General Circular No. 13/2003

F.No. 17/78/2001-C.L.V

Government of India

Ministry of Finance and Company Affairs

Department of Company Affairs

5th floor, `A’ Wing, Shastri Bhavan,

Dr. R.P. Road, New Delhi

Dated the 25th   March, 2003

To

All Regional Directors,

All Registrar of Companies

Sub:  Simplification of Procedure for Removal of Name of Defunct Companies.

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The matter regarding striking off of the names of the defunct companies has been engaging the attention of the Department for quite sometime. In the past also, the Department had considered and announced simplification in the operation of the provisions of Section 560 in such a way that the Registrar of Companies (ROCs) can weed out the defunct and dormant companies. This was done vide circular nos.9/7/83-CL.III dated 17.2.1987 and 1/3/91-CL.V / 5/4/91-CL.III dated 19.2.1991. This enabled the ROCs to strike off the names of defunct companies exercising, suo moto, the powers vested in them and on application made by directors confirming that the company has no assets and liabilities and they have no intention to carry on the business and undertaking that they would be personally liable for claims arising in future.

2. The Department subsequently amended Section 3 which came into force w.e.f. 13.12.2000, requiring private companies to increase their paid up capital to Rs.1 lakhs and public limited companies to Rs.5 lakhs. Sub-section (5) to Section 3 further provides that where the companies fail to enhance their paid up capital in accordance with sub-clause (3) & (4) to Section 3, they will be deemed to be defunct companies within the meaning of Section 560 and their name shall be strike off from the register by the Registrar.

3. The following data available with the Department reveal that the number of companies which fail to increase their capital by the cut off date of 12.12.2002 pursuant to sub-section (3) & (4) to section 3 are around 1.70 lakhs as against the total number of companies of 5.89 lakhs.

Region Default Total No. of Companies registered as on 31.3.2002 Percentage
Western Region 39681 184723 21.48%
Eastern Region 52819 94441 55.93%
Southern Region 26557 131176 20.2%
Northern Region 51882* 178906 29%
TOTAL 170939 589246

*Projected, as RD(NR) has still not provided figures for his region.

4. It may not be fair and just to allow these companies to remain as defaulters. Consequentially, Department has called for action for such default vide its Circular No.17/78/2001-CL.V dated 11.12.2002.

5. A cross section of the professionals have, however, felt that it would perhaps not be fair to prosecute these companies as they are defunct in the sense that either they never took off or carried on any significant business for a significant length of time. It has also come to the notice of the Department that some of the public companies have not even taken commencement of business certificate as required u/s 149 of the Companies Act.

6. Therefore, the Department has considered providing an easy exit route to small, non-functioning or defunct companies. It has accordingly been decided to introduce a Simplified Exit Scheme (SES), simplifying the procedures to be adopted by companies as well as ROCs in striking off the name of defunct companies, with in-built safeguards to ensure that unscrupulous promoters/directors/managers do not escape their liabilities.

7. There should be an incentive for the companies to exit, and a penalty for continuing to remain on the register without complying with the requirements of section 3. It is, therefore, also proposed that companies which actually exit may not be prosecuted under the circular of 11th December, 2002, and if prosecutions have already been filed, they may be withdrawn immediately after the name of the company is struck off the register. Similarly, if there are any pending prosecutions for non-filing of Annual Return and Balance Sheet can be withdrawn. However, if there are other offences, prosecutions can only be withdrawn with the prior permission of the Department. On the other hand, such companies that continue to remain registered without complying with section 3 of the Act should be prosecuted under the December circular vigorously.

8. It is hereby clarified that the SES will apply to all companies making an application u/s 560, and not just to companies who have not raised their capital to Rs.1 lakh and Rs.5 lakhs, respectively.

9. The SES will be as follows :-

i) A company must apply to the Registrar in the form prescribed (Annexure ‘A’) along with a fee of Rs.2,000/-

ii) The applicant company must give the audited accounts for the year ending March, 2002, if applying before 31st March, 2003, and for the year ending March, 2003, if applying thereafter. The audited accounts should show no assets and no liabilities.

iii) The application should be accompanied by an affidavit of at least two directors, sworn before a Magistrate or an Executive Magistrate (not a notary), including that of a managing or whole-time director, if there is one, to the effect that the company has not carried on any business and has no assets or liabilities. Draft enclosed as Annexure ‘B’.

iv) The application should further be accompanied by an indemnity bond, duly notarized, from at least two directors, including managing or whole-time director, if there is one, to the effect that should there be any liabilities on the company, such liabilities will be met in full by them, even after the name of the company is struck off the register of the companies. Draft is enclosed as Annexure ‘C’.

10. The Registrar of Companies on receipt of application shall publish in the prescribed proforma (Annexure ‘D’) in one local and in one national daily, the list of companies that have applied, and are under consideration, for being struck off u/s 560 of the Companies Act, 1956.

11. ROCs shall send this list of companies to the Department to enable it to put the list on the web sites of the Department/ICAI/ICSI; and also to Indian Banks Association (IBA) at Unit No.1, 2 and 4, 6th Floor, Centre I Building, World Trade Centre Complex, Cuffe Parade, Mumbai-400005, for circulation amongst their constituents/members.

12. Thirty days after publication as aforesaid and 45 days after dispatch of the proforma to IBA, if no objections are received, and if the case is otherwise in order, the Registrar of Companies will strike off the name of the companies from the Register and get them duly published in the Official Gazette.

