Strike Off of Company Name With Rules: A Detailed Analysis

♦ Section – 248: Power of Registrar to Remove Name of Company from ROC:

Sec – 248(1): Where the Registrar has reasonable cause to believe that:

(a) a company has failed to commence its business within 1 year of its DOI or;

(b) Omitted

(c) a company is not carrying on any business or operation:

• for a period of 2 immediately preceding FY’s and
• has not made any application within such period for obtaining the status of a dormant company U/s. 455 or
• 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 ROC and
• requesting them to send their representations along with copies of the relevant documents,  if any, within a period of 30 days from the date of the notice.

(d) the subscribers to the MOA have not paid the subscription which they had undertaken:

• to pay at the time of incorporation of a company and
• a declaration to this effect has not been filed within 180 days of its DOI U/s. 10A(1); or

(e) the company is not carrying on any business or operations, as revealed after the physical verification carried out U/s.12(9).

Sec – 248(2): Without prejudice to the provisions of section – 248(1), a company may,

• after extinguishing all its liabilities,
• by a special resolution or consent of 75% members in terms of paid-up share capital,
• file an application in the prescribed manner to the Registrar for removing the name of the company from the ROC on all or any of the grounds specified in sec – 248(1) and

the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner:

Provided that in the case of a company regulated under a special Act:

• approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.

Sec – 248(3): Section – 248(2) shall NOT apply to a company registered U/s. 8.

Sec – 248(4): A notice issued U/s. 248(1) or (2) shall be published in the prescribed manner and also in the Official Gazette (O.G.) for the information of the general public.

Sec – 248(5): At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company:

• strike off its name from the ROC, and
• shall publish notice thereof in the O.G., and
• on the publication in the O.G., the company shall stand dissolved.

Sec – 248(6): The Registrar, before passing an order U/s. 248(5), shall satisfy himself that:

• sufficient provision has been made for the realisation of all amount due to the company and
• for the payment or discharge of its liabilities and obligations by the company within a reasonable time and,
• if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company:

Provided that notwithstanding the undertakings, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations:

• even after the date of the order removing the name of the company from the ROC.

Sec – 248(7): 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 U/s. 248(5),

shall continue and may be enforced as if the company had not been dissolved.

Sec – 248(8):  Nothing in this section shall affect the power of the Tribunal:

• to wind up a company the name of which has been struck off from the ROC.

♦ Section – 249: Restrictions on Making Application U/s. 248 in Certain Situations.

Sec – 249(1): An application U/s. 248(2), on behalf of a company shall not be made if, at any time in the previous 3 months, the company:

(a) has changed its name or shifted its registered office from one State to another;

(b) 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;

(c) has engaged in any other activity except the one which is

• necessary or expedient for the purpose of making an application U/s. 248(2), or
• deciding whether to do so or concluding the affairs of the company, or
• complying with any statutory requirement;

(d) has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

(e) is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016.”

Sec – 249(2): Penalty for violation of section – 248(1):

• Fine – Maximum Rs. 1,00,000/-

Sec – 249(3): An application filed U/s.  248(2):

• shall be withdrawn by the company or
• rejected by the Registrar

 as soon as conditions U/s. 248(1) are brought to his notice.

♦ Section – 250: Effect of Company Notified as Dissolved:

Where a company stands dissolved U/s. 248:

• it shall on and from the date mentioned in the notice U/s. 248(5),
• cease to operate as a company and
• Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except:

√ for the purpose of realising the amount due to the company and

√  for the payment or discharge of the liabilities or obligations of the company.

♦ Section – 251: Fraudulent Application for Removal of Name:

Sec – 251(1): Where it is found that an application by a company U/s. 248(2), has been made with the object of:

• evading the liabilities of the company or
• with the intention to deceive the creditors or
• to defraud any other persons,

the persons in charge of the management of the company shall, notwithstanding that the company has been notified as dissolved:

(a) be jointly and severally liable to any person or persons who had incurred loss or damage as a result of the company being notified as dissolved; and

(b) be punishable for fraud in the manner as provided in section – 447.

