Provisions And Process of Strike off of Companies

In this editorial, we delve into the intricacies of striking off companies under the Companies Act, 2013. We explore the regulations, procedures, and common inquiries surrounding this process. In this Flash editorial, the author shall discuss the provisions and ROC C-Pace of the Strike off of Company under Companies Act, 2013. We receive queries on the Company’s strike off on a regular basis like:

1. Whether Company can apply for strike off without Filing of form INC 20A?
2. Whether it is required to file form MGT-14 for Strike off Company?
3. Whether Company can apply for a strike off within 1 year of Incorporation?
4. Whether Company can apply for strike off without completion of Annual Filing?
5. Whether DSC of auditor required on STK-2 form for Strike off?
6. Whether strike off is same as Winding up of Company?

BACKGROUND:

The Ministry of Corporate Affairs (MCA) issued a Notification dated 26^th December 2016 notifying Section 248, 249, 250, 251 and 252 of Companies Act, 2013 (Chapter XVIII). This chapter deals with Removal of Names of Companies from Register of Companies. MCA has appointed 26.12.2016 as effective date for Section 248 to 252.

This is an alternative to winding up a Company subject to statutory criterion specified under the section. This has replaced Section 560 (Form FTE) of the erstwhile Companies Act, 1956.

NOTE:

Strike off of Company is completely different from winding up of Company. In the case of Real Time Interactive Media (P) Ltd. V Metro Mumbai Infra developer (P.) Ltd. [2018] it is mentioned that, just because the name of company is struck off the register that will not come in the way of the court to pass and order winding up the Company.

√ Analogous Law:

This section corresponds to Section 560 (power of Registrar to Strike defunct Company off register) of the 1956 Act.

√ Applicable Section:

Section 248 of Companies Act, 248.

This section corresponds to Section 560 (power of Registrar to Strike defunct Company off register) of the 1956 Act.

√ Applicable Rule(s)

Rule 4,7 and 9 of the Companies (Removal of Name of Companies from The Register of Companies) Rules, 2016.

i. Ways of Stinking off of Companies

• By Registrar of Companies on Suo-motto
• By Application of Company for removal of name/ Strike off of Company

ii. Type of Companies which cannot be removed under these provisions: (Rule 3)

i. Listed Companies

ii. Companies registered under Section 8 Company.

iii. Companies having charges which are pending for satisfaction.

iv. Companies whose application for Compounding is pending.

v. Companies against which any prosecution for an offence is pending in any court.

vi. [1]Vanishing Companies

vii. Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;

viii. 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.

ix. Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

x. Companies where notices under section 234 of CA 1956 or 206 or 207 of the Act, 2016 have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the court.

iii. [2]Grounds of Strike off of Companies.

a) A company has failed to commence its business within one year of its incorporation. OR

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 under section 455.

c) The subscribers to the memorandum have not paid the subscription which they had undertaken to apy at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days of its incorporation under sub-section (1) of section 10A; or

d) The company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of Section 12.

iv. Situations in which Company can’t apply for Strike off:

The Company shall not make any application for the strike off of the Company if any time in the previous 3 month the company has done any of the below mentioned workings:

i. Has Changed its name or

ii. Has Shifted its registered office from one State to another.

iii. has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business.

iv. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement.

v. has made an application to the Tribunal for the sanctioning of a Compromise Or Arrangement and the matter has not been finally concluded; or

vi. is being wound up under Chapter XX, whether voluntarily or by the Tribunal.

PROC C-PACE FOR strike off of COMPANY:

Obligation of Company

I. Calling of Board Meeting:

The company will call the Board Meeting as per Secretarial Standard 1 to pass a Board resolution for the purpose of Strike off of Company and to authorize any director of the Company to file application with Registrar of Companies.

The company shall also approve the notice of the Extra Ordinary General Meeting. (if Company wants to hold the general meeting)

*Extinguishment of the Liabilities:

After passing of Board resolution if there are any liabilities in the Company. The company will set off all the liabilities before the next step. Therefore, Company have to extinguishing all its liabilities before passing of special resolution.

II. Calling of General Meeting:

The 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% of members as per paid up share capital of the Company.

Alternate Way:

As per Sub-Section 2 of Section 248, If Company don’t wants to held EGM they can take consent of seventy-five per cent. members in terms of paid-up share capital and submit the same with ROC C-PACE.

III. Filing of form with ROC C-PACE:

After passing of Special resolution company will file MGT-14 within 30 days of EGM.

IV. Application to ROC C-PACE by Company:

Application shall be made in Web form STK-2 (fee Rs. 10,000/-). Following below mentioned documents will be attached in the Form STK-2. _{Rule 4(1)}

Attachment – STK-2: _{Rule 4(3)}

i. NOC from the appropriate concerned authority, if required (RBI, IRDA, Housing Finance, SEBI etc.) _{Rule 4(2)}

ii. [3]Indemnity Bond from every Director in Form STK-3 on Stamp Paper.

iii. An Affidavit from every Director in Form STK-4 on Stamp Paper.

iv. Statement of Accounts certified by a Chartered Accountant in form No. STK-8 Statement should not be older than 30 days from the date of application.

v. CTC of Special Resolution duly signed by each Director or with the consent of the Shareholders.

vi. Statement regarding pending litigations, if any, involving the Company. (Better to give in affidavit format)

vii. A Affidavit, if Company has not completed annual filing due to non business.

