Big Dilemma - Strike off of Company without Annual Filing

CS Divesh Goyal 
on 22 August 2019


Short Summary:

We have received queries / questions many persons Like: Professionals / corporate on subject "Whether Completion of Annual Filing Mandatory for Strike Off of Company?".  There is difference in views of professionals, business entities even authorities on above mentioned question. In below mentioned editorial author will discuss provision of strike off in concerned to above question.

Background:

There was three phase in History of Companies Act for "Strike off of Companies".

Phase I:  Under Companies Ac, 1956 Closure of Company was stated under Section 560.

Phase II: Then MCA came with a Scheme 'Fast Track Exit Scheme' (FTE) on 7th June, 2011.

Phase III: Then MCA came with Companies Act, 2013, provision of Strike off of Company falls under Section 248 effective from 26th December, 2016.

Legal Provisions:

Extract of Sections 560:

As per section 560 of the Companies Act, 1956, Registrar of Companies may strike off the name of companies on satisfying the conditions therein.

As per Section 560, a company desirous of getting its name struck off has to apply to Registrar of companies in e-form 61. All pending statutory returns are required to be filed along with e-form 61. This language was mentioned in MCA circular no 36/2011 dated 07th June, 2011.

Fast Track Exit Scheme (FTE):

In order to give an opportunity for fast track exit by a defunct company, for getting its name struck off from the register of companies the Ministry has decided to modify the existing route through e-form - 61 and has prescribed the new Guidelines. The Guidelines for "Fast Track Exit mode" for defunct companies.

NOTE: After Effective of Section 248 dated 26th December, 2016, "FTE" scheme has been omitted. Therefore, legally after 26th December, 2016 there is no FTE Scheme.

Extract Section 248 of Companies Act, 2013:

In the latest provisions of Section 248 and in respective rules language are same as was in section 560 of Companies Act, 1956. Section 248 states the provisions of strike off of the Company not for Fast Track Exit of the Company.

Difference between FTE Scheme, 2011 and Companies Strike Off u/s 248

S. No.

Particulars

Provisions under FTE Scheme

Provisions under Section 248 of Companies Act, 2013 along with rules.

1.    

Link for Circular/ Rules

https://www.mca.gov.in/Ministry/pdf/Circular_36-2011_07jun2011.pdf

http://www.mca.gov.in/Ministry/pdf/Rules_28122016.pdf

2.    

Not Carrying Business & Activity

is not carrying over any business activity or operation for last one year before making application under FTE.

not carrying on any business or operation for a period of two immediately preceding financial years

3.    

Dormant Company

Any defunct company identified as dormant by the MCA, may apply for getting its name strike off

There is no such Provisions in Section 248.

4.    

Completion of Pending Statutory Return

Not- required to file pending statutory returns before apply for Strike Off.

Required to file pending statutory before apply for Strike Off.

Quick Bite: Many persons have query in mind that, where in Section 248 it is mandatory to file e-form AOC-4 and MGT-7 before filing of strike off?

There is amendment in rule 4 of Companies (Removal of Name of Companies) rules, 2016 w.e.f. 8th May, 2019 i.e "no application in Form No. STK-2 shall be filed by a company unless it has filed overdue returns in Form No. AOC-4 (Financial Statement) or AOC-4 XBRL, as the case may be, and Form No. MGT-7 (Annual Return), up to the end of the financial year in which the company ceased to carry its business  operations"

Therefore, after amendment in Rule 4 w.e.f. 08th May, 2019 it is very clear that annual filing of AOC-4 and MGT-7 is mandatory up to the end of the financial year in which the company ceased to carry its business operations.

In other words, Company is required to file AOC-4 and MGT-7 up to financial year till company carries its business and operations.

Note: Practically many Registrar of Companies (ROC) has sent e-form STK-2 for resubmission/ non accepting strike off if Annual filing of Company is not completed. Therefore, after above amendment ROC have to approve the STK-2 for strike off of Company even company has not completed annual filing if Company has declared that it has not done any business and profession since annual filing is pending."


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