Provisions and penalties for ‘struck off ‘ companies

Provisions and penalties for 'struck off ' companies Introduction The Ministry of Corporate Affairs (MCA) took strict action in 2017 by "Striking Off" more than 2 lakh firms as part of the ongoing effort to cleanse the financial sector. More than 3 lakh Director Identification Numbers (DINs) were mistakenly deactivated due to this operation. The process for removing company names by the ROC or voluntarily by the firm is outlined in Sections 248 to 252 of the Companies Act, 2013. The FAQs here are all about the Provisions and penalties for 'struck off ' companies and the reasons for the company's dissolution. FAQs on Provisions and penalties for 'struck off ' companies What are the Reasons for a Company’s Dissolution? The reasons for the company's dissolution are listed below-: If a company fails to file its compliances on time, it will be fined and the directors will be barred from founding another company. In this way, it is preferable to wind up an inactive business to avoid future fines or liability. The Companies Act establishes a legal entity known as a private limited company. As a result, a business must maintain frequent compliance throughout its life cycle. If a company fails to do so then the company can wind up or strike off. In comparison to maintaining compliances for a dormant firm, it is actually to re-establish a company when the time comes. The procedure of winding up is for a company that is no longer in operation and wants to avoid compliance obligations. A company that complied with all regulations can easily be liquidated. If there are any outstanding complaints, they must be resolved first. It should be remembered, however, that all registrations must be surrendered as well. What are the modes of "Striking off" a company? There are two modes to Strike off a company-: Strike off a company by Tribunal Strike off Voluntary Strike off What is the procedure to Strike off a company? Pass a resolution at a special resolution for a voluntary decision or general meeting for the AOA events and a creditors’ meeting. Declare the Company’s solvency for settling overdue obligations. ROC must receive the auditor’s report as well as a declaration of solvency, and the registered valuer’s report (in the case of a valuation of the Company’s assets). Appoint a Liquidator to complete the process. The company needs to start a winding up process as soon as the resolution date is passed. The liquidator will compile a winding-up report and convene a general meeting of the Company to lay out final winding-up accounts. A resolution will be passed if the majority of members agree; A Liquidator must send a copy of the statements to the ROC and file an application with the report with the Tribunal; the Tribunal will issue an order for the Company’s winding up after evaluating the circumstances. After reviewing the circumstances, the Tribunal will issue an order for the Company’s winding up; the liquidator must transmit a copy of the order to the ROC (Registrar of Companies) within 30 days, or face a penalty. When the ROC is satisfied, it confirms the Company’s winding up and strikes its name from the Register of Companies; the ROC then sends the notice to be published in the Indian Official Gazette. What are the penalties for 'struck off ' companies under Section 166 of the Companies Act,2013? Due to the majority of businesses having been de-registered due to filing delays with documents like IT returns, the penalty is usually referred to as a "Late Fine." Repeat offenders who disobey the rules face additional penalties. According to section 166(7) of the Companies Act 2013, the full-time Directors are responsible for upholding ethical practices and are subject to punishment if they don't. Depending on the seriousness of the violation, a disqualified director may be subject to a punishment of 1 to 5 lakh rupees. What are the provisions for the Restoration and Revival of a Company? The provisions for the Restoration and Revival of a company are listed below-: A de-registered business, its members, creditors, or employees have 20 years from the date of notification to file an appeal. The affected business or its employees may file an application with the NCLT within three years of being debarred. What is the consequence of failing to follow the Company Act's requirements? A person who fails to follow the requirements of the Companies Act or violates the law may be sentenced for up to six months of imprisonment, or a fine up to 50,000 rupees, or both. Can a firm that has been dissolved be reinstated? There are a lot of reasons for the company's dissolution and only a court order will permit a company that has been struck off due to voluntary dissolution to be reinstated. Any company that is placed back on the register is considered to have continued as if it had never been struck off and dissolved. Can a struck-off company still trade? When a company is struck off, the name will be removed from the company register and it cannot trade, sell its assets or make payments or even it cannot even get involved in any other business activities. The name of the company would be made available for new companies to use. What are the documents required to strike off the company’s name? The Company which is likely to be struck off must file an application to the registrar of the companies, along with the following documents: Indemnity Bond duly notarized by all directors (in Form STK 3). A certified statement of liabilities by a Chartered Accountant comprising of all assets and liabilities of the companies. An affidavit by all directors of the company in Form STK 4. CTC of Special Resolution duly signed by every director of the company. A statement concerning any pending litigation with respect to the company. Under which circumstances strike off cannot be done? In case a company has not filed 20A (inc. after 2nd Nov 2018) One year has not completed since the incorporation For ongoing company i.e having business transactions in the last 1-2 years DIN is deactivated Any director is disqualified The company has already received notice from ROC of strike-off Any ongoing litigation is pending Suggested Read - https://ebizfiling.com/blog/faqs-on-llp-strike-off-in-india/

Provisions and penalties for ‘struck off ‘ companies

FAQs on Provisions and penalties for ‘struck off ‘ companies