Striking Off the Name Of a Company by the Registrar Of Companies

1. Striking Off the Name Of a Company by the Registrar Of Companies

2. History • Previously under the company’s act 1956, there was no procedure to strike off the Companies on the application made by the Company. • The companies can be struck off only by the Registrar of Companies as laid down under section 560 of the Companies Act, 1956. • Later, with the difficulties faced by them, a guideline was released by the Stakeholders ministry on Fast Track Exit Scheme to be executed with effect from 3rd July 2011 to set off the inoperative Companies under FTE scheme. • Under this scheme, stakeholders were required to fill an e-form and had to attach the relevant documents along with a fee of Rs. Five thousand. But a separate provision i.e. Section 248(2) was incorporated under Companies Act, 2013 where companies can be struck off when the application is made by the company itself.

3. Introduction • Strike Off means withdrawing the name of the Company from the Register of Companies handled by Registrar of Companies (RoC). • Striking off is more like a Closure of the Company or an alternative to winding up of the Company subject to provisions specified under Section 248 of the Companies Act, 2013 and the Company will longer be in existence after being Struck Off and cannot perform any operation thereafter. • There are two approaches to Striking off a Company:- 1. Section 248(1) of the Companies Act, 2013 - Strike off by Registrar of Company i.e.  Registrar can on his accord strike off the names of companies from the register of companies maintained by Registrar of Companies. 2. Section 248(2) of the Companies Act, 2013 - Strike off by Company by its own under – With the insertion of this provision the Company also has the discretion to strike off the name of the company by filing an application with the Registrar and further following the procedure. The premise for voluntarily making such an elucidation by the company remains the same as is mentioned in the 1st mode.

4. Suo-moto action taken by the Registrar • The Registrar while considering the grounds required for striking off shall in its motion send a notice to the company and all the directors and to the all the related authority of the company in writing in Form STK-1, of his purpose to withdraw the name of the company from the register of companies at the addresses mentioned there, by registered post with acknowledgement due or by speed post. The following are the causes which the Registrar needs to look after: • Company has been incorporated, but failed to commence its business within one year of its incorporation; • If the Company is not carrying out business or operation for a period of two years immediately preceding financial years and has not made any application within such period for obtaining the status of a Dormant Company under Section 455 of the Act. • The said notice which the registrar is supposed to send should consist the grounds on which it has decided to strike off the name of the company from the register of companies.

5. Procedure to be followed by ROC for strike off by its own motion • The ROC has to follow the following procedures for strike off by its own motion: • a)Serving of Notice: The Registrar while considering the grounds required for striking off shall in its motion send a notice to the company and all the directors and to the all the related authority of the company in writing in Form STK-1, of his purpose to withdraw the name of the company from the register of companies at the addresses mentioned there, by registered post with acknowledgement due or by speed post • b)Representation of Company: The ROC shall consider the representation of the Company if it has received the same. If the ROC is not satisfied with the representation made by the company and its directors, it may proceed further for the strike off the name of the company.

6. c)Publication of notice: The notice for removal of name under sub-section (1) of section 248 shall be in Form STK 5 and the same needs to be there on the official website of the MCA on a separate link established on such website in this regard; and further it should be published in the Official Gazette and there are certain requirements which need to be met . • d)Intimation to regulatory authorities: The Registrar of Companies needs to immediately and simultaneously tell the concerned authorities who have jurisdiction and which also regulates the company, viz, the Income-tax authorities, central excise authorities and service-tax authorities, about the proposed action of removal or striking off the names.

8. Effect of a company notified as dissolved • According to Section 250 of the Act, if a company stands dissolved under section 248, the company needs to stop working as a company immediately from the date which has been specifically mentioned in the notice of dissolution and the certificate of Incorporation which was earlier issued to the company will be deemed to have been cancelled. • Liabilities of directors, managers, officers and members to continue: The liability or obligations, if any, of every director, manager or other authoritative officers who was implementing any power of management, and of every individual of the company dissolved under this section, shall proceed and might be enforced as if the company had not been dissolved.

9. RecenstrucktJudgement Where Court Stated The Name Of The Company Cannot Be Off If It Lacks Territorial Jurisdiction • The judgement is one by Delhi High Court where its territorial jurisdiction was examined and the idea of the cause of action was deliberated upon. • Relevance was induced by the Supreme Court judgement in the case of Alchemist Ltd. & Ors. v. State Bank of Sikkim & Ors., AIR 2007 SC 1812 where it was stated that " for the purpose of deciding whether facts averred by the petitioner-appellant, would or would not constitute a part of the cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action. • It is no doubt true that even if a small fraction of the cause of action arises within the jurisdiction of the Court, the Court would have territorial jurisdiction to entertain the suit/petition. Nevertheless, it must be a 'part of the cause of action', nothing less than that." 

10. Conclusion • Accordingly, under the previously mentioned provisions and procedure, striking off fills in as a quicker method of bringing an end to the existence of the company when contrasted with the more protracted and tedious cycle of winding up. • Besides, as already examined and discussed, anyone i.e. either the Company or the ROC can begin with the process of striking off.   • Nonetheless, Companies can't get away from their liabilities through this strategy, as the liabilities of the directors continues even after the company has been broken is not in existence. 

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