In the current scenario, there are certain companies which are inoperative or not working from the date of the incorporation and are lying idol without any statutory compliances. Since, the Ministry of Corporate Affairs have increased the form fee manifolds as well as introducing various new compliances from time to time, in these scenarios these type of companies are willing to get the name of the company strike off from the Register of Companies registered under the Ministry of Corporate Affairs.
In this article, we shall discuss the procedure and conditions to be fulfilled by the Companies which are willing for the voluntary striking off the name of the Company. The Ministry of Corporate Affairs has notified the sections 248 to 252 along with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 on 26th December 2016 in which all the procedures have been laid down regarding the striking off the company.
- Conditions to be fulfilled for the voluntary striking off the name of the company
For opting for the voluntary striking off the name of the company from the Register of Companies, the Company shall have:-
- A company has failed to commence its business within 1 year of its incorporation;
- A company is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.
- Provisions not applicable to the Companies
The said provision of the striking off the name shall not apply to the following companies:-
- Companies registered under section 8;
- 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 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;
- Companies where notices under section 234 of the Companies Act, 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;
- Companies against which any prosecution for an offence is pending in any court;
- 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;
- 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
- Restriction on making application in certain conditions
There are also certain restrictions on the point of making an application for the striking off the company.
Section 249 says that the application under section 248(2) shall not be made if, at any time in the previous 3 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 cesser of 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
- Procedure for making application for strike off
The procedure for filing the application of voluntary striking off the company in Form STK – 2 having fee of Rs. 10,000/- we.f. 10-05-2019 is as follows:-
- The company shall have extinguished all its liabilities;
- The company shall have the consent of members in terms of 75% of the paid up capital i.e. 3/4th of the paid up capital.
- Before making the application, the company should have filed the overdue returns in Form AOC 4 or Form AOC 4 (XBRL) and Form MGT 7 upto the end of the financial year in which the company ceased to carry its business operations;
- The company shall have to take the No Objection Certificate (NOC) from the Appropriate Regulatory Authority i.e. Income Tax Department and Goods and Services Tax Departments i.e. in the normal instance, the clause says that the Income tax returns and GST returns shall be duly submitted and filed till the time of making the application in Form STK – 2. Likewise, the companies operating in different sectors like Insurance companies, Housing finance companies, Asset management companies, etc. shall have to take the approval from the respective authorities which are regulating them.
- The application shall be accompanied by:-
- Indemnity bond duly notarized by every director in Form STK 3;
- A statement of accounts (in Form STK 8) containing assets and liabilities of the company made upto a day, not more than 30 days before the date of application and certified by the Chartered Accountant;
- An affidavit in Form STK 4 by every directors of the company;
- A copy of the 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;
- A statement regarding pending litigations, if any, involving the company.
- The Form STK 2 shall be signed by the Director duly authorized by the Board in their behalf and certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice.
- Role of Registrar after receiving the Form STK – 2
- After receiving the application in Form STK – 2, a notice in Form STK – 5 or Form STK – 6 as the case ,may be, shall be –
- Placed on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;
- Published in the official gazette;
- Published in English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the state in which the registered office of the company is situated;
- Meanwhile the Registrar of companies shall intimate the concerned regulatory authorities regulating the company, viz, 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, to be furnished within 30 days from the date of issue of letter of the intimation and if no objections are received within 30 days from the respective authorities, it shall be presumed that they have no objections to the proposed action of striking off or removal of name.
- Manner and procedure of issuing the notice of striking off
The Registrar of Companies, at the time of expiry of the notice specified in Form STK – 5 strike off the name of the company and shall place the notice under section 248(5) in Form STK – 7 to be published in the official gazette and the official website of the Ministry of Corporate Affairs.