Power of Registrar to remove name of company from register of companies (SECTION 248)

Section 248 of the Companies Act, 2013 deals with the "Striking off" of a company from the Register of Companies (RoC). This section empowers the Registrar of Companies to strike out the name of the said company, thus de-registering the company. This section gives the circumstances and reasons under which the company may be struck off voluntarily or through an application by the Registrar.

Key Provisions of Section 248:

1. Striking off by the Registrar (Action initiatied by RoC) u/s 248(1)

The circumstances under which the Registrar of Companies can strike off the name of a company from the register is where

•           The business has never been able to start its operations one year after the registrationof the company.

•           The company has not been engaged in any business activities or operations for the last two financial years.

•           The company did not file its financial statement as well as the annual return for two years consecutively.

•           The company cannot be in a position to honor its obligations and has been stagnant.

Section 124 of the Act also provides that the Registrar may give the company a notice which in effect informs the company why it should not be struck off before the latter takes any action.

2. Voluntary Striking Off (Action initiated by the Company) u/s 248(2)

There are various situations when a company can apply to the Registrar for the striking out of its name from the Register including,

•           It seems that the company is inactive, and the company is not involved in any business or operations.

•           The overall picture shows that the company has no assets and no liabilities.

•           The business has been idle for all intents purposes, and the company has no plan on reopening the business.

This should be filled in Form STK-2 and should be accompanied by:

•           The register of members and the members at the general meeting pass a special resolution for the striking off.

•           A statement from the directors on the facts and circumstances showing that the company has stopped trading and possesses no assets or liabilities.

With reference to above application an amenmenet has been introduced the following Amendments:-

            The Central Government hereby makes the following rules further to amend the Companies (Removal of Names of Companies from Register of Companies) second amendment rules,2023.

1.      Short Title and Commencement:- (1) These rules may be called the companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023.

(2) They shall come into the force on the date of their publication in the official gazatte which is 10^th May, 2023.

2.      In the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (hereinafter referred to as the principal rules) in rule 4, in sub-rule (1), the following provisions shall be inserted, namely:-

“Provided that the company shall not file an application unless it has filed overdue financial statements under section 137 and overdue annual returns under section 92, up to the end of the financial year in which the company ceased to carry its business operations:

Provided further that in case a company intends to file the application after the action under sub section (1) of section 248 has been initiated by the Registrar, it shall file all pending financial statements under section 137 and all pending annual returns under section 92, before filing the application:

Provided also that once notice under sub-section (5) of section 248 has been issued by the Registrar for publication pursuant to the action initiated under sub-section (1) of section 248, a company shall not be allowed to file the application under this sub-rule. 

Let’s First understand Section 137 & Section 92 before understanding this amendment:

1.    Section 137

As per the provisions of section 137 of the Companies Act, 2013 of India, it has been mandatory for the companies to file the financial statements with the Registrar of Companies (RoC). Out of the documents that need to be delivered to the RoC this section says that the financial statements of a company also need to be delivered.

Here, as follows are the elements that fall under Section 137:

a.      Filing of Financial Statements:

Subsequent to the AGM of a company there is a statutory necessity to prepare and transmit balances sheet, profit and loss account and other documents and these are lodged with Registrar of Companies (RoC).

It has to be filed in Form AOC-4 or any other format as prescribed then, with the ROC.

b.      Time Frame:

These financial statements should be filed within 30 days from the date of passing of the resolution in the AGM. If the AGM is not held the filing should be done in a period not exceeding 30 days from the date the financial statements were adopted.

c.       Non-Holding of AGM: 

If a company fails to hold its AGM, the financial statements, along with the reasons for not holding the AGM, must be filed with the RoC within 30 days of the last day by which the AGM should have been held. 

2.    Section 92

Section 92 of the Companies Act, 2013 deals with the Annual Return of a company. This section explains to fill an annual return with Registrar of Companies (RoC) while detailing the required information for inclusion. A company reveals its financial snapshot through the Annual Return during specific years of operation.

Key Provisions of Section 92:

a.      Filing of Annual Return:

·         A One Person Company (OPC) is the only exempted entity that does not need to file an Annual Return through Registrar.

·         Every company is required to file Form MGT-7 within 60 days of the conclusion of its Annual General Meeting (AGM). If no AGM is held, the form must be filed within 60 days of the last date on which the AGM should have been held as per the Companies Act, for that financial year

Now, let’s breakdown the amendment issued by the MCA:

·         Firstly, MCA has clarified that to file an application for Strike off by the company itself under the section 248(2), the company has to filed all the pending Financial Statements in Form AOC-4 and Annual Returns in Form MGT-7 up to the financial year in which the company ceased to carry its business operations.

It means that if a company ceases to carry on its business operations on 28 November 2023 then the company has to file the Financial Statements in Form AOC-4 and Annual Returns in Form MGT-7 up to the FY 2023-24.

·         Similarly, if the action is initiated by the Registrar under the section 248(1) but the company also wants to file an application under the section 248(2) then also company has to filed all the pending Financial Statements in Form AOC-4 and Annual Returns in Form MGT-7 up to the financial year in which the company intends to strike off its business.

·         Secondly, if the notice under sub-section (5) of section 248 has been issued by the Registrar, which is issued for the publication of the action initiated under sub-section (1) of section 248, a company shall not be allowed to file the application under this sub-rule.