Suo-motu Removal of name of company

Suo-motu removal of name of the companies from the register of companies maintained by Company registrars is legal roots in Sub – section (1) of Section 248 of the Companies Act, 2013 as discussed earlier here in its original form and its amendment by the Companies (Amendment) Act, 2015 as discusses thereafter. Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 deals with its procedural aspects. We will discuss Rule 3 in this post.

According to amended Section 248(1), “where the Registrar has reasonable cause to believe that—

(a) a company has failed to commence its business within one year of its incorporation; or

(b) deleted

(c) a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,

he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.”

Powers of removal

According to sub – rule (1) of rule 3 of these rules, the Registrar of Companies may remove the name of a company from the register of companies in terms of sub-section (1) of section 248 of the Act.

Companies Excluded from Removal

This is not a proviso to sub – rule (1) of rule 3 as it appears but an exclusion rule applicable to rule 3 and 4 both. According to proviso to sub – rule (1) of rule 3, following categories of companies shall not be removed from the register of companies under this rule and rule 4, namely:-

(i) listed companies;

(ii) companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;

(iii) vanishing companies;

(iv) companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;

(v) companies where notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;

(vi) companies against which any prosecution for an offence is pending in any court;

(vii) companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;

(viii) companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;

(ix) companies having charges which are pending for satisfaction; and

(x) companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

Vanishing companies

According to explanation to sub – rule (1) of rule 3, “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 Registrar of Companies and Stock Exchange for a 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.

Notice

According to sub – rule (2) of rule 3 read with sub – section (4) of section 248, the Registrar shall give a notice in writing in Form STK 1 which shall be sent to all the directors of the company at the addresses available on record, by registered post with acknowledgement due or by speed post.

This rule does not require receiving the notice by company or any or all of its directors. Therefore, it is advisable to check notices hosted by MCA21 portal official gazette and newspapers.

Reason and representation

According to sub – rule (3) of rule 3, the notice shall contain the reasons on which the name of the company is to be removed from the register of companies. The notice shall seek representations, if any, against the proposed action from the company and its Directors along with the copies of relevant documents, if any, within a period of thirty days from the date of the notice.

Manner of publication of notice

According to sub –rule (1) of rule 7, the notice for removal of name under sub-section (1) of section 248 shall be in Form STK 5. The notice shall be –

(i) placed on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;

(ii) published in the Official Gazette;

(iii) published in English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated.

Intimation to regulatory authorities

According to sub – rule (2) of rule 7, the Registrar of Companies shall, simultaneously intimate the concerned regulatory authorities regulating the company, viz, the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies. The registrar of companies shall seek objections, if any, to be furnished within a period of thirty days from the date of issue of the letter of intimation. 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.

Strike off the company

According to sub – section (5) of section 248, at the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.

Effect of company notified as dissolved

According to Section 250, Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.