Ministry of Corporate Affairs after demonetization is taking stern actions against the shell companies and non-compliant companies which have not filed the financial statements and annual return with the ROC. Last year, MCA struck off more than 2 lakh companies and disqualified more than 3 lakh Directors under section 248(1) and 164(2)(a) of Companies Act, 2013. In 2018, action of Govt. to strike off companies is still continuing to clean the corporate structure of the country.
Section 248 and Section 455 of the Companies Act, 2013
As per Section 248 of the Companies Act, 2013 which deals with the power of Registrar to remove name of company from register of companies:
Section 248(1): Where the Registrar has reasonable cause to believe that –
he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.
Therefore, though the public notice issued by the ROC stated the reference of Section 248 of the Act, it is pertinent to note that the said Section empowers the ROC to strike the names of the Companies only in two cases.
Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.
“Inactive Company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.
So, as per Section 455(4), if a company has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.
Currently, ROC’s across the country has been instructed to identify inactive companies which has not filled statutory returns for last 2 years and also not taken dormant status under section 455. So, ROC is issuing show cause notices to such Companies fallen u/s 248(1)(c). Notice mandated to show cause within 30 days as to why your company should not be struck off. If reply is not filed within 30 days, ROC will take appropriate action against the company and the concerned Directors.
Section 164(2): No person who is or has been a director of a company which—
shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of 5 years from the date on which the said company fails to do so
Section 167(1): The office of a director shall become vacant in case he incurs any of the disqualifications specified in section 164.
Section 252(1) Appeal by Anyone – Within 3 years
Section 252(3) Appeal by Company/Members/Creditors/Workman – Within 20 years
The petition under Section 252(3) for the restoration of name of struck Company shall be filed with the Tribunal (NCLT). The petition shall be filed in Form No. NCLT-9.
A copy of the petition shall be served on the Registrar of Companies and on such other persons as the Tribunal may direct, not less than 14 days before the date fixed for hearing of the application.
Tribunal shall hear the Petitioner and Respondent (ROC). It will also take note of the observations/objections received, if any. After hearing Both the Parties, if it is satisfied, it can order the restoration of name of company in the record of the ROC.
Where the Tribunal makes an order restoring the name of a company in the register of companies, the order shall direct that:
The Company shall file the copy of order in form INC-28 with the ROC within 30 days from the date of the order.
The Registrar of Companies do, in his official name and seal, publish the order in the Official Gazette.
The company shall file pending financial statements and annual returns with the Registrar and comply with the requirements of the Companies Act, 2013.
The liability 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 even after strike off.
Another concern for a company whose name has been struck-off by the ROC is that Asset, Rights, Cash balances and other Current or Non-current Assets of the company is vested with whom? In the absence of any specific provisions in the Companies Act, 2013, it is highly debatable issue as to status of assets after strike off.