In this day and age of increasing corporate fraud and scams, the Government, has conferred the powers on Registrar of Companies (ROC) to Strike off the Companies in certain cases. Striking off is an alternative process of removing the name of the Companies from records of Registrar of Companies implying that Company won’t be in existence and cannot continue its operations further. This mechanism has been placed to increase transparency and eliminate the functioning of shell Companies.
Section 248-252 of Companies Act, 2013 read with Companies (Removal of Name of Companies from Registrar of Companies) Rules 2016 apprises on the provisions and procedure related to Strike off and Revival of Companies. The Companies can suo-moto opt for strike off than winding up. While Striking Off means a temporary closure with minimal obligations allowing Companies to revive itself in the future, winding off means a company’s permanent closure. Rebirth of struck off Companies is to make the business a going concern again.
REASONS FOR STRIKE OFF:
The Registrar shall send a notice of strike off to the Company and all its Directors in Form STK-1 under following circumstances.
- Company has failed to commence business within 1 year of incorporation
- Company is not carrying on its business or operations for 2 immediately preceding financial years meaning company has neither filed Financial Statements & Annual Return for last 2 years nor has applied for obtaining the status of Dormant Company.
- The subscribers to the memorandum have not paid subscription which they had undertaken to pay at the time of incorporation and a declaration regarding the same has not been filed within 180 days
- The company is not carrying on any business or operations, as revealed after the physical verification carried out
The Registrar shall allow representations along with requisite documents within 30 days from service of notice. However certain categories of Companies cannot be removed from Registrar of Companies.
- Listed Companies
- Companies delisted due to non-compliance of listing regulations
- Vanishing Companies
- companies where inspection or investigation is ordered
- Companies against whom charges are pending for satisfaction
- Companies against whom any prosecution is pending in any court
- Companies whose application for compounding is pending before the competent authority
- Companies having outstanding public deposits
- Section 8 Companies
VOLUNTARILY STRIKE OFF
A Company may apply to Registrar of Companies for strike off in Form No. STK-2. Before making the application, Company has to ensure it has paid off all its liabilities and a Special Resolution or consent of 75% of members in terms of paid up share capital have been obtained.
In case the Company is regulated under a Special Act, the approval of regulatory body or competent authority shall also be enclosed with the application.
WHO CAN APPLY FOR REVIVAL
An application can be made by a Company (through its authorized representative), Member, creditor or workman to the Tribunal if they believe that removal of name from the Registrar of Companies was erroneously done. Such an application can be made within 20 years from date of publication of notice in the official gazette (STK-7).
Further, any person aggrevied by the order of Registrar can file an appeal to the tribunal with 3 years from date of order of Registrar.
The Registrar of Companies may suo-motu file application before Tribunal seeking restoration within 3 years from date of passing the order on being satisfied that name of company Striked Off either inadvertently or on the basis of incorrect information filed by the Company.
The Tribunal before passing an order in above scenarios shall abide by the Principles of Natural Justice i.e provide an opportunity of being heard to the Registrar, Company and all the persons concerned.
PROCEDURE FOR REVIVAL
Rule 87A inserted by National Company Law Tribunal (Amendment) Rules, 2017 apprises on the procedure to follow for restoring the Company.
An application under Section 252(3) shall be filed with the Tribunal in Form No. NCLT -9 along with the Annexures as attachments mentioned below.
- Certificate Of Incorporation
- Memorandum of Association & Articles of Association
- Copy Of Public Notice STK-5
- copy of ‘Notice of striking off and dissolution’ published in the Official Gazette of India STK-7
- Notice of Strike Off, if any received by the Company in STK-1
- Reply given by Company to Notice Of Strike Off
- Master data Of Company
- Application verifying the Application in Form NCLT-6
- Income Tax Returns and Financial Statements
- Letter Of Undertaking
- Letter Of Authorization & Power of Attorney
- Memorandum of Appearance in Form NCLT-12
- Order Copy of preceding case law for reference
- Bharat kosh Payment Receipt
♦ STK-5 & STK-7 can be obtained from website of Ministry of Corporate Affairs.
♦ A Copy of the Petition shall be served on the Registrar or any other person as directed by the Tribunal atleast 14 days before the date of hearing.
♦ An acknowledgement of service of Petition filed with ROC should also be sent to the Tribunal.
The Tribunal shall on passing the order for restoring the name of the company, shall direct that-
- Applicant shall deliver a certified copy of the order to ROC within 30 days of passing the order in Form INC-28
- The ROC, on receipt of such an order, shall publish the same in the Official Gazette
- The Applicant shall pay the cost of application to ROC
- The Company shall file all pending Financial Statements and Annual Returns.
RELEVANT CASE LAWS
1. Mr. Pankaj Kumar Mishra Vs. Registrar of Companies & Ors (NCLAT)
Facts: Roc Mumbai struck off the name of the Company. This order was challenged by Principle Commissioner of Income Tax as certain financial transactions had been entered into by the Company but no income tax return was filed. NCLT Mumbai allowed the appeal of CIT and directed to restore the name of the Company without giving any opportunity of being heard. Being aggrieved the appellant, Ex-Director & Majority Shareholder filed the appeal.
Conclusion: NCLAT held that Tribunal must give a reasonable opportunity of making representations and of being heard before passing an order, to the Registrar, the Company and all the persons concerned under Section 252 (1) of the Companies Act, 2013.
2. PR Commissioner of Income Tax v. ROC Delhi
Facts: The question involved in this case was whether name of the Company can be restored on the ground that tax dues against Company were not determined by the Income Tax Department despite valid notice seeking objections was served by ROC before order of Strike Off.
Conclusion: It was held that as per Section 179 of Income Tax Act 1961, striking off the name of the Company does not absolve its erstwhile directors from the liability to pay the tax leviable in respect of income of the previous year. In such a scenario, there is no requirement for restoring the name of the Company.
3. Kanodia Knits Private Limited v. ROC
Facts: The name of the Company was struck off by ROC on grounds that Company was not carrying business or operations for 2 previous years.
The appellant filed an appeal before NCLT claiming that it had not been served notice under Section 248 and Company had been in operation. Further Appellant showed 2 Income Tax returns for FY 2016-17 & 2017-18 with total income of Rs 504 and Rs 1473 respectively. On verifying invoices, it was observed that transactions took place between Kanodia Housery Mills and Kanodia Knits Pvt Ltd, both of whose the registered office is the same.
Conclusion: It was held that documentary evidence produced by the appellant in order to prove that it was carrying on the business were not reliable as invoices failed to prove that business was in operation.
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