Power of Registrar to remove name of Company from Register of Companies

When a company is registered on incorporation, logically,there should be a provision for its deregistration also other than by way of winding up, if after registration, the company does not carry on business.Provision for deregistration by way of removal has been in existence for a longtime.  Section 247 of the Companies Act,1913 (the 1913 Act) also contained the provisions relating to removal of the name of a company from the register of Companies and English Acts also contain similar provisions. However, it may be noted that both under the provisions in the 1913 Act and the 1956 Act, only the Registrar had the powers to remove the name of a company if he was convinced that the company had not been in operation or had not been carrying on business. Section 560 of the 1965 Act was amended by the Companies (Amendment) Act, 2000. The amendment was of a consequential nature and deleted the term “managing agent, secretaries and treasures” in clause 5(a). The Companies (second amendment) Act, 2002, amended section 560 of the 1956 Act again, by which powers of the court were conferred on the Tribunal. However, the change introduced by the Companies (Amendment)Act, 2002, did not come into force as the effective date of its enforcement was not notified.

Companies Act, 2013: section 248

Section 248 of the 2013 Act was not notified at the time of going to press. This clause corresponds to section 560 of the Companies Act,1956 and seeks to provide the circumstances under which the 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. The clause further provides that a company may by a special resolution or with the consent of seventy-five percent members in terms of paid-up share capital may also file an application to the Registrar for removing the name of the company from the register of companies. Where company is regulated under special law,approval of the regulatory body constituted, shall also be obtained and enclosed with application. This clause further seeks to provide that at the expiry of the time mentioned in the notice, the Registrar may strike of the name of the company from the register of companies, and on the publication in the official gazette of this notice, the company shall stand dissolved.However, the Registrar, before passing an order shall satisfy himself that sufficient provision has been made for the realization of all accounts due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time. The liability of every, director,manager or other officer exercising any power of management and every member of company dissolved shall continue and may be enforced as if company has not been dissolved. Unlike the 1956 Act where only the Registrar had powers to remove the name of a company from the register of companies on account of its not carrying on business the 2013 Act authorizes companies themselves to apply for removal of their names from the register of members.

Salient features of Chapter 18

Under the 1956 Act the only ground on which the Registrar could strike the name of a company was that it was not carrying on Business. As per the 2013 Act, the Registrar can strike off the name of a company, if,

  • It has not been carrying on business for two immediately preceding financial  years and has not applied for treating it as a dormant company or
  • It has failed to commence business within one year of incorporation or
  • The subscribers to memorandum have not paid the amount agreed to be subscribed, within 180 days of incorporation.
  • The 1956 Act did not provide for a company voluntarily applying for striking off its name from the register of Companies.Even though the Central Government formulated exit schemes to enable companies to apply for striking off their names from the registrar of Companies. Yet such schemes did not specify the statutory provided for a company to apply voluntarily for striking off its name after complying with the provisions of section 248(2) of the 2013 Act.
  • The procedure to be followed by the Registrar to strike off the name of a company has been simplified in the 2013 Act as compared to the procedure under section 560 of 1956 Act.
  • It is specifically provided that the provision of section 248 of the 2013 Act is not applicable to companies registered under section 8 of the 2013 act.
  • If a company is regulated under a special act then approval of the regularity authority shall be applied and enclosed with the application by the company seeking to strike off its name from the register of companies.

Registrar’s power to remove the name of a Company

The Registrar has powers to remove the name of a company in the circumstances specified in sub-section (1) of 248 of the 2013 Act. However,before doing so, he or she has to send a notice to the company and all the directors of his intention to remove the name of the company and seek relevant documents,etc. within in a period of thirty days from the date of the notice. Section 248(1) of the 2013 Act makes it mandatory for the Registrar to issue notice.

Right of a company to apply for striking off [Section 248(2) of Companies Act, 2013)

This is a new provision. Under 1956 Act, there was no provision for a company to apply to the Registrar for striking its name off the register of companies; the central Government had formulated scheme s to enable companies to apply for striking of their names. Under the 1956 Act, “exit schemes” were introduced to allow companies to formally apply to be removed from the register. Prior to the exit schemes, the initiative to remove defunct companies was taken in 1987, through a circular issued by the department of company affairs, Ministry of finance and company affairs, Government of India. Now as per section 248(2) of the 2013 Act a company can also file an application before the Registrar for removal of its name from the register of companies on any or all of the grounds specified in sub-section(1) of section 248 of the 2013 Act.For doing so, it has to establish that it has no liability and that it has obtained the approval of the shareholders holding not less than 75% shares.

Dissolution of the company

On expiry of 30 days of the notice issued under section 248(6) of the 2013 Act, unless contrary is shown by the company, the Registrar will strike off the name of the company from the register of companies and publish the notice in the Official Gazette. On such publication, the company shall stand dissolved.

Discharge of liabilities

The provisions in section 248(6) of the 2013 Act is to ensure that the liabilities and obligations of the company are met and that notwithstanding the strike of the company, the assets etc. are made available for the meeting the liabilities of the company.

Personal liability of directors

Section 248(7) of the 2013 Act provides that the liability,if any, of every director, manager or other officer who was exercising the power of management and every member of the company shall continue and may been forced as if the company has not been dissolved. It appears from the wording of section 248 (7) of the 2013 Act that it is the personal liability of the persons mentioned therein towards the company which can be enforced against the persons mentioned therein. It is to be noted that the liability of a member can never be more than that of a contributory as in a case of winding up of a company.

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