Sec – 251(2): Without prejudice to the provisions contained in section – 248(1):

• Registrar may also recommend prosecution of the persons responsible for the filing of an application U/s. 248(2).

♦ Section – 252: Appeal to Tribunal:

Sec – 252(1): Any person aggrieved by an order of the Registrar, notifying a company as dissolved U/s. 248, may, file an appeal to the Tribunal:

• within a period of 3 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 ROC 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 ROC:

Provided that before passing any order U/s. 252(1), the Tribunal shall:

• give a reasonable opportunity of making representations and
• of being heard to the Registrar, the company and all the persons concerned:

Provided further that if the Registrar is satisfied that:

• the name of the company has been struck off from the ROC either inadvertently or
• on the basis of incorrect information furnished by the company or its directors,
• which requires restoration in the ROC,

he may within a period of 3 years from the date of passing of the order dissolving the company U/s. 248,

• file an application before the Tribunal seeking restoration of name of such company.

Sec – 252(2): A copy of the order passed by the Tribunal:

• shall be filed by the company with the Registrar
• within 30 days from the date of the order and

on receipt of the order, the Registrar shall cause:

• name of the company to be restored in the ROC and
• shall issue a fresh Certificate of Incorporation.

Sec – 252(3): If a company, or any member or creditor or workman thereof feels aggrieved by the company:

• having its name struck off from the ROC,
• Tribunal on an application made by the company, member, creditor or workman
• before the expiry of 20 years from the publication in the O.G. of the notice U/s. 248(5),

may, if satisfied that the company was at the time of its name being struck off:

• carrying on business or in operation or
• otherwise it is just that the name of the company be restored to the ROC,
• order the name of the company to be restored to the ROC,

and the Tribunal may, by the order,

• give such other directions and make such provisions as deemed just for placing the company and
• all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the ROC.

♦ Rule3: Removal of name of company from the Register on suo-motu basis:

Rule-3(1): The ROC may remove the name of a company from the ROC in terms of section 248(1) of the Act:

Provided that following categories of companies shall not be removed from the ROC under this rule – 3 and 4, namely:

(i)  listed companies;

(ii) companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;

(iii) vanishing companies;

(iv) companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation  are pending in the Court;

(v) companies where notices U/s. 234 of the Companies Act, 1956 or section 206 or 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under U/s. 208 has not yet been submitted or follow up of instructions on report U/s. 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;

(vi) companies against which any prosecution for an offence is pending in any court;

(vii) companies whose application for compounding is pending before the competent authority for compounding the offences committed by the  company or any of its officers in default;

(viii) companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

(ix) companies having charges which are pending for satisfaction; and

(x)  companies registered U/s. 25 of the Companies Act, 1956 or section 8 of the Act.

√ “vanishing company” means a company,

• registered under the Act or previous company law or any other law for the time being in force and
• listed with Stock Exchange
• which has failed to file its returns with the ROC and Stock Exchange
• for a consecutive period of 2 years, and
• is not maintaining its registered office at the address notified with the ROC or Stock Exchange and
• none of its directors are traceable.

Rule-3(2): For the purpose of rule – 3(1), the Registrar shall

• give a notice in writing in Form STK – 1
• which shall be sent to all the directors of the company
• at the addresses available on record, by registered post with acknowledgement due or by speed post.

Rule-3(3): The notice shall contain:

• the reasons on which the name of the company is to be removed from the ROC and
• shall seek representations, if any, against the proposed action from the company and its Directors
• along with the copies of relevant documents, if any,
• within a period of 30 days from the date of the notice.

