On incorporation of a company a certificate of registration is issued from the government of India with the condition that the company has come into existence from the date of registration and the name of the company is entered in the Register of Companies. Once registered the name can not be removed from the register unless the company dissolved by the process of law. But in case the company failed to commence business within one year of date of registration the company become Defunct and in such situation the registered is authorized under sec 560 to striking the name of the company or remove the name of the company from the Register of Companies.
Defunct company means the company which failed to commence business within one year from the date registration without any proper reason which beyond the control of the company. Again if a company is not filling its balance sheet for many years than also it will be traded as defunct company.
Provision of law of striking:
Power of roc to strike off:
ROC is authorized under sec 560 to strike off the name of the company which is defunct or not in operation since one year without any proper reason, subject to giving notice to the company and published notice in the official gazette.
The registered is not bound to remove the name of the company just by giving application by them company even the company is not in operation and if the intention of the application is to avoid liability due against the company.
Under two conditions ROC can strike off the name of the company-
i) Where the company is wond-up and no liquidator is working in it.
ii) If it believed that the complete affair of the company is wond up and the required return is not being submitted.
Position of company’s creditors after striking off:
Striking off the name of the company is not affecting the creditor because the creditor has the following option:
i) They can claim their dues from every Director, Secretary and Treasures or any officer of the company and against every member of the company, but the liability is limited to the previous liability.
ii) The creditor can apply to the court for the winding-up of the company name of which has been struck off.
iii) The creditor can apply to the court at any time within twenty years from the date of publication of notice that the name of the company has been struck-off from the register.
Court power to wind - up the company even after dissolution under sec 560(5):
As per sec 560(5) (b) the court is authorized to wind up a company even without the company being first restored.
Procedure involved in striking off names of companies by registrar:
Striking off name can be done in two types:-
1) Striking off by the Registrar on its own motion:
To strike off the name of the company the Registrar has to comply with the following procedure:
a) Letter of Enquiry: when the registrar has reason to believed that the company is not in operation, he shall send a letter of inquiring whether the company is in operation or not.
b) Notice threatening striking-off: If the registrar not received any reply from the company within one month of previous letter, send to the company second letter and stating that if again no reply is being received within one month from the letter then a notice is being published to the official gazette to strike off the name of the company.
c) Final notice of removal: If the registrar in response to the letter received reply that the company is not in operation or do not received any reply then he may proceed to strike off the name of the company. It can strike in two ways:
- A notice is send to the official gazette that with the expiration of three month from the date of notice, the name of the company be strike off.
- The above mentioned notice is send to the company as well as to the Income Tax department. Similar procedure for publication of notice in the official gazette is taken.
d) After the expiry of three month from the notice if no reason has been shown by the company the name of the company strike off from the register and published the same in the official gazette.
2) Striking-off on Company’s application:
The registrar can exercise the conferred on him also on an application by the company on this matter. The procedure to be followed given in the following:
i) Board resolution: When the company wants to strike-off the name from the Registrar, he need to passé a resolution in the properly held Board meeting and mention in the resolution the company proposed to strike-off the name of the company and send it to the ROC with an application for the purpose.
ii) Document : Application should be accompany with the following document:
- An affidavit signed by the Director and confirms that the company has no asset or liabilities and the company is not in operation.
- Indemnity from the director, in case of any liability exist the director will pay that before striking the name of the company form the registrar.
3) Notification and Striking-off:
If the register satisfied with the above formalities about the correctness of the application than the registrar proceed to strike the name of the company and publish a notice in the official gazette.