Striking off a company from the Register of Companies is a statutory procedure required under the Companies Act, 2013, which deletes the name of a business from the register maintained under the Registrar of Companies (ROC). Through this, the corporation ceases to be legally considered as being in existence. This can be done by the ROC on its own initiative under Section 248 or may be done voluntarily by the company when it intends to discontinue business operations. The rationale behind striking off is to ease regulatory compliance by removing dead or inactive companies from the system and making corporate records cleaner.
What is Striking Off a Company Under the Companies Act 2013?
Strike-off of a company under the Companies Act, 2013 is the process through which the name of a company is struck off from the Register of Companies by the Registrar of Companies (ROC) in effect dissolving the company and ceasing its existence as a legal entity. Such action is carried out under Section 248 of the Act and can be either voluntarily carried out by the company or suo motu by the ROC.
Reasons for Strike Off by ROC
- Not Starting Business – Where a firm fails to start its business within one year from the date of its formation.
- Not Working for Two Continuous Accounting Years – If a company has not conducted any business or operations during the two immediately preceding accounting years and has not filed for being struck off from the register as dormant.
- Failure to File Financial Statements or Annual Returns – When a company does not file its financial statements or annual returns with the ROC for a continuous period of three financial years.
- Default in Payment of Subscription Money – When the subscribers do not pay the subscription money and the company does not file the declaration within 180 days from the date of incorporation.
Once a company is struck off, it legally dies and cannot carry out any business unless revived through restoration by the National Company Law Tribunal (NCLT).
What is Revival or Restoration of a Struck Off Company Under Companies Act 2013?
Revival or restoration of a struck-off company under the Companies Act, 2013, is the process of company re-enrollment that has been removed or struck off from the Register of Companies by the Registrar of Companies (ROC) pursuant to Section 248. The company is struck off on the grounds such as the failure to begin business, failure to conduct any business for two successive financial years, or failure to file statutory returns. To restore such a company, a petition under Section 252 has to be filed before the National Company Law Tribunal (NCLT) by the company, or its members, creditors, employees, or even the ROC. When the NCLT comes to the conclusion that the company exists, has working business prospects, or is endowed with valuable assets, restoration can be ordered. Upon restoration, the firm gains a legal existence as if it had never been struck off. The procedure involves filings under the law, compliance waiting periods, and obtaining a certified copy of the NCLT order to file before the ROC.
Process of Revival or Restoration of Struck Off Company
Section 252 of the Companies Act, 2013 prescribes the process of revival, in addition to the Companies (Removal of Names of Companies from the Register of Companies) Rules of 2016.
Legislative revival of a struck-off company is allowed, as long as it follows the prescribed procedure in Section 252 of the Companies Act, 2013. Submission on time, correct documentation, and adherence to NCLT instructions are necessary for effective restoration.
Important Notes:
- Restoration brings the company back into existence as if it had never been struck off.
- Directors are responsible for making all compliance filings.
- The company should not be in breach of any other provision of the Companies Act or FEMA (if any).
Three categories of persons who can apply for restoration:
1. The company or any of its members, creditors, or employees
- Time limit: Within 20 years from the publication of the notice in the Official Gazette.
- Application: To be filed with the National Company Law Tribunal (NCLT) under Section 252(3)
2. Any person aggrieved by the order of ROC
- Time limit: Within three years from the date of strike-off.
- Application: to NCLT under Section 252(1)
3. ROC Suo Motu Application
The ROC can also start restoration in case the company was struck off because of a mistake or due to incorrect facts.
Step-by-Step Restoration Process of a Struck Off Company
1. Determine Eligibility
Check the ground for strike-off and find out under which subsection of Section 252 you fall (e.g., company/member/creditor/ROC).
