THE LEGAL BRIDGE

Judiciary & Law Notes Series

THE COMPANIES ACT, 2013

CHAPTER XVIII

Removal of Names of Companies from the Register

Sections 248–252

For Judicial Service Aspirants & Law Students

RJS • DJS • PCS-J • HJS • UPJS • BJS • MPCJ

Striking Off • Dissolution • Restoration • C-PACE

— Enriched with landmark judgments and illustrative case law —

Chapter XVIII — Removal of Names of Companies from the Register of Companies

A company comes into existence by incorporation and ordinarily goes out of existence only by winding up or dissolution under Chapter XX. But the Act also recognises a middle path — a simpler, cheaper, and faster exit for companies that have never traded, have ceased to operate, or are defunct. Chapter XVIII of the Companies Act, 2013 (Sections 248 to 252) provides for the 'striking off' of the name of a company from the register maintained by the Registrar, resulting in the company being 'dissolved' — though subject to revival if circumstances warrant.

The Chapter replaces the earlier Section 560 of the Companies Act, 1956, and has been meaningfully strengthened: grounds are widened, procedural safeguards are clearer, and a new 'Fast-Track Exit Mode' is built in. A specialised body — the Centre for Processing Accelerated Corporate Exit (C-PACE), established by MCA — now processes applications with considerable speed.

Section 248 — Power of Registrar to Remove Name of Company from Register

(1) Grounds for Suo Motu Striking Off

Where the Registrar has reasonable cause to believe that —

1. A company has failed to commence its business within one year of its incorporation;[Omitted by the Companies (Amendment) Act, 2017];A company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455;The subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within 180 days of its incorporation under sub-section (1) of section 10A;The company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.

He 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 and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.

(2) Voluntary Application by the Company

Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner.

Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application. Form STK-2 is the prescribed form for voluntary striking-off application. A government fee of ₹10,000 is payable.

(3) Notice to Objectors and Order

Nothing in sub-section (2) shall apply to a company registered under section 8. The Registrar shall, on receipt of an application under sub-section (2), cause a public notice to be issued in the prescribed manner and after the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.

(5) Certain Approvals / Consents Required

The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director, or other persons in charge of the management of the company.

(6) Assets Continue to be Available

The assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies. This is a critical safeguard — striking off does not extinguish liabilities.

(7) Directors' Responsibility Does Not End

The liability, if any, of every director, manager, or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved.

Section 249 — Restrictions on Making Application in Certain Situations

A company shall not make an application under sub-section (2) of section 248 unless it has filed overdue returns in Form AOC-4 (financial statement) and Form MGT-7 (annual return) up to the end of the financial year in which the company ceased to carry on its business operations.

A company shall not make an application under sub-section (2) of section 248 if, at any time in the previous three months, the company —

1. Has changed its name or shifted its registered office from one State to another;Has made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;Has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;Has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; orIs being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be.

If a company files an application under sub-section (2) of section 248 in violation of sub-section (1), it shall be punishable with fine which may extend to ₹1,00,000. An application filed under sub-section (2) of section 248 shall be withdrawn by the company or rejected by the Registrar as soon as conditions under sub-section (1) are brought to his notice.

Section 250 — Effect of Company Notified as Dissolved

Where a company stands dissolved under section 248, it shall on and from the date mentioned in the notice under sub-section (5) of that section cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company.

In short, on dissolution:

• The company loses its legal existence as an active entity;
• The Certificate of Incorporation is deemed cancelled;
• The only continuing 'residual' legal existence is for realisation of dues and payment of liabilities;
• The directors, even after dissolution, remain personally liable for any wrongs or obligations that attached during management.

Section 251 — Fraudulent Application for Removal of Name

Where it is found that an application by a company under sub-section (2) of section 248 has been made with the object of —

• Evading the liabilities of the company; or
• With the intention to deceive the creditors; or
• To defraud any other persons,

The persons in charge of the management of the company shall, notwithstanding that the company has been notified as dissolved —

1. Be jointly and severally liable to any person or persons who had incurred loss or damage as a result of the company being notified as dissolved; andBe punishable for the offence of fraud in the manner as provided in section 447.

Without prejudice to the provisions contained in sub-section (1), the Registrar may also recommend prosecution of the persons responsible for the filing of an application under sub-section (2) of section 248. Section 447 punishes fraud with imprisonment from 6 months to 10 years and fine from the amount involved to 3 times the amount involved.

Section 252 — Appeal to Tribunal for Restoration of Name

(1) Right of Appeal — 3 Years

Any person aggrieved by an order of the Registrar notifying a company as dissolved under section 248, may file an appeal to the Tribunal within a period of three years from the date of the order of the Registrar and if the Tribunal is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies.

Provided that before passing any order under this section, the Tribunal shall give a reasonable opportunity of making representations and of being heard to the Registrar, the company and all the persons concerned. This section is the critical gateway for 'revival' of a struck-off company.

(2) Registrar's Suo Motu Application

If the Registrar is satisfied, that the name of the company has been struck off from the register of companies either inadvertently or on the basis of incorrect information furnished by the company or its directors, which requires restoration in the register of companies, he may within a period of three years from the date of passing of the order dissolving the company under section 248, file an application before the Tribunal seeking restoration of name of such company.

(3) Appeal by Member, Creditor, or Workman — 20 Years

A company, or any member or creditor or workman thereof feeling aggrieved by the company having its name struck off from the register of companies, may, within a period of twenty years from the publication in the Official Gazette of the notice under sub-section (5) of section 248, file an application to the Tribunal seeking restoration of the name of the company. On such application, the Tribunal may, if satisfied that the company was, at the time of its name being struck off, carrying on business or in operation or otherwise it is just that the name of the company be restored to the register of companies, order the name of the company to be restored.

The Tribunal shall, by the order, direct that the name of the company shall be restored in the register of companies, which shall be binding on the Registrar, and on restoration the company shall be deemed to have continued in existence as if its name had not been struck off from the register of companies. The Registrar shall cause a public notice to be issued in the Official Gazette to the effect that the name of the company has been restored.

Comparative Overview — Timelines for Restoration

Procedure for Voluntary Striking Off — A Practitioner's Outline

1. The Board passes a resolution recommending striking off and fixes a date for an extraordinary general meeting;Members approve by special resolution (or by written consent of 75% in terms of paid-up share capital);The company extinguishes all its liabilities — clears tax dues, repays creditors, settles all outstanding obligations;Company secures NOCs from appropriate regulatory bodies (for banking, insurance, RBI-regulated NBFCs, SEBI-regulated intermediaries, etc.) and from the IT Department;Directors furnish an affidavit (Form STK-4) of no pending litigation; indemnity bond (Form STK-3) for payment of any liability that may arise; statement of account certified by a CA;Application in Form STK-2 is filed with the Registrar along with ₹10,000 fee;The Registrar issues a public notice (Form STK-6) in the Official Gazette and on the MCA portal, inviting objections within 30 days;If no objection is received, the Registrar issues Form STK-7 striking off the name of the company from the Register and publishes the dissolution in the Gazette.

C-PACE — Centre for Processing Accelerated Corporate Exit

Established by the MCA in 2023 at IICA, Manesar, C-PACE is a dedicated authority for processing striking-off applications. It centralises what was previously handled by ROCs across India. The objectives are uniformity, speed, and reduction of backlog. C-PACE processes both voluntary applications under Section 248(2) and also deals with representations received from suo motu striking-off notices under Section 248(1). It is manned by officers drawn from MCA and the ROC offices and operates as a division of the ROC.

Distinction Between Striking Off, Dormancy, and Winding Up

Effect of Striking Off on Directors' Liabilities

Under sub-section (7) of Section 248, the directors, managers, or other officers remain liable for their acts notwithstanding the company's dissolution. This is reinforced by Section 251, which punishes fraud in obtaining striking off, and Section 164(2), which disqualifies directors of companies that fail to file returns for three consecutive years from being appointed as directors in any other company for five years.

Practical implications: A director whose company has been struck off for non-compliance (failure to file AOC-4/MGT-7) is barred under Section 164(2) from being a director in any other company. This has led to mass disqualifications in 2017–2018, where over 3 lakh directors were disqualified. Relief was sought via High Courts and NCLT under the CFSS and other amnesty schemes.