Strike Off and Restoration of Name of The Company & LLP – Setting Up of Business Entities and Closure Important Questions

Strike Off and Restoration of Name of The Company & LLP – Setting Up of Business Entities and Closure Important Questions

Question 1.
Write a short note on Provisions and procedures for striking off the name of the company. [Dec. 2010 (4 Marks)]
Answer:
Strike off can be done by:
(a) ROC
(b) Company Power of Registrar to remove the name of company [Section 248(1)]: In the following cases the Registrar can remove the name of the company from the register of companies
1. No Commencement of Business: If the company fails to commence its business within 1 year of its incorporation.

2. Inactive Company: If a company is not carrying on any business or operation for a period of 2 financial years and has not made any application within such period for obtaining the status of a dormant company u/s 455. In this case, Registrar 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 30 days from the date of the notice.

3. Unpaid Shares by Subscribers: If subscribers to the MOA have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days of its incorporation u/s 10A(1); or

4. Physical Verification: If a company is not carrying on any business or operations, as revealed after the physical verification carried out u/s 12(9).

Removal of name on the application of the company [Section 248(2)]: Step 1 Liabilities- A company may, after extinguishing all its liabilities, Step 2 Special Resolution- Company shall special resolution or consent of 75% members in terms of paid-up share capital Step 3 Application Company shall file an application in the prescribed manner to the ROC for removing the name of the company from the register of companies on all or any of the grounds above.

Step 4: Public Notice: The Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner. However, in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.
Provisions of this section shall not apply to section 8 Company.

Question 2.
What is meant by striking the name of the company under section 248 of the Companies Act, 2013? [June 2012 (4 Marks)], [June 2013 (2 Marks)]
Answer:
On incorporation, the name of the company and LLP is entered in the Register maintained by the Registrar. On striking off, the name of the company/LLP is temporarily removed from the said Register. The name j of the company can be restored in the Register on making an application.

“Striking-off” implies removal. The name of the company can be removed in g following two ways:
(a) By Registrar of Companies on Suo Motu;
(b) By Application of company for removal of name/Strike-off of Company.

The provisions relating to strike-off provide an opportunity to the non-work-ing companies to get their names struck off from the records of the ROC. The provisions of Sections 248 to 252 of the Companies Act, 2013 read with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 deal with the removal of names of companies from the Register of Companies.

A company can be struck off by any of the following modes:

  • Suo Motu by the ROC Under Section 248(1) of the Act; or
  • An application by the company for removal of name/strike off of company under Section 248(2) of the Act

Question 3.
Spectacular Ltd. wants to make an application to the Registrar of Companies (ROC) for removal of its name under section 248(2) of the Companies Act, 2013 from the register. It is understood that the application, inter alia, shall be accompanied by an ‘affidavit’ by every director of the company. You are a practicing Company Secretary. The company has approached you to draft such an affidavit. Help the company.fJu/n? 2018 (8 Marks)]
Answer:

FORM No. STK- 4
AFFIDAVIT
(To be given individually by every Director)

[Pursuant to Section 24&2 read with clause(iii) of sub-rule(3) of Rule 4]
I ___________ Director of___________ (hereinafter called “the Company”), incorporated on _________ under the Companies Act, 2013 or the Companies Act, 1956 having its registered office at __________and having CIN __________ do solemnly affirm and state as under:
1. I__________S /o Shri__________Holder of DIN/Income Tax PAN/Passport number (copy of Income Tax PAN/Passport duly attested by a Company Secretary) Director of the Company stated above since (mention date of appointment).

2. My present residential address is__________(copy of documentary evidence duly attested by Company Secretary) is enclosed.

3. My permanent address is__________(copy of documentary evidence duly attested by a Company Secretary) is enclosed.

4. The Company does not maintain any bank account as of date.

5. The Company__________(mention name of the Company) does not have any assets and liabilities as of date.

6. The Company has been inoperative from the date of its incorporation/The Company commenced business/operations/commercial activity after incorporation but has been inoperative for the past__________year(s) due to following reasons__________: (Give the reasons here)

7. As of date, the Company does not have any dues towards Income Tax/Sales Tax/Central Excise/Banks and Financial Institutions; and other Central or State Government Departments/Authorities or any Local Authorities.