♦ Rule-4: Application for removal of name of company:

Rule-4(1): An application for removal of name of the company U/s. 248(2) shall be made in Form STK-2 along with the fee of Rs. 10,000:

Provided that no application in Form No. STK-2 shall be filed by a company unless it has

• filed overdue returns in Form No. AOC-4(Financial Statement) or AOC-4 XBRL and Form No. MGT-7(Annual Return),
• up to the end of the FY in which the company ceased to carry its business operations:

Provided further that in case a company intends to file Form No.STK-2

• after the action U/s. sec – 248(1) has been initiated by the Registrar,
• it shall file all pending overdue returns in Form No.AOC-4 (Financial Statement) or AOC-4 XBRL, as the case may be, and Form No.MGT-7(Annual Return) before filing Form No.STK-2:

Provided also that once notice in Form No. STK-7 has been issued

• by the Registrar
• pursuant to the action initiated U/s. 248(1),
• a company shall not be allowed to file an application in Form No. STK-2.

Rule-4(2): Every application under rule – 3(1) shall accompany a no objection certificate from  appropriate Regulatory Authority concerned in respect of following companies, namely :-

(i) companies which have conducted or conducting non-banking financial and investment activities as referred to in the RBI Act, 1934 (2 of 1934) or rules and regulations thereunder;

(ii) housing finance companies as referred to in the HFC (NHB) Directions, 2010 issued under the NHB Act, 1987 (53 of 1987);

(iii) insurance companies as referred to in the Insurance Act, 1938 (4 of 1938) or rules and regulations thereunder;

(iv) companies in the business of capital market intermediaries as referred to in the SEBI Act, 1992 (15 of 1992) or  rules and regulations thereunder;

(v) companies engaged in collective investment schemes as referred to in the SEBI Act, 1992 (15 of 1992)  or  rules and regulations thereunder;

(vi) asset management companies as referred to in the SEBI Act, 1992 (15 of 1992) or rules and regulations thereunder;

(vii) any other company which is regulated under any other law for the time being in force.

Rule-4(3): The application in Form STK-2 shall be accompanied by:

(i) indemnity bond duly notarised by every director in Form STK-3;

Provided that in case of a:

(a) Government company in which the entire paid up share capital is held by the CG, or by any SG or Governments or by the CG and one or more SG’s; or

(b) subsidiary of a Government company, referred to in clause (a), in which the entire paid up share capital is held by that Government company, a duly notarised indemnity bond in Form STK-3A shall be given by an authorised representative, not below the rank of Under Secretary or its equivalent, in the administrative Ministry or Department of the GOI or the SG, as the case may be, on behalf of the company;

(ii) a statement of accounts in Form No. STK-8 containing assets and liabilities of the company made up to a day, not more than 30 days before the date of application and certified by a Chartered Accountant;

(iii) An affidavit in Form STK-4 by every director of the company;

(iv)  a copy of the special resolution duly certified by each of the directors of the company or consent of 75% of the members of the company in terms of paid up share capital as on the date of application;

(v) a statement regarding pending litigations, if any, involving the company.

♦ Practical Questions:

 1. What are the various forms in which notice can be issued by Registrar for the removal of names of companies from the ROC?

Answer: The notice U/s.  248(1) of the Companies Act, 2013 is in Form STK-5 and U/s. 248(2) in Form STK-6.

Such notices are:

(i) Placed on the official website of the MCA on a separate link established on such website in this regard; and

(ii) Published in the O.G.

(iii) published in English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated. When the said notice is published U/s. 248(1), the prescribed form for the same is Form STK-5A, while for the purpose of section 248(2), the prescribed form remains the same, i.e., Form STK-6.

2. Pursuant to section 248(1) of the Act, the Registrar on the satisfaction of certain conditions, may send a notice to the company stating his intention to remove the name of the company from the ROC. Is there a draft format of such notice?

Answer: The Companies (Removal of Names of Companies from the ROC) Rules, 2016 have been amended to include Form STK-5A, i.e., a standard Public Notice to the companies to be issued by the Registrar in pursuance of section 248(1) and (4) of the Act stating the reason for proposing removal of a company’s name from the ROC and requisitioning objections if any within a period of 30 days from the date of publication of the notice.

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