Reviving Stricked-off Companies: A Guide to Restoring Your Business to Active Status

"Strike off" refers to either the voluntary cessation of operations by a company or the compulsory removal of its name from the Registrar of Companies' list, based on specified grounds. This action can be initiated voluntarily by the company or mandated by the Registrar of Companies under applicable legal provisions.

Upon incorporation of a company under the Companies Act, the Registrar of Companies issues a Certificate of Incorporation affirming the establishment of the company as of the date of issuance. The certificate acknowledges the entry of the company's name into the Register of Companies maintained by the ROC.

Once a company is registered, its name remains on the Register unless it undergoes dissolution through lawful procedures, such as winding up or amalgamation with another company. However, if a company becomes defunct, the Companies Act offers an expedited route to dissolution by allowing the Registrar of Companies to strike the company's name from the Register under Section 560 of the Companies Act, 1956.

The Registrar retains discretion regarding the removal of a company from the register, even upon receipt of an application indicating the company's non-functionality or reduction of members to fewer than seven. If the application seeks to evade liability in a pending legal action against the company, it must be dismissed by the Registrar.

The following are the topics discussed in this article:

1. Reasons for strike-off of a company by the ROC

2. Eligibility to file an application for the revival of a company

3. Grounds for the revival of a company

4. Process for the revival of a company

5. Conclusion

GROUNDS OF STRIKE -OFF OF COMPANY BY ROC:

Section 560 of the Companies Act 2013 confers authority upon the Registrar of Companies to strike off the names of companies based on the following grounds:

1. Companies that have failed to commence operations within one year of their incorporation.

2. Companies that have not conducted any business or operations for two consecutive financial years, evidenced by non-filing of e-Forms AOC-4 and MGT-7 for the preceding two financial years.

3. Instances where subscribers to the memorandum have not remitted the subscription money and failed to file a declaration (e-Form 20A) to that effect within 180 days.

4. Companies that, upon physical verification of their registered office, are found not to be engaged in any business activities.

In practice, the Registrar of Companies primarily strikes off companies for failing to file e-Forms AOC-4 and MGT-7 for two consecutive financial years. A company dissolved under Section 560 can be reinstated in the Register of Companies through a court order. Upon restoration, the court may issue directions and provisions deemed appropriate to ensure that the company and all affected parties are reinstated to a position as closely as possible to if the company had not been struck off.
 

WHO CAN FILE APPLICATION FOR REVIVAL OF COMPANY:

1. Any individual adversely affected by the Registrar's decision may file an appeal within three years from the date of the Registrar's order.

2. If the Registrar determines that a company's name has been removed from the Register of Companies due to inadvertence or incorrect information provided by the company or its directors, the Registrar may file an appeal within three years.

3. A company, its members, creditors, or employees who are adversely affected by the company's name being struck off from the register of companies may file an appeal within twenty years from the date of publication of the notice of strike off in the Official Gazette.
 

In voluntary striking off cases, the appeal period extends to twenty years, whereas for compulsory striking off by the ROC, the appeal must be lodged within three years from the date of the ROC's order for the purpose of revival.
 

GROUNDS FOR REVIVAL
 

The NCLT typically considers the following grounds when evaluating an application for the revival of a struck-off company:

1. Whether the company holds any immovable property.

2. Whether the company has complied with obligations to authorities such as Income Tax, GST, Provident Fund, and others, in addition to ROC requirements.

3. Whether there are active transactions visible in the company's bank statements, indicating ongoing business activities.

4. Whether the company has renewed necessary licenses annually, such as FSSAI, Excise, etc.

5. Any additional documents as per the specific circumstances and case-by-case basis.

PROCEDURE FOR REVIVAL OF COMPANY:

An application must be submitted in Format NCLT 9 along with a demand draft of Rs. 1000/- payable to the Ministry of Corporate Affairs. The application shall include the following documents:

• An Affidavit verifying the petition in the prescribed format (Form NCLT 9).
• The order issued by the ROC for striking off the company.
• Certificate of Incorporation.
• Memorandum of Association.
• Copies of the latest audited financial statements from the financial year in which such statements were last filed with the ROC.
• Bank statements.
• Certified true copy of the Board Resolution authorizing the practicing professional to represent the company in court.
• Memorandum of Appearance.
• Any other relevant documents based on the specific circumstances of the case.

2. A copy of the petition must be submitted to the Registrar of Companies at least 14 days prior to the scheduled hearing date before the Tribunal.

3. If the Tribunal, namely the NCLT, after conducting a hearing, issues an order for the revival of the company's name, the company is required to:

• Submit a certified copy of the order in Form INC-28 to the ROC within 30 days.
• File any pending annual financial statements and annual reports with the ROC.
• Fulfill the statutory obligations under the Companies Act, 2013 and applicable rules within the timeline specified by the Tribunal.

CONCLUSION: