In India, out of the total 18,94,146 registered companies, 6,83,317 have closed down as on May 2019 as per report released by Ministry of Corporate Affairs. A company when incorporated had a vision to run its business and to contribute to Indian Society.
All the Companies in India as we already know are regulated by Ministry of Corporate Affairs through the Law specially enacted for companies i.e. The Companies Act, 2013 along with Rules, Regulations, Amendments, notifications and clarifications applicable depending upon its enforceability, to protect the stakeholders.
A company is thus bounded to do and observe all the compliances which are given under The Companies Act, 2013 as applicable to that particular type of company. These provisions are applicable to them keeping in mind that a company are disclosing working to the fact that they is doing and running business fairly. But there are certain provisions under the Act, where the power is given to the concerned authority to close of the company, if found to be guilty or negligible or non compliant or any action or inaction which is detrimental to the stakeholders of the company.
Hence, a summary of such section/provisions is given in the tabular format for your knowledge, where a company may or shall be closed by the concerned authority:-
| S.NO | SECTION | REASON | AUTHORITY | ACTION |
| 1 | 7(7) | where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action | Tribunal | Strike off |
| 2 | 8(5) | If section 8 company’s licence is revoked for not doing the activities under which it has been granted licence, the Central Government may after revoking the licence, by order, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act. | Central Government (Powers delegated to Registrar by Ministry of Corporate Affairs, dated the 10th July, 2012, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) vide number S.O. 1538 (E), dated the 10th July, 2012 | Winding Up |
| 3 | 10A | No declaration has been filed with the Registrar within one hundred and eighty (180) days | Registrar | Removal of the name of the company from the register of companies under 248 of the Act |
| 4 | 12 | Company has no registered office | Registrar | removal of the name of the company from the register of companies under 248 of the Act |
| 5 | 224 | Petition moved by Inspector’s report under section 223 | Central Government | winding up of the company |
| 6 | 248 | a) company has failed to commence its business within one year of its incorporation
b) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company c) subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company d) the company is not carrying on any business or operations, as revealed after the physical verification carried out under section of section 12. |
Registrar | Removal of the name of the company from the register of companies |
The action to close the company by concerned authority is big step and show cause is always served to the company as well as its directors before passing of such order. Also, such action can be avoided by timely response. Also note that company’s order to close off also depends upon the reply drafted on the merits of the company. Hence, it purely majorly lies on timely response and reply submitted to department.
Disclaimer:– The above article inclusive list and is bird view of all sections which can directly lead to closing of company under the Companies Act, 2013. The author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.
(The Author is Corporate Consultant and provides varied array of services including Start-ups, Secretarial, Legal, Trademark, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- [email protected] and Contact Number: 91-8178515005)
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