8. I further affirm that
(a) No inquiry, technical scrutiny, inspection, or investigation is ordered or pending against the company;
(b) No prosecution or any compounding application for any offense under the Act or under any of the other Acts is pending against the company or against the undersigned;
(c) The company is neither listed nor delisted for non-compliance of listing agreement;
(d) The company is not a company incorporated for charitable purposes under Section 8 of the Companies Act, 2013 or Section 25 of the Companies Act, 1956;
(e) The company does not have any management disputes or there is no litigation pending with regard to management or shareholding of the company;
(f) No order is in operation staying filing of the documents by a court or tribunal or any other competent authority;
(g) The company is not prevented from making the applications for strike off as mentioned in section 249 of the Companies Act, 2013.

I solemnly state that the contents of this affidavit are true to the best of my knowledge and belief and that it conceals nothing and that no part of it is false.

Signature: __________
(Deponent)

Verification:
I verify that the contents of this affidavit are true to the best of my knowledge and belief.
Place: __________

Signature: __________
(Deponent)

Date: __________
Note: Attention is also drawn to provisions of section 449 which provide for punishment for false evidence.

Question 4.
Radha Manufacturing Ltd. wants to file an application for the removal of the name of the company from the Registrar of Companies (ROC). Enumerate the various grounds on which the company is permitted to file an application for removal of name the company from ROC under the provisions of the Companies Act, 2013. [Dec. 2018 (3 Marks)]
Answer:
Strike-off provisions give a choice or an option to a non-working company to remove its name from the Register of Companies. There are many companies that are registered with ROC but due to various reasons, they are not operative. The Strike off provisions gives the option to such companies to apply to ROC for removal of their name from the Register of Companies. The procedure of removal of the name of the company is governed by section 248(2) of Companies Act, 2013 read with Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. This is a speedy way to close down a company being non-operational over a period of time.

Various grounds on which company is permitted to file an application for removal of name the company from ROC: On the following grounds, the company through its board of directors, can file an application for removal of the name of the company from the Register of Companies:
(a) If a company has failed to commence its business within 1 year of its incorporation or
(b) If the company is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company u/s 455 of the Companies Act, 2013.

Before making an application to the ROC for removal of the name of the company, the board of directors of the company shall take all the steps necessary in order to extinguish all its liabilities. Approval of the shareholders by a special resolution or consent of 75% members in terms of paid-up share capital is also required to be taken before filing an application to the ROC for the removal of the name of the company from the Register of companies.

Question 5.
List out various situations in which a company is not permitted to apply for strike-off the name of the company from the Register of Companies. [Dec. 2018 (3 Marks)]
Answer:
Restrictions on making application u/s 248 in certain situations [Sec-tion 249]: An application u/s 248(2) on behalf of a company shall not be made if, at any time in the previous 3 months, the company:
(a) Change in Name or Registered Office: has changed its name or shifted its registered office from one State to another;

(b) Disposal of Property: -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;

(c) Activity: 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;

(d) Compromise and Arrangement: has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

(e) Winding Up: is being wound-up whether voluntarily or by the Tribunal or under the Insolvency & Bankruptcy Code, 2016.

An application filed shall be withdrawn by the company or rejected by the Registrar as soon as conditions are brought to his notice.

Question 6.
Situations under which a company cannot apply for strike-off its name from the Register of the companies. Comment. [June 2019 (3 Marks)]
Answer:
Restrictions on making application u/s 248 in certain situations [Sec-tion 249]: An application u/s 248(2) on behalf of a company shall not be made if, at any time in the previous 3 months, the company:
(a) Change in Name or Registered Office: has changed its name or shifted its registered office from one State to another;

(b) Disposal of Property: -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;

(c) Activity: 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;

(d) Compromise and Arrangement: has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

(e) Winding Up: is being wound-up whether voluntarily or by the Tribunal or under the Insolvency & Bankruptcy Code, 2016.

An application filed shall be withdrawn by the company or rejected by the Registrar as soon as conditions are brought to his notice.