2. Draft Documents
The following documents need to be prepared and filed along with the NCLT application:
- Certified copy of order of strike-off passed by ROC
- Latest audited accounts and evidence of business operations
- Affidavit affirming the application
- Memorandum of Appearance and Vakalatnama (if filed by advocate)
- Copy of board resolution authorizing the making of a petition
- Details of directors and shareholders
- Copy of PAN card, Aadhaar and address proof of directors
- Proof of statutory filings, if made (e.g. forms submitted to MCA)
- Application in Form NCLT-9
3. Application to NCLT
File a petition before the concerned NCLT on Form NCLT-9. Pay the fee. Give notice to the ROC and the parties concerned as directed by the NCLT.
4. NCLT Hearings
Attend hearings. The NCLT determines if the company was in operation at the time of strike-off or if it has genuine intentions to start operations. The NCLT can seek:
- File any pending annual returns.
- Pay taxes or penalties.
5. Issuance of Restoration Order
When the NCLT is satisfied, it will order restoration. The restoration order could direct the ROC to restore the name of the company, ask the company to file all pending returns within a specified time, and compel payment of all fines or expenses.
6. Submission to ROC
On receiving the order of the NCLT, file a certified copy to the ROC on Form INC-28. File annual returns and financial statements. Pay penalties and late filing fee, if any.
7. ROC Reinstates the Company
The ROC makes the MCA master data up-to-date and brings out a notice in the Official Gazette to restore the company.
Relevant Forms
- Form NCLT-9 – This is the main application form to be filed along with the National Company Law Tribunal (NCLT) to seek the restoration of a struck-off company in terms of Section 252 of the Companies Act, 2013.
- Form INC-28 – Once the restoration order is received from NCLT, this form is utilised to file a certified copy of the order with the Registrar of Companies (ROC). The official restoration of the company in the MCA books is required.
- Form AOC-4 – This form is utilised for filing the company’s financial statements for each year with the ROC. After the restoration of the company, all the outstanding AOC-4 filings due for past financial years are to be made.
- Form MGT-7 – This form is for filing the annual return of the company. Similar to AOC-4, all pending MGT-7 forms must be filed after restoration.
- Form DIR-12 – In case there are any modifications in the directors of the company (for example, re-appointment or removal), this form is filed to inform the ROC about the changes after restoration.
Grounds for Revival Order by NCLT
- The business was operational when it was struck off, which means that there were some transactions, activities, or assets present.
- Ignorance of filing returns or documents required is a consequence of genuine reasons, i.e., ill health, ignorance, or management problems.
- The business is anticipating the possibility of resuming business operations or reopening the business in the near future.
- If the company has property, land, intellectual property, or other assets of greater significance that necessitate legal protection for purposes of management or disposal.
- The Registrar of Companies (ROC) failed to follow the relevant legal procedures before strike-off (for example, there was no reasonable chance for a hearing).
- Restoration benefits creditors, employees, shareholders, or the public interest.
- Strike-off was carried out based on erroneous facts or assumptions, e.g., the company’s compliance status or whether it had filed the required documents.
- The employee or creditor has a valid claim or pending dues against the corporation and needs to be revived in order to assert their rights.
Benefits of Revival of a Struck-Off Company
- The legal personality of the company is revived, allowing it to operate independently.
- The business entity can resume activities, enter into agreements, and generate income.
- Makes it easier for the legitimate use, transfer, or sale of properties like real estate, bank accounts, trademarks, or intellectual property listed under the name of the company.
- Entitles creditors or shareholders to claim and recover payments from the company.
- Protects directors’, employees’, investors’, and creditors’ interests.
- Prevents directors’ disqualification as a result of non-compliance or strike-off of companies.
- Enables the company to file late returns and shed legal obligations.
- Guarantees the credibility of the company’s reputation, brand, and history.
Conclusion
Revival of a struck-off company under the Companies Act of 2013 gives a legal framework to revive a company struck off from the Register of Companies. This gives a second opportunity to genuine businesses to begin anew, safeguard assets, and fulfil stakeholder expectations. The process of revival through the National Company Law Tribunal (NCLT) focuses on compliance while safeguarding the interests of shareholders, creditors, and employees. Prompt action and careful documentation are unavoidable for effective revival.
