Strike off by Company

What is Strike Off?

Strike off can be understood as removal of something from somewhere, when it comes to the term of business , it means removing the very existence of any company by removing its name from the records of respective Registrar of Companies.

Strike off in general term is known as to remove or erase someone from somewhere where the same 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.

Types 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.

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.

Rationale for making suo moto application of Strike Off

Every Company subsist to fulfil some objective for which Company was incorporated in the first place. It may happen that the purpose for which the Company was established got accomplished and it is no more rationale to continue the Company as a legal entity. For example if a Company was formed pursuant to a joint venture and after completion of project, company is no longer required in such case, Company can itself file for strike off its name from Register of Companies.

Further it may also happen that the purpose for which Company was set up remains unfulfilled due to various reasons like adverse pricing, increase in competition, government regulation etc. In such scenario businessmen resort to close the Company to save the cost of running business in absence of any productive business.

In both cases, where Company needs to be closed down and for this ministry of corporate affairs has stated provisions. Company being a legal entity came into existence through process of registration under the Companies Act, 2013 (“Act”) similarly exit of Company is also governed through strike off’s provisions of the Act

When Company can file Application.

As per section 248(2) of the Act a company can make an application to the Registrar only if following conditions are satisfied:

  • Company has extinguished all its liability
  • Company has accorded members approval through Special Resolution
  • If Company is regulated under any other act, beside the Companies Act,2013 then approval of such regulatory body to be obtained.

Restriction on making Application

As per section 249 of the Act, an application 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 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,
  • 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

It is important to note that If Company has already received notice from Registrar under section 248(1) of the Act, then Company is not allowed to make application under this section.

If a company files an application in violation of these provisions, it shall be punishable with fine which may extend to one lakh rupee.

If the registrar came to know of any such contravention, application will be rejected by the Registrar.

Fraudulent Application for Removal of Name.   

As per section 251 of the Act, if any Company intentionally makes fraudulent application with the Registrar to deceive the creditors or to evade its liability , then the director, person in charge of Company will be liable even if the Company got dissolved:

  • Liable to any person or persons who had incurred loss or damage as a result of the company being notified as dissolved; and
  • Liable for punishment for fraud in the manner as provided insection 447.

Registrar may also recommend prosecution of the persons responsible for the filing such fraudulent application.

Steps taken by the Company to make application for strike off

As per rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 a company willing to make application for strike off should follow below given process.

Other Restriction on making application to the Registrar for Strike off

As per rule 3 of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 following categories of companies shall not be removed from the register of companies:

  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 are pending in the Court.
  5. Companies where any prosecution ,inquiry or scrutiny, if any, is pending with the Court arising out non-compliance of provisions of the Act or Companies Act, 1956;
  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
  10. Companies registered under section 8 of Companies Act, 2013 or section 25 of erstwhile Companies Act, 1956

Legal aspect of Strike Off

  • Name of the Company will be removed from the Register of Companies.
  • 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.
  • The Registrar, 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.

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 National Company Law Tribunal (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

By Registrar of Companies

  • If a Company got struck off and Registrar is satisfied that name got struck of inadvertently or on the basis of incorrect information furnished by the company , registrar may within a period of 3 years from the date of order make an appeal to NCLT
  • 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

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

In all three cases Company after getting order from NCLT, shall file the order with the Registrar within 30 days from the date of order in form INC 28

The Registrar will further restore the name of the Company and issue a fresh certificate of incorporation.

Forms of Strike off at Glance when Company makes application for Strike off

STK 2E Form to file by Company for application of Strike off
STK 3Format of Indemnity to file with STK 2
STK 4Format of Affidavit to file with STK 2
STK 6Public notice given by the Registrar when Company  makes application to the Registrar
STK 7Notice of Strike off of Company by the Registrar
STK 8Format of statement of asset and liability to form with STK 2

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close