Procedure for Striking off a Company under Companies Act 2013

Narendra Kumar

06 Sep, 2022

We all must have heard about the defaulting companies’ situation. MCA had issued a notice to all defaulting company and asked to revert within 30 days, a failure which may result in the name of the company will be struck off from the registrar. The main grounds of notices were a failure of commencement of Business and failed to file annual returns financial statements in the last two years. In this article, we will discuss the procedure for Striking off a company under the Companies Act.

Overview:

MCA has revised the procedure of striking off the name of the company from the register of companies maintained by the Registrar of Companies vide its notification dated 26^th December 2016 on notifying Section 248 to 252 of the Companies Act, 2013. The provisions relating to Strike Off provide an opportunity to the defunct companies to get their names struck off from the records of the ROC. To provide a procedural aspect of Strike Off under Act, MCA has issued Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016.

Modes of Strike Off:

As per the Companies Act, 2013 there are two modes of strike off as below:

• Strike off by ROC under Section 248(1) of the Companies Act 2013
• Strike off by Company by its own under Section 248(2) of the Companies Act 2013.

Strike off by ROC under Section 248(1) of the Companies Act 2013:

Grounds of strike off:

The ROC may remove the name of a company from ROC on below following grounds:

• A company has failed to commence its business within one year of incorporation;
• The company is not carrying out any business or Activity for the preceding 2 financial years and has not sought the status of Dormant Company under Section 455 of the Act.

By above grounds, the ROC shall send notice to the Company informing his intention to remove the company’s name from the record and request the company to send its representative.

Procedure for Strike Off:

• ROC shall send notice in STK-1 to the Company and all the Directors by speed post.
• The notice shall contain the reason for the removal of the name and seek the representative of the Company.
• The Company shall send the required documents and representation within 30 days from the date of the notice.
• On satisfaction of representation, the ROC may drop out the strike off. IF ROC is not satisfied, then it may proceed with a strike off the name of a company.
• The notice for removal of name under sub-section (1) of section 248 in STK-5 shall be published on the official website of MCA, in Official Gazette, English newspaper and one vernacular language at the place registered office is situated.
• TO ROC shall also intimate to the Authorities regulating the Company about the proposed action of removal or striking off the names of such companies.
• If no cause to the contrary is shown by the company, ROC may on expiry of the time mentioned in the notice strike off the name of the Company and shall be published in Official Gazette.

Effect of Dissolution:

• The company shall cease to operate from the date of dissolution and Certificate of Incorporation shall stand canceled.
• The liabilities of managers, directors, and officers shall remain the same as if the Company had not been dissolved.

Restriction on below Companies:

• Companies Registered Under Section 8 Company
• Listed companies
• Companies which are delisted for non-complaining of listing regulations or listing agreement or any other statutory laws;
• Vanishing companies;
• Any inspection or investigation is ordered and being carried out against Company
• Companies, where notices have been issued by the Registrar or Inspector and reply, is pending.
• Any prosecution for an offense is pending in any court against the Company;
• Companies whose application for compounding is pending;
• Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
• Any charge satisfaction is pending against the Company.

Striking off by Company by its own under Section 248(2) of the Companies Act 2013:

Grounds of strike off:

The Company without prejudicing the provisions of above may by its own by passing special resolution strike off the name of the Company on the grounds mentioned in Section 248(1).

Procedure for Strike Off:

• The Company shall hold Board Meeting to get approval from the Board of Directors for striking of a name of the Company and shall approve the notice of EGM.
• The Company shall take approval from Shareholders bypassing the special resolution in General Meeting for such strike off.
• The Company is regulated by any other authority than shall take approval from them.
• After taking approval the Company shall file an application in form STK-2 along with the following documents:
• STK 3: An indemnity bond by every director duly notarized.
• STK 4: An affidavit by every director of the Company.
• Statement of accounts containing assets and liabilities of the company made up for a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
• a copy of the special resolution duly certified by each of the directors of the company or consent of seventy-five percent of the members of the company regarding paid-up share capital as on the date of application;
• A statement regarding pending litigation, if any, involving the company.
• After receiving an application, ROC shall publish a public notice STK-6. Any objection to the proposed strike off shall be sent within 30 days.
• After complying with all the process, ROC shall strike off the name and dissolve the company by sending notice in the official gazette in form STK-7.

Restriction for making an application by Company by its own:

The Company cannot make an application on its own if the following transaction is made at any time before 3 months of making an application:

• Any change in the name of the Company
• Change in registered office from one state to another state.
• The company has made a disposal of a value of property or rights held by it, immediately before cesser of trade business.
• The company has engaged in any other activity except the one which is mandatory or expedient for the purpose of making an application under that section.
• An application has been made by the company to the National Company Law Tribunal (“Tribunal”) for the sanctioning of a compromise or arrangement, and the matter has not been finally concluded.
• The company is being wound up under Chapter XX^[1] by the Tribunal.

Read our article:Understanding the Provision Regarding Strike off of LLP