Striking-off of the Companies under Companies Act, 2013

Background

An alternative mechanism to the Winding up of a Company is striking off the Company.

The Companies Act facilitates two modes of strike-off

-Strike off by the Registrar of Companies (Under Section 248(1) of Companies Act, 2013.

-Strike off by a Company on its own accord under Section 248(2) of Companies Act, 2013.

Grounds on which provision of Strike-off could be enacted (Section 248)

• Where the company hasn’t commenced its business within one year of its Incorporation.

• Where the company hasn’t been pursuing any business or activity for the preceding two financial years, for which it hasn’t sought the status of Dormant Company under section 455 of the Act.

Note:

Dormant means inactive or inoperative, a Company is dormant where it has been registered under Companies Act for future project or to hold an assets or intellectual property but isn’t pursuing any significant accounting transactions.

Strike off by ROC:

• The Registrar of Companies may issue a notice the Companies and its Directors in Form STK-1 (Removal of Names of Companies) if he/she holds a reasonable cause as specified above.

• Such a Notice would inform the respective companies of the removal of its name from the record and request it to send its representatives with the requisite documents within 30 days of the issue of such notice.

Strike off on the Company’s accord:

A company may file an application to Registrar of Companies in E-Form STK-2 after closing of its liabilities and passing special resolution, which must be consented by Seventy-five per cent of its members.

Procedure for Strike Off:

1. Hold Board Meeting:

Hold Board Meeting to pass resolution for striking off the name of the Company and appointing any one the director /Company Secretary to apply for the same with the ROC.

2. Clearing of Remaining Liabilities:

Once Board Resolution has been passed, the company shall clear all the remaining liabilities, if any

3. Hold General Meeting

Hold General Meeting and pass a resolution for striking off of the company by taking approval from 75% members as per the paid up share capital of the company.

4. E-form filing

Company shall file E-form MGT-14 within 30 days of such resolution being passed.

Application and documents:

Companies will file an application to the Registrar of Companies in pursuit to strike-off accompanied by the following documents:

• Indemnity Bond duly notarized by all Directors (In form STK-3)

• A statement of liabilities comprising of all assets and liabilities of the companies (certifies by a Chartered Accountant)

• Copy of Special resolution being passed with signatures of every director of the company.

• An affidavit in Form STK-4(by all directors of the Company)

• A statement concerning any pending litigations with respect to the company.

Note: Annual filing is necessary before applying for strike off but ROC may approve forms without annual filing if ROC finds there have been no transactions and bank account is not operational.

Non- Qualifying Companies for Strike –off:

Vanishing Companies.

Listed Companies.

Companies which have been listed for inspection or investigation –if such directive is being carried out/pending/completed but prosecutions concerning such inspection or investigation are pending in the court of law.

• A company which hasn’t yet responded to notices of select provisions.

• Companies which hasn’t furnished the follow-up instructions any report under Section 208 of Act.

• If the prosecutions related to the above two provisions are pending in a Court of law.

• Companies against which any case for prosecution is pending in a court of law.

• Companies accepting any public deposits which are outstanding.

• Companies having any charges which remain to be satisfied.

• Companies registered under Section 25 of Companies Act, 1956 or Section 8 of Companies Act, 2013.

Restrictions on making Applications for Strike off

Companies are restricted on filling applications for strike-off, if any time during the last three months, it has:

• Made a disposal for the value of property or rights held by it (subject to conditions)

• Changed its name or relocated its registered office to another state.

• Engaged in any other activity other than what is necessary or expedient for making application under the concerned provision, and so and so forth.

• Filed an application to the Tribunal for the granting of Compromise or arrangement, and a consensus for the same hasn’t yet been arrived at

• Been wound up under Chapter XX, whether voluntarily, by the Tribunal or under the Insolvency and Bankruptcy Code (IBC), 2016.

Penalty of Not adhering with the requirement mentioned under Companies Act, 2013

 In case of Company:

Where Company fails to abide by the requirement of Section 455 of Companies Act, 2013 and Companies (Miscellaneous) Rules, 2014 which states the provisions of filing of Annual return within 30 days from the end of financial year the ROC will strike off the name of such Company from register.

Also every officer in default and the company who does not comply with the provision and rules under Companies act, 2013 will be reprimanded under Section 450 of Companies Act, 2013.