Question 7.
ROC can strike off the name of a company on Suo Motu basis only after following certain procedures. Comment. [June 2019 (5 Marks)]
Answer:
To exercise the power u/s 248 to remove the name of the company effectively the ROC is required to follow the procedure as given below:
1. Service of notice: The Registrar is required to send a notice in Form No. STK-1 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. Such notice should contain the reasons on which the name of the company is to be removed from the Register of Companies. Such a notice should be sent to all the directors of the company at the addresses available on record, by registered post with acknowledgment due or by speed post.

2. Reply to Notice: On receipt of such a notice, the company and all the directors of the company are required to send their representations along with copies of the relevant documents, if any, explaining the reasons as to why the name of the company should not be removed from the register of companies. Such a representation should be given within a period of 30 days from the date of the notice.

3. Consideration of the representation made: The ROC will consider the representation made by the company and all the directors of the company. If the ROC is not satisfied with the representation made by the company and its directors, it may proceed to strike off the name of the company.

4. Publication of Notice: The notice for removal of the name of the company should be in Form No. STK-5 for the information of the general public and should be:

  • Placed on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;
  • Published in the Official Gazette;
  • Published in Form No. STK-5 A 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.

Such a publication is required to be given for the information of the general public in order to enable the general public to give their objections, if any, to the proposed removal/striking-off of the name of the companies from the register of companies and requiring them to send their objection to the ROC within 30 days from the date of publication of the notice

5. Intimation to regulatory authorities: Intimation about the proposed action of removal or striking-off the names of the company should be sent to the Income-tax Authorities, GST Authorities, etc. having jurisdiction over such a company. Such intimation should be given to enable the authorities to give their objections if any. Such objections are required to be given within a period of 30 days from the date of issue of the letter of intimation.

6. Striking off/Removal of the name of the company: After expiry of 30 days from the date of publication of the notice in the newspaper, Official Gazette and intimation to regulatory authorities and unless cause to the contrary is shown by the company, if there are no objections received within 30 days from the general public or respective authority, the ROC can proceed to strike-off or remove the name of the company from the Register of companies.

7. Provision for the realization of the amount due: The ROC before passing an order for Striking off/Removal of the name of the company should satisfy that sufficient provision has been made for the realization of all amounts due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time. Registrar can obtain necessary undertakings from the director or other persons in charge of the management of the company.

8. Notice of dissolution of the company: After the expiry of the time mentioned in the notice, the ROC can strike off the name of the company from the Register. The notice of striking off the name of the company from the register of companies and its dissolution should be published in the Official Gazette in Form No. STK-7 and the same should also be placed on the official website of the Ministry of Corporate Affairs. The company shall stand dissolved on the publication of such notice in the Official Gazette.

Question 8.
Can an aggrieved creditor apply for restoration of the name of the company after 10 years if it’s striking-off? If so, how? [June 2011 (2 Marks)], [June 2013 (2 Marks)]
Answer:
Registrar of Companies can Suo Motu after issuing the notices u/s 248(1) strike of the name of the company. In such a case it may happen that the name of the company may be struck off even though the company is an active company but due to the non-filing of reply, the ROC has removed the name of the company from the Register. In such a case the directors of such a company have no option but to approach NCLT by making an appeal for the restoration of the name of the company in the Register of companies maintained by the ROC.

Appeal to Tribunal [Section 252]: Any person aggrieved by an order of the Registrar, notifying a company as dissolved u/s 248, may file an appeal to the Tribunal within a period of 3 years from the date of the order of ROC. If the Tribunal is of the opinion that the removal of the name of the company is not justified in view of the absence of any of the grounds on which the order was passed by the ROC, it may order restoration of the name of the company. However, before passing any order, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the ROC, the company, and all the persons concerned.

Application by ROC for restoration of name of the company: If the ROC is satisfied, that the name of the company has been struck off from the register of companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, which requires restoration in the register of companies, he may within a period of 3 years from the date of passing of the order dissolving the company, file an application before the Tribunal seeking restoration of name of such company.

Filing copy of the order of Tribunal with ROC: A copy of the order passed by the Tribunal shall be filed by the company with the ROC within 30 days from the date of the order and on receipt of the order. The ROC shall cause the name of the company to be restored in the register of companies and shall issue a fresh certificate of incorporation.

Application for restoration of name of the company by the company, member, creditor, or workman: If a company, or any member or creditor or workman thereof feels aggrieved by the company having its name struck-off from the register of companies, the Tribunal on an application made by any of them before the expiry of 20 years from the publication of notice in the Official Gazette may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company is restored to the register of companies, order the name of the company to be restored to the ROC.

