REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER OF COMPANIES

[Mr. M. GOVINDARAJAN]

Chapter XVIII of the Companies Act, 2013 (‘Act’ for short) provides the procedures for removal of names of companies from the Register of Members in Sections 248 to 252 which came into effect from 26.12.2016.  For this purpose the Government made ‘The Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (‘Rule’ for short) which came into effect from 26.12.2016.

Section 2(74) of the Act defines the term ‘Register of companies’ as the register of companies maintained by the Registrar on paper or in any electronic mode under this Act.

Power or Registrar

Section 248(1) provides that where the Registrar has reasonable cause to believe that-

• A company has failed to commence its business within one year of its incorporation; or
• 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 with such period for obtaining the status of a dormant company,

he shall send a notice to the company and all directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of relevant documents, if any, within a period of 30 days from the date of the notice.

Application by company for removal

Section 248 (2) provides that a company may file an application before the Registrar of companies for removal of the name of their company from the Register of Members.  A special resolution is to be passed in this regard or to obtain consent of 75% members in terms of paid up share capital on all or any of the grounds specified in Section 248(1) of the Act.

Rule 4(1) provides for the procedure of filing application before the Registrar of Companies.  An application for removal of name of the company under Section 248(2) of the Act shall be made in Form No. STK-2 along with a fee of ₹ 5000/-.

Rule 4(2) provides that the application shall accompany a ‘No Objection Certificate’ from the appropriate Regulatory Authority concerned in the respect of the following companies-

• Companies which have conducted or conducting non banking financial andinvestment activities as referred to in the Reserve Bank of India Act or rules and regulations made there under;
• Housing finance companies as referred to in the Housing Finance Companies (National Housing Bank) Directions, 2010 issued under the National Housing Bank Act, 1987;
• Insurance companies as referred to in the Insurance Act, 1938 or rules and regulations there under;
• Companies in the business of capital market intermediaries as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations there under;
• Companies engaged in Collective Investment Schemes as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations there under;
• Asset management companies as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations there under;
• Any other company which is registered under any other law for the time being in force.

Rule 4(3) provides that the application shall be accompanied by the following documents-

• Indemnity bond duly notarized by every director in Form STK – 3;
• A statement of accounts containing assets and liabilities of the company made up to a day, not more than 30 days before the date of application and certified by a Chartered Accountant;
• An affidavit in Form STK – 4 by every director 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

Rule 5 provides that the application shall be signed by a director duly authorized by the Board in their behalf.  Where the director concerned does not have a registered digital signature certificate, 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 while uploading the form.

Rule 6 provides that the form STK-2 shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice, as the case may be.

The company shall place the application, on its website, if any, till the disposal of the application.

Penalty

Section 249(2) provides that if a company files an application in violation of Section 248(1) it shall be punishable with fine which may extend to ₹ 1 lakh.

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.

Section 251(2) provides that without prejudice to the provisions of Section 251(1) the Registrar may also recommend prosecution of the persons responsible for the filing of an application under Section 248(2).

Restrictions on application

Section 249 provides that an application under Section 248(2) on behalf of the 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 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 once 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 whether voluntarily or by the Tribunal.

Notice

Rule 7(1) provides that the Registrar of Companies may issue notice in Form No. STK-5 or STK – 6 as the case may be and may be placed on the web site of the Ministry of Corporate Affairs on a separate link established on such website in this regard.  The said notice shall be published in the Official Gazette and also 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. 

Rule 7(2) provides that the Registrar of Companies shall, simultaneously intimate the concerned authorities regulating the company, viz., the income tax authorities, Central excise authorities, 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 a period of 30 days from the date of issue of the letter of intimation and if no objections are received within 30 days from the respective authority, it shall be presumed that they have no objections to the proposed action of striking off or removal of name.

Strike off name

Section 248(5) provides that at 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 in Form No STK – 7  The same shall be placed on the Official Website of the Ministry of Corporate Affairs..   On such notification the company shall stand dissolved.

Section 248(6) provides that the Registrar, before passing an order, 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 person 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.

Section 248(7) provides that 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, shall continue and may be enforced as if the company had not been dissolved.

Section 248(8) provides that nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies.

Withdrawal of application

Section 249(3) provides that an application filed under Section 248(2) shall be withdrawn by the company or rejected by the Registrar as soon as conditions under Section 248(1) are brought to his notice.

Effect of dissolution

Section 250 provides that where a company stands dissolved under Section 248, it shall on and from the date mentioned in the notice under Section 248(5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

Pending applications

Rule 10 provides that any application or pending proceeding for striking off or Form –FTE filed with the Registrar of Companies prior to the commencement of these rules, but not disposed of by such authority for want of any information or document shall, on its submission, to the satisfaction of the authority, be disposed of in accordance with the rules made under the Companies Act, 1956.

Appeal

Section 252 provides for filing appeal against the order of the Registrar.  Section 252(1) provides that any person aggrieved by an order of the Registrar, notifying a company as dissolved under Section 248, may file an appeal to the Tribunal within a period of 3 years from the date of order of the Registrar.   If the Tribunal is of the opinion that the removal of the name of the company from the Register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies.  Before passing any order, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned. 

Application by Registrar to the Tribunal

If the Registrar is satisfied that the name of the company has been struck off from the registrar of companies either inadvertently or on the basis of incorrect information furnished by the company or its directions which requires restoration in the register of companies, he may within a period of 3 years from the date of passing of the order of dissolving the company under Section 248 file an application before the Tribunal seeking restoration of the name of such company.

Order of Tribunal

Section 252(2) provides that a copy of the order passed by the Tribunal shall be filed by the company with the Registrar within 30 days from the date of the order and on receipt of the order, the Registrar shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation.

Section 252(3) provides that if a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck off from the register of companies, the Tribunal on an application made by the company, member, creditor or workman before the expiry of 20 years from the publication in the Official Gazette of the notice may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise, it is just that the name of the company be restored to the register of companies, order the name of the company to be restored to the register of companies and the Tribunal may, by the order, give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name company has not been struck off from the register of companies.

Companies that cannot be removed

Rule 3 provides that the following categories of companies shall not be removed from the register of companies-

• 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 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 competent authority for compounding the offences committed by the company or of 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; and
• companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Act.

Clarification on availability of STK-2

Vide Circular No.16/2016, dated 26.12.2016 the Ministry has clarified that e-Form STK -2 for making application to the Register of Companies for removal of name of the company from the register of companies, is under developed and would be deployed in some. 

Discussions to this article

[Raji M]

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