Certification- STK-2:

E-form STK-2 shall be signed (Affixation of DSC) by a Director, Chartered Accountant (who have signed STK-8) and one more professional (CS, CA, ADV, CMA). Director should be [4]authorized by the Board for such purpose. _{Rule 5.}

Certification from Professional:

The e-form STK-2 shall be certified by Company Secretary in Whole time Practice or Chartered Accountant or Cost Accountant in whole time practice.

Place of application on Website:

The Company will place the copy of the application on its website (if any) till the disposal of the application. . _{Rule 7(1).}

Declaration from any Director:

The directors will give following below mentioned declarations:

• The application has been in accordance with the conditions mentioned under sub section (1) and (2) of section 248 and sub section (1) of section 249:
• There is no inspection or investigation ordered and carried out or yet to be carried out or being carried out against the company and where inspection or investigation have been carried out , no prosecution pending in any court arising out of such inspection or investigation;
• The company is neither having any public deposit which are outstanding nor the company is in default in its repayment or interest thereon ;
• The company does not have any outstanding loans, secured or unsecured;
• The company does not have any dues towards income tax .VAT, excise duty, service tax or any other duty, by whatever name called, payable to the central  government or state government,  statutory authority or local authority;
• All other liabilities of the company have been settled or discharged or extinguished;
• All the requirements of the act and rules made thereunder relating to removing the name of the company from the register of companies and matters incidental or supplemental thereto have been complied with;
• To the best of my knowledge and belief, the information given in this application and its attachment is correct and complete;
• the requisite fee has been paid.

Obligations to ROC C-PACE:

Issue of Notice for any objections:

The Registrar shall, on receipt of such application Issue a public notice in form STK-6. Such notice shall be published in the following manner. _{Rule 7(1).}

• Place a copy of notice on the official website of MCA on a separate link.
• Published in the Official gazette.
• Publish in one English and one vernacular language newspaper, both having wide circulation in the state in which registered office of the Company is situated.

 Intimation to Authorities for any objections:

The Registrar of Companies shall, simultaneously intimate the concerned regulatory authorities regulating the Company, having jurisdiction over the Company, viz;

• Income Tax Authorities
• Central Excise Authorities
• Service Tax Authorities

If the authorities have any objections, they have to furnish the same within a period of 30 days from the date of issue of the letter of intimation. 

Issue notice of Striking off and dissolution of Companies:

If no objections received then ROC C-PACE shall issue a notice u/s 248(5) of the striking off of Company and publish the same in official gazette in form No. STK-7.  A copy of the notice shall also be placed on the official website of the MCA.

Other Provisions:

Liability of Directors:

The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.

Effect of Strike off:

It shall on and from the date mentioned in the notice under sub-section (5) of section 248 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 realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

Appeal to Tribunal:

Any person aggrieved by an order of the Registrar, notifying a company as dissolved under section 248, may file an appeal to the Tribunal (NCLT) within a period of three years from the date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies.

ANSWER TO QUESTIONS:

1. Whether Company can apply for strike off without Filing of form INC 20A?

Ans: There is no restriction on companies for filing of e-form STK-2 before filing of INC 20A. Therefore, we can opine that Company can apply for strike off without filing of INC 20A.

2. Whether it is required to file form MGT-14 for Strike off Company?

Ans: If Company has taken consent of Shareholders without holding of EGM. In such a case, there is no need to file MGT-14. Therefore, we can opine that the Company can apply for strike off without filing of MGT-14.

3. Whether Company can apply for a strike off within 1 year of Incorporation?

Ans: After Companies (Amendment) Act, 2019, one more ground added in situations when company can apply for strike off i.e. in case Company has not received the subscription money from subscribers within 180 days from incorporation Company can go for strike off.

Therefore, one can opine that this is the only ground when company can apply for strike off within 1 year of Incorporation of Company.

4. Whether Company can apply for strike off without completion of Annual Filing?

Ans: After amendment in Rule 4 w.e.f. 08^th May, 2019 read with notification dated 10^th May 2023, it is very clear that annual filing of AOC-4 and MGT-7 is mandatory up to the end of the financial year in which the company ceased to carry its business operations. In other words, Company is required to file AOC-4 and MGT-7 up to financial year till company carries its business and operations.

Therefore, one can opine that the Company can apply for strike off without completion of annual filing.

5. Whether DSC of auditor required on STK-2 form for Strike off?

The answer of same has given above.

6. Whether strike off is same as Winding up of Company?

The answer of same has given above.

CONSLUSION:

The implementation of Sections 248-252 streamlines the process of company strike off, emphasizing compliance and procedural adherence. Strike off serves as a crucial mechanism for the closure of defunct entities, ensuring regulatory alignment and accountability.

[1] Means a Company registered under this act, listed on stock exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period of 2 years, and not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange, and none of its directors are traceable

[2] Companies (Amendment) Act, 2019 has provided additional grounds for removal of name by inserting new clause (c) and (d) as mentioned above.

[3] If the person is foreign national or non-resident Indian, the indemnity bond, and declaration shall be notarized or apostillised or consularised.

[4] Better to pass a Board Resolution for authorization of Director.

*****

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).