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.
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Company Strike off by ROC
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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.
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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.
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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.
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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.
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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.
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7. Steps to be taken
by ROC for Strike
Off
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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
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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
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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.
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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:
1. 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.
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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
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13. ROC Strike Off
Forms at Glance
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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