Procedure for reviving a Strike Off Company in India And Director's Office
Procedure for reviving a Strike Off Company in India And Director's Office

 

The Ministry of Corporate Affairs immediately after a painstaking demonetization process is currently taking serious measures against those companies that failed to file their annual returns and financial statements with the Registrar Of Companies (ROC). Available reports have it that well over 2 lakhs firms were struck off last year by the Ministry of Corporate Affairs (MCA). In addition, the MCA invoked the Companies Act, 2013 – sections 248(1) & 164(2)(a) to disqualify well over 3 lakh directors. The process of restructuring the country’s corporate system started in 2008.

 

This article focuses on the process of reviving a strike off company. Therefore, hang on with us as we walk you through all the relevant information you need to know about the entire process.

 

WHAT IS A STRIKE OFF COMPANY?

Striking off a company means the process of delisting a company’s name from the official register of companies. Once a company’s name is struck off from the register of companies, the name would be available for anybody to adopt and incorporate. There are two ways for a company’s name to be delisted, one is by the company requesting the Registrar through an application or if the Registrar discovers that the company is no longer in operation.

 

 THE REGISTRAR OF COMPANIES ENABLING PROVISIONS

The ROC leverages two sections of the Companies Act, 2013 – Sections 248 and 455. In line with Section 248, the ROC has the statutory powers to delist any company found wanting from the registers of companies;

 

SECTION 248(1)

Whenever the Registrar Of Companies believe that any of the following is true, the agency will strike off the company’s name:

  • A company has not started operation within a year after registration;
  • A company has stopped operation for a combined period of 2 years without writing the ROC to seek for a dormant status in line with Section 455.

Once the Registrar believes any of the above is true, he/she will send the concerned company a notice of delisting the company’s name and hence direct the company’s directors to send their representatives and arm them with relevant documents on or before 30 days from the date the company received the notice.

 

Although the notice issued by the ROC to the company’s directors falls under the purview of Section 248 of the Companies Act 2013, it is important to make it clear at this point that the ROC has the power to strike off a company’s name only on the basis of the two-point highlighted above.

 

SECTION 455

This section deals with the dormant status of a company. If a registered company is no longer in operation after the date of incorporation for a period of 2 years, such a company is known as an “Inactive Company” and can write to the Registrar requesting a dormancy status in line with Section 455.

 

Under section 455, an inactive company is a company no longer in operation for a period of two years cumulatively or a company that has not file its annual returns and financial statements for a period of two years.

 

Therefore, under sub-section 4 of Section 455, the Registrar is statutorily mandated to inform an inactive company by writing of its decision to place its name on the register maintained for dormant companies.

 

Currently, all the ROC’s offices throughout the country have been mandated to look out for an inactive company. Once such a company has been identified, the ROC will issue a “show cause notice” relying on section 248(1)(c) requesting the concerned company to within 30 days explain why ROC should not strike off the Company’s name. In the event that the company refuses to file a response within the 30 days, the ROC will take appropriate legal action against the company’s directors.

 

WHEN A DIRECTOR’S OFFICE CAN BECOME VACANT

Section 164, sub-section 2 takes care of a Director’s vacation of office. The section clearly states that no director shall be reappointed or appointed in a new company for a duration of 5 years when:

  • The company he/she served as a director has not filed its annual returns or financial statements for a period of 3 years; or
  • The Company failed to pay interest on deposit received or failed to pay the dividend cleared for a period of one year or more.

 

SECTION 167(1)

Section 167(1) of the Company Act 2013 clearly highlighted the reason the office of a company’s Directors can be vacant. The section States that a director can be removed from office if he/she incurs the disqualifications as mentioned in Section 164, sub-section 2.

 

PROCEDURES TO REVIVE A STRIKE OFF COMPANY

Once a company has been stricken off, there are procedures to revive such a company. Below are the processes of reviving a dissolved company:

  1. Write a letter of appeal to the National Company Law Tribunal: Writing a letter of appeal to the Tribunal falls under section 252. Sub-section 1 of Section 252 States that anyone can write a letter of appeal to the Tribunal within 3 years. Sub-section 3 States that a letter of appeal can be written by a company or creditors or members or workman to the Tribunal within 20 years.
  2. Prepare a petition: The petition should be prepared with the aid of a lawyer and filed using Form No. NCLT-9.
  3. Submit the petition to the Registrar Of Companies: A copy of the petition should be submitted at the ROC. The Tribunal may direct that a copy should also be served to other persons. Please note that the ROC should be served 14 days before the date scheduled to hear the appeal.
  4. Hearing by the Tribunal: On the scheduled date of hearing, the Tribunal will hear the appeal by the petitioner and the arguments of ROC. After the hearing, if the Tribunal is reasonably convinced, it can order the ROC to restore the name of the company on the register of Companies.
  5. Ruling by the Tribunal: In the event that the Tribunal agrees to the appeal of the petitioner, the Tribunal will make the following ruling:
  6. The petitioner shall within 30 days delivers a certified true copy of the Tribunal’s order to the ROC
  7. The ROC will upon receipt of the order copy published the same in his official seal and name in the official Gazette.
  8. The petition shall pay the cost incurred by the ROC unless otherwise directed by the Tribunal. The company shall then file all pending annual returns and financial statements to the ROC and also comply with other provisions of the Companies Act 2013.
  9. Submitting Of the order to the ROC: The petitioner shall within 30 days file a certified true copy of the order at the ROC using Form INC-28.

 

  1. Gazette the order: The ROC will upon receipt of the order copy published the same in his official seal and name in the official Gazette

 

  1. Pending Documents filing at the ROC: The petitioner shall file all pending annual returns and financial statements to the ROC and also comply with other provisions of the Companies Act 2013.

 

THE LIABILITIES AND ASSETS STATUS OF A STRIKE OFF COMPANY

Once a company has been stricken off, the assets and liabilities of such a company shall be “bona vacantia.” In a layman’s language, the assets and liabilities of a stricken off company will be forfeited to the Crown. In addition, the credit balance in the company’s bank account shall be frozen and forfeited to the Crown.

 

 

 

 

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