There are many companies incorporated in India under the Companies Act, 2013 or previous company law or any other law for the time being in force, which is not carrying over any business activity or operations since incorporation or is not carrying on any business or operations for a period of two immediately preceding financial years.
With reference to Section 92 and Section 137 of the Companies Act, 2013 every company registered with the Registrar of Companies is to prepare a return “The Annual Return” in Form No. MGT.7 and copy of financial statement (audited balance sheet and the statement of profit & loss account) shall be filed with the Registrar in Form No. AOC.4 every year irrespective of whether the company is carrying over any business activity or operations.
Offence & Penalty: If a company fails to file its Annual Return with the Registrar of Companies in accordance with sub section 4 of section 92 the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six month or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both (sub section 5 of section 92).
Further if a company fails to file the copy of the financial statements before the expiry of the period specified in section 403, the company shall be punishable with fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the Managing Director and the Chief Financial Officer of the company, if any, and, in the absence of the Managing Director and the Chief Financial Officer, any other Director who is charged by the Board with the responsibility of complying with the provisions of section 137, and, in the absence of any such director, all the directors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.
Apart from prosecution for default, it may expose the company and its directors to other regulatory action by Income tax authorities and a delicate risk perception by banks and other financial institutions who extend financial assistance.
Because of the increased compliance and resultant costs involved the promoters / directors of companies which is not carrying over any business activity or operations since incorporation or is not carrying on any business or operations for a period of two immediately preceding financial years are considering to striking off the name of the company.
To give opportunities for above such companies for striking off the name of the company from the Registrar of Companies, the Ministry of Corporate Affairs vide Notification No. 16/2016 dated 26th December 2016 has notified section 248-252 together with the Removal of Names of Companies from the Registrar of Companies Rules, 2016.
With reference to Section 248 there are two modes of the Removal of Names of Companies from the Registrar of Companies:
1. Removal of name of company from the registrar on suo-motu basis:- The Registrar of Companies may remove the name of a company from the registrar of companies in terms of sub-section (1) of Section 248 of the Act.,
2. An Application for removal of name of the company under sub-section (2) of section 248 shall me made in Form STK-2 along with the fee of 5,000/- (Rupees Five Thousand Only).
The provisions of Section 248 shall not be applicable to the following companies:
• Listed Companies
• Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws
• Vanishing companies
• Companies where inspection or investigation is ordered and being carried out or actions or such order are yet to be taken up or were completed but prosecution arising out of such inspection or investigation are pending in the Court.
• Companies where notice under section 234 of the Companies Act, 1956 (1 of 956) or section 206 or section 207 of the act have been issued by the registrar or Inspector and reply there is pending or report under section 208 has not yet been submitted or follow up of instructions or report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court.
• Companies against which any prosecution for an offence is pending in any court.
• Companies whose application for compounding is pending before the competent authority for compounding the offence committed by the company or any officers in default;
• Companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
• Companies having charges which are pending for satisfaction; and
• Companies registered under Section 25 of the Companies Act 1956, or section 8 of the Act.
For the purpose of clause (iii) above “Vanishing Company” means a company, registered under the Act or previous company law or any other law for the time being in force and listed with Stock Exchange which has failed to file its returns with the Register of Companies and Stock Exchange for consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its directors are traceable.
We shall discuss the procedure to close down a company under sub-section (2) of section 248 (Removal of Name of the Company from the Registrar of Companies by way of an application by the company):
As per the provisions of the Section 248-252 of the Companies Act, 2013 read with companies (Removal of Name of Companies from the Register of Companies) Rules, 2016, a company may file an application for removal of name (strike off) as detailed herein below:
1. An application for removal of name of company under sub-section (2) of section 248 shall be made in Form STK-2 along with the fees of Ten Thousand Rupees.
