How to Reactivate Strike-Off Company?

The Ministry of Corporate Affairs (MCA) is taking strict actions against shell companies and companies which do not file their financial statements and annual returns regularly with ROC (Registrar of companies). Last year alone, it struck off lakhs of companies under section 248(1) of Companies Act, 2013. The government is still cleaning up the corporate field. But it has come up with a procedure to reactivate strike off company.

Introduction

A company is struck off when there is the removal of the name of the company by ROC. Under Section 248 of The Companies Act, 2013, the Registrar can strike off company which has defaulted or is defunct, from the Register of companies. This dissolved company can revive under the Companies Act, 2013, through an order of National Company Law Tribunal (NCLT).

Strike off Company Under Companies Act, 2013

• Section 248 talks about the power of ROC to remove the name of the company from the Register of companies.
• The company can appeal to the NCLT under section 252.
• The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 also deal with strike off.
• Rule 87A of the NCLT (Amendment) Rules, 2017 and NCLT Rules, 2016 additionally address struck off.
• In the case of striking off defunct companies, section 248 of Companies Act 2013 comes into picture.  However, restoration can be done under section 252 of The Companies Act 2013.

What are the reasons for strike off company?

There are several reasons for striking off a company, and following are a few cases where a company is struck off-

• If the company fails to start a business within one year of incorporation of the company.
• Failure to carry on the business for two preceding financial years.
• If the company does not file the financial statements and annual returns for a period of 3 years continuously.
• When the directors fail in filing the Form DIR-8 on time.
• Non-compliance with relevant provisions of Companies Act and other legal framework.

Who can file an Application for Revival?

Procedure for the revival of strike off companies as per Companies Act, 2013

If a person or company is not satisfied with the order of the Registrar for strike off company under section 248, it can file an appeal to NCLT. This appeal can be filed within 3 years from the date of order.  Following is the procedure for the revival of strike-off of companies–

1. Preparation & filing application under NCLT

The applicant has to file an application for restoring the company whose name was struck off from the Register of the company. It can be done under section 252(3) read with rule 87A of National Company Law Tribunal (Amendment) Rules, 2017. Furthermore, a petition for restoration can be filed with NCLT within 3 years from the date of the strike-off.

2. Rule 87A(2) : Submission of the petition with ROC

Copy of the application has to be served on the ROC and other people as per the NCLT directions either by post or hand not less than 14 days from hearing.

3. Attachment of documents list with application in NCLT-9

The applicant has to file a list of documents under Annexure B of the NCLT Rules, 2016 required to be filed with NCLT while filing the application.

4. Hearing of the Petition by NCLT: Rule 87A (3)

The NCLT has to hear both the sides. After the hearing, if satisfied can restore the name of the company in the record of ROC.

5. File NCLT order with ROC

After the Tribunal makes an order for restoration of the company after strike off, it will direct the appellant to deliver a certified copy of the order to ROC within 30 days from order.

6. Directions by NCLT under Rule 87A(4)

After the delivery, ROC has to publish the order in the official gazette. The appellant has to pay the Registrar as per the directions of the Tribunal. After this, the company has to file the pending financial statements and annual returns with the Registrar and pay the fee as per NCLT.

7. Publication of order in the official gazette

Lastly, the ROC has to publish the order in the official gazette.

Role of ROC in striking off company

Under Section 248 of the Companies Act, the ROC has the authority to strike off a company who are not carrying any business or are not operating under the prescribed procedure. The Registrar has the power to issue a public notice in the official gazette regarding the strike off company.

Liability of company after strike off

The liabilities of the director, managers, and other officials shall continue and may be enforced even after the strike off of the company. According to section 250 of The Companies Act, 2013 in case the company stands dissolved, it will cease to operate except for realizing amount due and for payment or discharge of liabilities. As per section 248 (6), the assets will be available for the payment of any liabilities even after the date of order of strike off.

Conclusion

The Ministry has become stringent and taken actions against lots of companies for non-compliance and non-filing of statutory form with the Registrar. To put it simply, the striking off companies brought a ray of hope for rebuilding a corruption free economy.  This is a good initiative by the government, which helps in the complete clean up of the corporate structure and prevent tax evasion. Lastly, it also helps in the prevention of money laundering and strengthens the corporate sector.

For more information, and assistance in revival of struck off companies, contact LawyerINC.