Striking off the name of a company is an alternative mechanism for closing the operations of the company. The Registrar of Companies (‘ROC’) can issue a notice to strike off the company name from the Register of Companies for certain reasons. The company can also apply for the ROC to strike off its name from the Register of Companies.
Section 248 to 252 of the Companies Act, 2013 (‘Act’) provides the procedure of striking off company names by the ROC or voluntary by the company. Strike off of a company name means closing a defunct company in a faster manner. It is the simplest way to dissolve a company.
Voluntary Application to Strike Off a Company
A company can pass a special resolution or obtain the consent of 75% of members (in terms of the paid-up capital) to file an application to the ROC for removing its name from the Register of Companies. The company can apply to the ROC for removing its name after extinguishing all its liabilities on either or all of the following grounds:
- The company fails or does not commence business within one year of incorporation
- The company is inoperative or does not carry out any business for two preceding financial years and has not filed an application within such period for getting the status of a dormant company under Section 455 of the Act.
On receiving the application by the company for striking off the company name, the ROC shall issue a public notice in the manner prescribed under the Act.
Restriction for Filing Voluntary Application to Strike Off by a Company
The company cannot apply for striking off the company name if, at any time in the past three months, the company:
- has made a disposal for value of rights or property held by it, immediately before the cessation of trade, for the purpose of disposal for gain in the normal course of carrying out business or trading
- has shifted its registered office from one state to another or changed its name
- has filed an application to the National Company Law Tribunal (‘Tribunal’) for sanctioning of an arrangement or compromise, and the matter has not been finally concluded
- has engaged in other activities except for the one that is expedient or necessary for making an application or complying with a statutory requirement, or concluding the affairs of the company
- is being wound up under Chapter XX of the Act, whether by the Tribunal or voluntarily
If a company applies for striking off its name in violation of the above conditions, it can be punishable with a fine that may extend to Rs.1 lakh.
Striking Off Company Name by ROC
The ROC will send a notice to the company and its directors of the intention to remove the company name/strike-off company name from the Register of Companies if there is a reasonable cause to believe that:
- the company fails or does not commence business within one year of incorporation
- the company is inoperative or does not carry any business for two preceding financial years and has not filed any application within such period for getting the status of a dormant company under Section 455 of the Act
The ROC will request the company to send its representations with copies of the relevant documents within thirty days from issuing the notice of striking off the company name.
Procedure for Striking Off Company Name
A notice issued by the ROC for striking off the company name or application filed by a company for striking off its name should be published in the Official Gazette for informing the general public. The ROC will strike off the company name from the Register of Companies upon the expiry of the specified time in the notice for striking off unless the company shows the contrary reason for the same within the mentioned time.
The ROC will publish the dissolution notice in the Official Gazette after striking off the company name in the Register of Companies. Upon publication of the notice in the Official Gazette, the company will stand dissolved.
Before passing an order of company dissolution and striking off the company name, the ROC will satisfy itself that sufficient provision is made for the payment or discharge of company liabilities, the realisation of amounts due to the company and its obligations within a reasonable time.
The ROC will also obtain the necessary undertaking from the director, managing director or other persons in charge of the company management in this regard.
However, the company’s assets will be available for the discharge or payment of its obligations and liabilities even after the date of the order of removing the company name from the Register of Companies.
The liability of every manager, director, or other officer exercising any power of management and every member of the dissolved company will continue, and it can be enforced as if the company had not been dissolved.
Effect of Company Notified as Dissolved
When a company is dissolved under Section 248 of the Act after issuing notice in the Official Gazette, it ceases to operate from the date mentioned in the notice published in the Official Gazette.
The Certificate of Incorporation issued by the ROC shall be deemed to be cancelled from the date of such dissolution. However, the Certificate of Incorporation will be valid for payment or discharge of the company liabilities, realising the amount due to the company and discharge of company obligations.
Appeal to Tribunal Against Dissolution of Company
Any individual aggrieved by the ROC order notifying that a company is dissolved under Section 248 of the Act can file an appeal to the Tribunal within three years from the ROC order date.
The Tribunal can pass an order to restore the company name in the Registrar of Companies if it is of the belief that the removal of the company name is not justified due to the absence of the grounds on which the ROC passed the order. The Tribunal should give a reasonable opportunity to the ROC, the company and all the concerned persons of making representations and hearing.
The company should file a copy of the order passed by the Tribunal with the ROC within thirty days from the Tribunal order date. Upon receipt of the order, the ROC shall restore the company name in the Register of Companies and issue a fresh Certificate of Incorporation.
The ROC can apply to the Tribunal seeking restoration of the company name if it is satisfied that the company name has been struck off from the Register of Companies based on incorrect information furnished by the directors or company or inadvertently and requires restoration. The ROC can file to the Tribunal to restore the company name on the Register of Companies within three years from the dissolution order’s date.