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Posted on April 27, 2021
Recently, the Ministry of Corporate Affairs (MCA) has completed strike off many private limited companies which are not filed their financial statements and annual returns on a regular basis with ROC (Registrar of companies). The Directors of such strike off companies were also ruled out from being a Director of the Company. In this article, we look at the process of Company strike off clearance or restoring a company which was ticked as strike off by the MCA for failing to file the annual return.
The Ministry of Corporate Affairs (MCA) is calling for strict actions against almost all private companies and companies which are failed to file their annual returns with ROC (Registrar of companies). Even last year, MCA struck off lakhs of private companies under section 248(1) of the Companies Act, 2013. The government is still on with the process to clean up the corporate field. And on the other side, it also comes up with a legal procedure to restore or reactivate strike off the company.
A private company is struck off means that when the removal of the name of the company is done under the Registrar of Companies procedure. Under Section 248 of The Companies Act, 2013, the Registrar is the responsible person who can strike off company which has defunct, from the ROC. The company which was dissolved can be restored or revived under the Companies Act, 2013, by an order of National Company Law Tribunal (NCLT).
Company has been Struck off – what does it mean?
A company is said to be struck off or dissolved when the name of the company is removed from the Companies House register. It means, the company cannot do business any more, cannot trade, make payments, sell assets, or anything involved in the business activities. And if the company does any business after its strike-off then it will lead to a serious of legal repercussions, like penalties, and a directorship will be taken off for up to 15 years and personal liability can be used to pay the company debts and so on.
Any assets or funds that have not been distributed before the company is strike off are shifted to the Crown through ‘bona vacantia’. To acquire those cash and assets back, the company have to go through the proper procedure of restoring or reviving the company.
Importantly, once the company has been struck off, the name of the company will become available for new companies to register. so, if you want to restore the company again, you have to check the availability of the same name, if it is not available, you have to find a different company name, that’s really serious.
Strike off Company under Companies Act, 2013
- Section 248 explains the complete information and the power of Register of companies to take the name of the company from the ROC.
- To restore the company name, it can appeal to the NCLT under section 252.
- Apart from Removal of Name of Companies from the Register of Companies, the Companies Rules, 2016 also carry on with strike off.
- Rule 87A of the NCLT (Amendment) Rules, 2017 and NCLT Rules, 2016 also address struck off.
- The striking off defunct companies can be done under section 248 of Companies Act 2013. However, restoration of the company in Register of Companies can be done under section 252 of The Companies Act 2013.
The Reasons for Strike Off Company
There are various reasons for striking off a company, and here are the few reasons why a company struck off:
- First reason is if the company fails to commence the business within one year of registration of the company.
- If the company fails to carry on its business for two preceding years.
- If the company fails to submit or file annual returns and financial statements for a continuous period of 3 years.
- When the directors of the company fail to file the Form DIR-8 on time.
- Disobedience of relevant provisions of Companies Act and other legal rules and regulations.
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Procedure for the Revival of Strike Off Companies as per The Companies Act, 2013
Application for restoring or reactivating strike off companies can be filed by the director or the company or any member of the company. If the company or the member of the company is not satisfied with the strike-off order of the Registrar under section 248, then the company or the member can file an appeal to NCLT. This appeal should be filed within a period of 3 years from the date of strike-off order.
Check out the procedure for the revival of strike-off of companies below:
Preparation & Filing Application Under NCLT
The applicant can file an application for restoring or reviving the company whose name was struck off. This procedure can be done under section 252(3) read with rule 87A of National Company Law Tribunal (NCLT) Rules, 2017.
Rule 87A(2) – Submission of the Petition with ROC
The application of reviving the company copy has to be served on the ROC and other people according to the NCLT rules either on hand or through post and it has to be done within 14 days from hearing.
File documents with Application in NCLT-9
The applicant has to submit a list of documents as per Annexure B of the NCLT Rules, 2016 while filing the application of reviving the company.
Hearing of the petition by NCLT: Rule 87A (3)
The NCLT should hear from both sides (Roc and Applicant). Once the hearing is over, if NCLT is satisfied, it can restore the company’s name again in the list of ROC.
File NCLT order with ROC
After receiving the order for restoration of the company’s name, it will direct the applicant to deliver a certified copy of the order to ROC and this process has to be done within 30 days after receiving the order.
Directions by NCLT under rule 87A(4)
After submitting the order to ROC, the ROC has to issue the order in the official gazette. Then the applicant has to pay the fee to the Registrar as per the rules. After this procedure, the company need to file all its the pending financial statements and has to pay annual returns with the Registrar and also has to pay the fee as per NCLT.
Publish the order in the Official Gazette
Finally, the ROC has to publish the order of restoring the company in the official gazette.
The main aim of the Ministry to become so stringent and to take actions against lots of companies for non-filing and non-compliance of legal forms with the Registrar is to rebuild a corruption-free economy. This is really a good initiation taken by the government, which helps in the cleaning up the complete corporate structure and to prevent tax evasion. In conclusion, striking off such companies also helps to prevent money laundering and to strengthen the corporate sector in India.