The Tribunal may give such other directions and make such provisions as deemed just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off from the register of companies.

Question 9.
Registrar of Companies may file an appeal before the National Company Law Tribunal for restoration of the name of the company. Elucidate. [Dec. 2018 (3 Marks)]
Answer:
Registrar of Companies can Suo Motu after issuing the notices u/ s 248(1) strike of the name of the company. In such a case it may happen that the name of the company may be struck off even though the company is an active company but due to the non-filing of reply, the ROC has removed the name of the company from the Register. In such a case the directors of such a company have no option but to approach NCLT by making an appeal for the restoration of the name of the company in the Register of companies maintained by the ROC.

As per Section 252 of the Companies Act, 2013, any person aggrieved by an order of the Registrar, notifying a company as dissolved u/s 248, may file an appeal to the Tribunal within a period of 3 years from the date of the order of ROC.

Thus, an appeal can be filed by any person aggrieved by an order of the Registrar and not by the Registrar against his own order.

Question 10.
What procedure is required to be followed by the Registrar to remove the name of the Limited Liability Partnership Suo Motu from the Register of LLP under the Limited Liability Partnership Act, 2008?
Answer:
Subject to the provisions of section 75 of the LLP Act, 2008 read with Rule 37 of LLP Rules, 2009, the Registrar can Suo Motu remove the name of the LLP from the Register in case an LLP is not carrying on any business or operation for a period of 2 years or more and the Registrar has reasonable cause to believe the same.

Procedure to be followed by ROC for striking off the name of the LLP on a Suo Motu basis:
1. Notice by ROC: Before striking off the name of the LLP, the registrar is required to send a notice to the LLP and all the partners of the LLP of his intention to remove the name of the LLP from the register of LLP. Such notice shall contain the reasons for which the name of the LLP is to be removed from the register.

2. Reply to Notice: On receipt of such a notice, the LLP and all the partners of the LLP are required to send their representations along with copies of the relevant documents, explaining the reasons as to why the name of the LLP should not be removed from the register. Such a representation should be given within a period of 1 month from the date of the notice.

3. Consideration of the representation made: The Registrar will consider the representation made. If the Registrar is not satisfied with the representation made by the LLP and its partners, it may proceed to strike off the name of LLP.

4. Publication of Notice: Notice shall be placed on the website of the Ministry of Corporate Affairs for the information of the general public for the period of 1 month. Such publication is required to be given for the information of the general public in order to enable the general public to give their objections, if any, to the proposed striking-off of the name of the LLP from the register and requiring them to send their objection to the Registrar within 1 month from the date of publication of the notice.

5. Striking-off of the name of the LLP: After the expiry of the time limit of 1 month and unless cause to the contrary is shown by the LLP, if there are no objections received, the Registrar can proceed to strike off the name of the LLP from the Register of partnership.

6. Provision for the realization of the amount due: The Registrar before passing an order for striking-off of the name of the LLP should satisfy that the sufficient provision has been made for the payment or discharge of its liabilities and obligations by the LLP within a reasonable time. Registrar can obtain necessary undertakings from the designated partner or partner or other persons in charge of the management of the limited liability partnership.

7. Notice of dissolution of the LLP: After the expiry of the time mentioned in the notice, the Registrar can strike off the name of the LLP from the Register. The notice of striking off the name of the LLP from the register and its dissolution should be published in the Official Gazette. The LLP shall stand dissolved on the publication of this notice in the Official Gazette.

Question 11.
The Registrar has Suo Motu struck off the name of the M/s. A2Z Solutions, an LLP from the register as Registrar has a reasonable cause to believe that the LLP is not carrying on any business for the last two years. Being aggrieved by the order of Registrar, the LLP wants to file an appeal before the National Company Law Tribunal (NCLT) for restoration of the name of the LLP in the Register of Partnership maintained by the Registrar. Referring to the provisions of the Limited Liability Partnership Act, 2008, advise the LLP on the procedure to be followed for making an application to NCLT. [Dec. 2018 (5 Marks)]
Answer:
Restoration of Name of the LLP: Registrar can strike off the name of LLP Suo Motu after issuing the notices u/s 75. In such a case it may happen that the name of the LLP may be struck off even though the LLP is active. The partners of such an LLP can approach the NCLT by making an application for the restoration of the name of the LLP in the Register of Partnership maintained by the Register.

