Strike Off/Closure Of Company Pursuant To Section 248 Of Companies Act, 2013

Companies that do not intend to carry on their operations can apply for removal of their names from the Register of Companies (ROC) and the ROC can remove their names if it has reasonable cause to believe so. Striking off of the company’s name by the Register of Companies (RoC) is an alternative to winding up of company and below mentioned are the modes by which the Company’s name can be struck off from the Register of Companies:

A.        Strike off by the ROC under Section 248(1) of the Companies Act 2013,

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

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

Section 248(1) of the Companies Act, 2013 permit the Registrar of Companies(RoC) to suo motu remove the name of the Company on the following grounds:

 Grounds of Removal by ROC:

1. A company has failed to commence its business within one year of its incorporation; or
2. 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 a period for obtaining the status of a dormant company under Section 455.
3. 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 under sub­section (1) of section 10A.
4. 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.

Procedure followed by the Registrar for striking off the name of the Company:

1. The Registrar shall give 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 acknowledgment due or by speed post.
2. The notice shall contain the reasons due to which the name of the Company is to be removed from the Register of Companies 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 thirty days from the date of the notice.
3. A notice issued under sub-section (1) or sub-section (2) of Section 248 shall be published in the prescribed manner

Form STK-5 – http://www.mca.gov.in/MinistryV2/roc.html and

Form STK-6 – http://www.mca.gov.in/MinistryV2/publicnoticestk6.html and also in the Official Gazette for the information of the general public.

4. 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 register of Companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.
5. The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realization 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
6. The Registrar shall cause a notice under subsection (5) of section 248 of striking off the name of the company from the register of companies and its dissolution to be published in the Official Gazette in Form STK 7 and the same shall also be placed on the official website of the Ministry of Corporate Affairs.

In spite of the submission of the undertakings referred to in this sub-section, 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.

However, the following categories of Companies shall not be removed from the Register of Companies(ROC) pursuant to Rule 3 sub-rule (1) of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016:

1. Listed Companies;
2. Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
3. Vanishing Companies;
4. 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;
5. Companies, where notices under section 234 of the Companies Act, 1956 (1 of 1956) or Section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto, is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;
6. Companies against which any prosecution for an offence is pending in any court;
7. 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;
8. Companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
9. Companies having charges which are pending for satisfaction; and Companies registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013.

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

Section 248(2) of the Companies Act, 2013, without prejudice to the provisions of Sub-Section (1), 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 Form STK-2 to the Registrar with a fee of Rs. 10,000(Rupees Ten Thousand) for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the (Form STK 5 or Form STK 6, as the case may be) in prescribed manner.

In the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act (in the form of No Objection Certificate) shall also be obtained and enclosed with the application.

Manner of filing of Application:

1. The application in Form STK-2 shall be signed by a director duly authorized by the board on their behalf.
2. If Directors do not have Digital Signature: A physical copy of the form duly filled in shall be signed manually by the director duly authorized in that behalf and shall be attached with the Form STK 2 while uploading the form.
3. Form STK 2 shall be certified by a Company Secretary/Chartered Accountant/Cost Accountant in Whole Time Practice.

Procedure to be followed in case the application is made by the Company:

1. Convene a Board meeting and pass a Board resolution for strike off the Company name subject to the approval of member
2. Convene a General meeting of members of the Company and obtain shareholder’s approval by passing a Special resolution or consent of 75%. members in terms of paid-up share capital, file an application in Form STK-2 to the Registrar with a fee of Rs. 10,000(Rupees Ten Thousand)
3. Filing Form STK-2 which shall be accompanied by:
4. Indemnity Bond duly notarised by every director in Form STK-3
5. Statement of Accounts in Form STK-8 containing assets and liabilities, made up to a day, not more than 30 days before the date of application and certified by Chartered Accountant
6. Affidavit by every director of the company in Form STK -4
7. Copy of 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.
8. A statement regarding pending litigations, if any, involving the company.
9. Publication of notice by the Registrar of Companies (ROC), after filing an application for strike off by the Company, the ROC shall publish a public notice in Form STK-6 inviting objections to the proposed Strike off, if any. The objections are to be sent to the respective ROC within thirty days from the date of publication.
10. The notice shall be placed on the website of the Ministry of Corporate Affairs, published in the Official Gazette and published in a leading English newspaper and at least in one vernacular newspaper where the registered office of the company is situated.
11. The Registrar of Companies shall simultaneously intimate the concerned regulatory authorities regulating the company, viz, the Income-tax authorities, central excise authorities, and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections, if any.
12. The Registrar of Companies after having apprised with the consequence shall strike off the name and dissolve the Company and a Notice of striking off and its dissolution to be published in the Official Gazette in Form STK 7(http://www.mca.gov.in/MinistryV2/stk7publicnotices.html). On the publication in the Official Gazette of this notice, the company shall stand dissolved with effect from the date mentioned therein. The same shall also be placed on the official website of the MCA.
13. 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 under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.

Restriction on making application under section 248 in certain situations pursuant to Section 249 of Companies Act, 2013:

1. An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company:
   • has changed its name or shifted its registered office from one State to another;
   • has made a disposal for value of property or rights held by it, immediately before ceasing the 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;
   • has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company or complying with any statutory requirement;
   • has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
   • Is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016
2. If a company files an application under sub-section (2) of section 248 in violation of subsection (1) of Section 249, it shall be punishable with fine which may extend to one lakh rupees.
3. An application filed under sub-section (2) of section 248 shall be withdrawn by the company or rejected by the Registrar as soon as conditions under sub-section (1) of Section 249 are brought to his notice.

 Penalties

1. If a company files an application under voluntary strike-off pursuant to sub-section (2) of Section 248 in violation to strike off of Company by Registrar of Companies (ROC) pursuant to subsection (1) of Section 248 then it shall be punishable with fine which may extend to 1,00,000(Rupees One Lakh).
2. If any application is filed with the intention to defraud, then Section 251(1) provides that where it is found that an application by a company 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, 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 be punishable for fraud in the manner as provided in Section 247. Furthermore, ROC may also recommend the prosecution of the persons responsible for the filing of an application under Section 248(2).

Disclaimer:

The entire contents of this document have been developed based on relevant information and are purely for private circulation. Though the authors have made utmost efforts to provide authentic information however, the authors expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.