2. Every application under sub-rule (1) shall accompany a no objection certificate from appropriate Regulatory Authority concerned in respect of following companies namely:-
• companies which have conducted or conducting non-banking financial and investment activities as referred to in the Reserve Bank of India Act, 1934 (2 of 1934) or rules and regulations thereunder;
• housing finance companies as referred to in the Housing Finance Companies (National Housing Bank) directions, 2010 issued under the National Housing Bank Act, 1987 (53 of 1987);
• insurance companies as referred to in the Insurance Act 1938 (4 of 1938 or rules and regulations thereunder;
• companies in the business of capital market intermediaries as referred to in the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules and regulations thereunder;
• companies in collective investment schemes as referred to in the Securities Exchange Board of India Act, 1992 (15 of 1992) or rules and regulations thereunder;
• asset management companies as referred to in Securities Exchange Board of India Act, 1992 (15 of 1992) or rules and regulations thereunder;
• any other company which is regulated under any other law for the time being in force.
3. The application in Form STK-2 Shall be accompanied by;-
• Indemnity bond duly notarized by every director in Form STK-3
• A statement of accounts containing assets and liabilities of the company made up to a day not more than thirty days before the date of application and certified by a Chartered Accountant.
• An affidavit in Form STK-4 by every director of the company
• A copy of the special resolution duly certified by each of the directors of the company or consent of seventy five per cent of the members of the company in terms of paid up capital as on the date of application.
• A statement regarding pending litigations, if any involving the company.
Manner of notarisation, appostilisation or consularisation of indemnity bond and declaration in case of a foreign nationals or non resident Indians: As provided under companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 if the Director of the company applying for Removal of Name of the Company is a foreign national or a non-resident Indian, the Indemnity bond and declaration shall be notarized or appositlised or consularised in the country of the foreign national.
4. The application in form STK-2 shall be signed by a director duly authorized by the board in their behalf using a digital signature certificate (DSC). Where the director concerned does not have a registered digital signature certificate, a physical copy of the form duly filled in shall be signed manually by the director duly authorized in that behalf and shall be attached with the Form STK-2 while uploading the form.
5. The form STK-2 Shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time Practice or Cost Accountant in whole time practice as the case may be.
6. Procedure followed after filing of application for removal of Name of the Company from the Registrar of Companies:
• Where a company has filed an application (e-form STK-2), a public notice shall be issued by the Registrar of Companies (ROC) in Form STK-6 inviting objection to the proposed removal of Name of the Company from the Registrar of Companies. The Registrar of Companies shall, simultaneously intimate the concerned regulatory authorities regulating the company, viz, the income tax authorities, the central excise authorities and service tax authorities having jurisdiction over the company about the proposed action of removal or strike off the name of the company and seek objections if any.
• The objections are to be sent to the respective Registrar of Companies within 30 days (Thirty Days) from the date of publication for Form STK-6. The notice in form STK-6 shall be place on the website of Ministry of Corporate Affairs, published in the Official Gazette and in a leading English news paper and at lease in one vernacular newspaper where the registered office of the company is situated.
• If no objections are received within thirty days from the respective authority it shall be presumed that they have no objections to the proposed action of striking off or removal of name of the company.
• Notice of striking off and Dissolution of company: after followed and dealt with the above steps, the registrar shall cause a notice under sub- section (5) of Section 248 of striking off the name of the company from the register of companies and its dissolution to be published in the Official Gazette in Form STK-7 and the same shall also be placed on the official website of the Ministry of Corporate Affairs.
7. Restrictions on making application under section 248 in certain situations:
• An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company:
1. has changed its name or shifted its registered office from one State to another;
2. 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;
3. has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
4. has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
5. is being wound up under Chapter XX, whether voluntarily or by the Tribunal.
• If a company files an application under sub-section (2) of section 248 in violation of sub-section (1), it shall be punishable with fine which may extend to one lakh rupees.
• An application filed under sub-section (2) of section 248 shall be withdrawn by the company or rejected by the Registrar as soon as conditions under sub-section (1) are brought to his notice.
8. Stamp Duty is required to be paid on Affidavit and Indemnity Bond as per respective State Stamp Acts.
Note: Make sure that the company does not maintain any bank account as on the date of filing application and does not have any assets and or liabilities.
Disclaimer:
1. The sole intention of this email / document is to educate the stakeholders about the provision of the Company’s Act and its timely compliance / good corporate practice and do not intent to promote or market any services.
2. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013, Income Tax Act, Rules, Regulations and all other Acts applicable to Companies. The observations of the author are personal view and this cannot be quoted before any authority without the written consent of the author.