The application can be made by:
(a) LLP
(b) Partner
(c) Creditor to the Tribunal before the expiry of 5 years from the publication in the Official Gazette of the notice of removal of the name of the LLP.

If the Tribunal is satisfied that the LLP was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the LLP be restored to the register, order the name of the LLP to be restored to the register.

Procedure for making an application to NCLT:

  1. Application to NCLT: An application is to be filed before the bench of the NCLT where the registered office of the LLP is situated, in Form No. NCLT-9. Such an application should be accompanied by various documents showing that the LLP is active and that the name of the LLP should be restored in the Register.
  2. Copy to Registrar: A copy of the application or appeal is required to be sent to Registrar.
  3. Comments of Registrar: Registrar may send his report to NCLT along with his comments and views on the restoration of the name of the LLP.
  4. Order by NCLT: NCLT after hearing all the parties shall pass an appropriate restoration of the name of the LLP in the register.

Question 12.
Glory Technology LLP is not carrying on any business for a period of two years desirous of striking the name from the register of Limited Liability Partnership maintained by the Registrar of Companies. Whether LLP is allowed to do so? Examine. [June 2019 (3 Marks)]
Answer:
Facts of Case: Glory Technology LLP is not carrying on any business for a period of two years desirous of striking the name from the register of Limited Liability Partnership maintained by Registrar of Companies. Provision: As per Section 75 of the LLP Act, 2008, where the Registrar has reasonable cause to believe that a Limited Liability Partnership (LLP) is not carrying on business or its operation, in accordance with the provisions of the Act, the name of LLP may be struck off the register of limited liability partnerships in such manner as may be prescribed.

However, the Registrar shall, before striking off the name of any LLP, give such LLP a reasonable opportunity of being heard.

As per Rule 37 of the LLP Rules, 2009, where LLP is not carrying on any business or operation –
(a) For a period of 2 years or more and the Registrar has reasonable cause to believe the same, for the purpose of taking Suo Motu action for striking off the name of the LLP; or

(b) For a period of 1 year or more and has made an application in Form No. 24 to the Registrar, with the consent of all partners of the LLP for striking off its name from the register, the Registrar shall send a notice to the LLP and all its partners, of his intention to strike off the name of the LLP from the register and requesting them to send their representations along with copies of the relevant documents, if any, within a period of 1 month from the date of the notice. Conclusion: Glory Technology LLP is not carrying on any business for a period of more than 1 year and thus it can voluntarily apply to the ROC for striking its name from the Register of LLPs.

Question 13.
Mithali sports LLP has been struck off by the Registrar of Companies. One of its unsecured creditors has approached you to know his eligibility in making an application for revival of struck-off LLP. Also brief with the procedures for the revival of struck off LLP. [Dec. 2019 (3 Marks)]
Answer:
Registrar can strike off the name of LLP Suo Motu after issuing the notices u/s 75. In such a case it may happen that the name of the LLP may be struck off even though the LLP is active. The partners of such an LLP can approach the NCLT by making an application for the restoration of the name of the LLP in the Register of Partnership maintained by the Register.

If LLP, or any partner or creditor thereof, feels aggrieved by the order of Registrar then they can make an application to the Tribunal before the expiry of 5 years from the publication in the Official Gazette of the notice of removal of the name of the LLP. If the Tribunal is satisfied that the LLP was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the LLP be restored to the register, order the name of the LLP to be restored to the register

Procedure for making an application to NCLT:

  • An application is to be filed before the bench of the NCLT where the registered office of the LLP is situated, in Form No. NCLT-9. Such an application should be accompanied by various documents showing that the LLP is active and that the name of the LLP should be restored in the Register.
  • A copy of the application or appeal is required to be sent to Registrar.
  • Registrar may send his report to NCLT along with his comments and views on the restoration of the name of the LLP.
  • NCLT after hearing all the parties shall pass an appropriate restoration of the name of the LLP in the register.

Setting Up of Business Entities and Closure Questions and Answers

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