Company Strike off by ROC

Strike off in general term is known as to remove or erase someone from somewhere from which it used to exist. In business term strike off of Companies means cessation of existence of a Company and removing the name of the Company from the database of list of companies maintained with the Ministry of Corporate Affairs of India.

1. Company Strike off by ROC

2. What is Strike Off Strike off in general term is known as to remove or erase someone from somewhere from which it used to exist. In business term strike off of Companies means cessation of existence of a Company and removing the name of the Company from the database of list of companies maintained with the Ministry of Corporate Affairs of India. 2

3. Type of Strike Off Company can exit from its corporate entity in two ways. In both cases existence of Company puts to an end. Suo Moto/Voluntary Strike Off : When a Company itself makes an application to the Registrar of Companies for removal of its name from database of Registrar, it is called as Strike off by the Company on its own. To read more about voluntary strike off click here. Compulsory/Mandatory Strike Off : The Registrar of the Companies when satisfied that Company is not carrying any business or not complied certain provisions , the Registrar on its own issue notice to the Company for its striking off. 3

4. Rationale behind Strike off by ROC In recent past years, MCA has realised that there are various companies in India which are incorporated under an Act but they are not doing any business. Such Companies are generally called as shell companies which are created for purpose for money laundering or to show paper transaction to avail tax exemptions. The Companies Act, 2013 does not define the term Shell Company. However, the Organization for Economic Cooperation and Development (OECD) defines a Shell Company as a company which is formally registered or otherwise legally organized in an economy but which does not conduct any operation in that economy. As per official documents, 2.97 lakh companies were identified under this category as on 31.03.2017 and after following due process names of 2,26,166 companies were struck off from the ROC as on 31.12.2017. Over 4.3 lakh inactive companies, including shell companies, had been struck off the ROC since Financial Year 2018, with around 55,000 companies being struck off after the latest effort to identify such corporates. There were around 11.87 lakh active companies as on January 31, 2020, according to government data. 4

5. When ROC Strike Off a Company Every Company while in its subsistence is legally bound to comply with the provisions of the Act and to submit returns or documents in timely manner as per the Act and to carry business for which company was incorporated. When the ROC has reasonable cause the believe that any Company is not following the provisions of the Act and is in default for certain compliance, then in such case the ROC has power to remove the name of the Company from ROC. Section 248(1) states that in below given conditions, the Registrar has power to remove name of company after serving notices and giving reasonable opportunity of being heard: When a company has failed to commence its business within one year of its incorporation. When a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company. i.e. Non submission of annual return and annual financial statements. 5

6. When ROC Strike Off a Company When the subscribers to the memorandum 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 one hundred and eighty days of its incorporation.   When the company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12. i.e. inspection of registered office of the Company. 6

7. Steps to be taken by ROC for Strike Off 7 The Registrar has reason to believe that Company breaches condition given in section 248(1) of the Act The Registrar will send notice to the Company and all Director in Form of STK-5 Notice will state intention of the Registrar to remove the name of the Company Notice shall provide opportunity to make representation within 30 days of date of notice The ROC will also publish a notice in the Official Gazette and in newspaper for the information of the general public in Form of STK-5

8. Steps to be taken by ROC for Strike Off 8 The ROC will inform authorities like IT, Excise etc. for seeking objection, if any, in 30 days and in case of no reply, it shall be considered as Deemed Consent. If representation not received with 30 days or representation not seem satisfactory, ROC will Strike Off the name of the Company If Company comply with all pending returns or give proper justification ROC if satisfied will not strike off the name of the Company The ROC will again also publish a notice in the Official Gazette for the information of the general public in STK-7 The ROC will also publish the notice on the website of the MCA

9. Restriction on ROC to issue Strike Off Notice As per rule 3 of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 following companies can not be removed by the ROC : Listed Companies; Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws; Vanishing Companies; Companies where inspection or investigation are pending in the Court; Companies where any prosecution, inquiry or scrutiny, if any, is pending with the Court arising out non-compliance of provisions of the Act or old act; Companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same; Companies having charges which are pending for satisfaction; and Companies registered under section 8 of Companies Act, 2013 or section 25 of erstwhile Companies Act, 1956 9

10. Legal Aspects of Strike Off As per section 250 of the Act, Name of the Company will be removed from the ROC. The COI 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.  As per section 248 of the Act, The liability, if any, of every director, other officer who was exercising any power of management and of every member of the company dissolved shall continue and may be enforced as if the company had not been dissolved. The ROC, 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:   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 register of companies. 10

11. Restoration of Struck Off Companies Section 252 of Companies Act, 2013 states the provision where a struck off company can be restored after making an appeal to NCLT. Such appeal can be filed in three ways as given below: By Aggrieved Person : If a Company got struck off and any person is aggrieved by such order he may file an appeal to NCLT within a period of 3 years from the date of order. If NCLT is of opinion that strike off was not justified, it can order to restore the Company in the Register of Companies. In such case NCLT shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned. 2. By Registrar of Companies If a Company got struck off and ROC is satisfied that name got struck of inadvertently or on the basis of incorrect information furnished by the company, ROC may within a period of 3 years from the date of order make an appeal to NCLT. 11

12. Restoration of Struck Off Companies If NCLT is of opinion that strike off was not justified, it can order to restore the Company in the Register of Companies. In such case NCLT shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned. 3. By Company or member or creditor or workman After strike off of Company, the company, member, creditor or workman may file an appeal to NCLT before the expiry of 20 years from the date of order to restore the name of the Company. If NCLT is of opinion that strike off was not justified, it can order to restore the Company in the Register of Companies. In such case NCLT shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned 12

13. ROC Strike Off Forms at Glance 13 STK 5 Public notice given by the Registrar when Registrar gives notice to Company STK 7 Notice of Strike off of Company by the Registrar

14. 14 THANKS! Any questions? You can find us at [email protected] www.legaldelight.com [phone]