name has been struck-off by the Registrar of Companies includes that rights, asset, cash balances and other current or non-current assets of the company is vested with whom? In the nonappearance of any definite provisions in the Companies Act, 2013, it is highly controversial subject as to status of assets after strike off.



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