13. The scheme will be in operation upto 31.12.2003 from the date of issue of circular.

14. Within thirty days of the end of the scheme, that is, by the 30th of January, 2004 all ROCs will send to the DCA :

a) list of companies struck off (in proforma at Annexure ‘D’)

b) list of companies which applied, but could not be struck off, and reasons for the same (in proforma at Annexure ‘E’).

Your faithfully,

Enc: As above

(E. Selvaraj)

Joint Director (T)

(Ph: 23383452)

ANNEXURE A

Application Form For Striking Of Name Of Company Under

Section 560 Of The Companies Act, 1956 Under Simplified Exit Scheme

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No. of Company
Name of the Company:

Address of the Company::

To

The Registrar of Companies,

—————

(Name of the State)

Sir,

The Company after carefully considering all aspects has duly resolved in the Board meeting held on___________ to make an application for striking the name of our company off the Register u/s 560 of the Companies Act, 1956, if there is a deadlock of having one member in the Board due to demise of other directors, even a single alive director may constitute the board as per Regulation 75 of Table A.

(2)  I/We furnish the following details and documents for considering the application.

(i) Balance Sheet and Profit and Loss Accounts for the year ending _____ showing no assets and liabilities.

(ii) An affidavit as per Annexure B of the General Circular No.17/78/2001-CL.V dated 25.3.2003 of D/o Company Affairs.

(iii) An indemnity bond as per Annexure C of the General Circular No.17/78/2001-CL.V dated 25.3.2003 of D/o Company Affairs.

 (iv) Demand Draft/Pay Order/Banker’s Cheque No. _______ dated________ payable at _________.

(3)  Now, therefore, the undersigned request you to take action to strike off the name of the company from the register.

Yours faithfully,

Names and addresses of applicants (directors)

1.Signature

2. Signature

Date :

ANNEXURE-B

AFFIDAVIT

We, the following Directors of ___________________________________ Private/Limited, (hereinafter called “the Company”), incorporated on ___/___/_____ under the Companies Act, 1956 and having its Registered Office at __________________________________________________:

1. Shri_______________, S/o. Shri___________, presently residing at___________________ and having permanent address at___________________ and having PAN No._______________.

2. Shri ______________, S/o. Shri ___________, presently residing

at ___________________ and having permanent address at___________________ and having PAN No._______________.

3. at ___________________ and having permanent address at___________________ and having PAN No._______________.

do solemnly affirm as under:

1.  The Company was incorporated on __________________ with the object to carry on the business of:- ______________________________________

_____________________________________________________________.

2. We are the directors of ________________________________________

Private / Limited.

3. The Company has been inoperative right from the date of its incorporation / for the past __________________ years due to diverse reasons.

4. That a resolution has been passed to approach the Registrar of Companies to strike off the name of company under section 560 he Companies Act, 1956, in the meeting of Directors held on……….

5. As on date the Company is not having any dues towards Income Tax / Sales Tax / Central Excise/ Banks and Financial Institutions or any other Central or State Government Departments / Authorities or any local authorities.

6. That an application is hereby filed for action under section 560 of the Companies Act, 1956, before the Registrar of Companies with necessary fees and required balance sheet.

7. In case of any loss(es) to any person or any valid claim from any person, if any, arising out of the striking off the name of the Company from the Register of Companies, by the Registrar of Companies, ___________, we the Directors of the Company jointly and severally, undertake to indemnity any person for any such losses and the indemnity bond to this effect is enclosed.

We solemnly affirm that this declaration is true to the best of our knowledge and belief and that it conceals nothing and that no part of it is false.

Place:                                       Signature: 1. Shri____________________

2. Shri____________________

Date:                                                           3. Shri____________________

[Delete wherever not applicable]

ANNEXURE-C

INDEMNITY BOND

1. We Shri _______________, S/o Shri ________________, residing at ___________,Shri _______________, S/o Shri __________________, and Shri________________S/o Shri__________________________residing at ____________________, do hereby jointly and severally declare that:

(a) We are the Directors of _______________________Private/ Limited, a Company incorporated on ___________ under the Companies Act, 1956 whose Registered Office is situated at _____________________________.

(b) That we have mad an affidavit dated _____ the ______, _______ duly sworn before notary public affirming that the Company ______________         __________________________Private/Limited, has assets worth Rs.________/- in the form of ____________. The Company has no liabilities.

(c) Further the Company is not doing / carrying on any business right from the date of its incorporation and the Company is also not intending to do any business or commercial activity as laid down in the main objects of its Memorandum of Association in future.

(d) Thus the Company is defunct and is requesting the Registrar of Companies, _______________ to strike off the name of the Company from the Register of Companies in terms of Section 560 of the Companies Act, 1956.

2. In view of the above, we do hereby undertake in writing:

(a) to pay and settle all lawful claims arising out of the striking off the name of the Company.

(b) to indemnify any person for any such losses that may arise pursuant to striking off the name of the Company.

(c) to settle all lawful claims and liabilities which have not come to our notice at this stage, even after the name of the Company has been struck off in terms of Section 560 of the Companies Act, 1956.

Place:                                                 Signature: 1._______________

2._______________

Date:                                                                  3._______________

WITNESSES:

1. Signature

Name:

Father’s name:

Address:

Occupation:

2. Signature

Name:

Father’s name:

Address:

Occupation:

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Category : Company Law (3434)
Type : Circulars (7506) Notifications/Circulars (30263)

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