If a company applies to the Registrar of Companies to remove its name from the ROC. Dissolution of a company by strike-off is the easiest way of closing a defunct company. This process is laid out in Section 248-252 of the Companies Act, 2013.
Voluntary application to strike off a company
- The first step is to process a special resolution and to obtain the consent of 75% of members (based on paid-up capital).
- Once this is obtained an application can be filed with the ROC to strike off its name from the Register of Companies.
- Before this is done, the company will need to extinguish all its liabilities.
Situations where a voluntary filing for a strike-off cannot be done
The company cannot apply for getting the company’s name removed if the following have taken place in the previous three months:
- If the company has disposed of rights or property held by it before the end of trade for the purpose of gain in the normal course of business.
- If the company has moved its registered office from one state to another or changed its name.
- If the company has applied to the National Company Law Tribunal for sanctioning an arrangement and the matter has not been finalized.
- If the company has indulged in other activities except for the one that is necessary for applying or meeting a statutory requirement or concluding the company affairs.
- If the winding-up of the company under Section XX of the Act is taking place either by the tribunal or through the voluntary application.
Impact of the dissolution of a company
Once a company is dissolved under Section 248 of the Act after the issue of notice in the Official Gazette it will stop operations from the date of the notice. The Certificate of Incorporation remains canceled from the date of dissolution.
Penalties for violation
Any company that applies for the removal of its name in violation of the above-mentioned conditions can be punished with a fine that may extend to Rs 1 lakh.
Conditions under which the ROC can strike off the Company Name
If certain conditions are fulfilled, the Registrar of Companies can issue a notice to the company of the intention to remove the company name from the Registrar of Companies. These include –
- If the company has not started operations within one year of incorporation.
- If the company has remained inactive in the previous two years and has not filed an application to be declared a dormant company under Section 455 of the Companies Act.
- Once this application is received, the ROC shall issue a public notice as defined in the Companies Act.
The company can send its representation along with copies of necessary documents within 30 days of the issue of notice. The notice issued by the ROC for removing the company name from the Register is required to be published in the Official Gazette for informing the general public. Once the notice is published in the Gazette, the company will stand dissolved. The ROC will remove the company name from the Register after the expiry of the allotted time from the date of the notice unless the company provides valid reasons within the specified time. The ROC will confirm that sufficient provision has been made for payment of existing company liabilities and realization of receivables within a reasonable period of time before passing the final order of company dissolution and striking off the name from the register. Mandatory undertaking from the Board of Directors will be obtained for this purpose and the company assets will remain available to fulfill the obligations after the date of dissolution. No liability of the company management will be extinguished till all the obligations are met.