Chapter XVIII: The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016

[YAGAY andSUN]

The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 were introduced under the Companies Act, 2013 to establish a legal framework for the removal of the name of companies from the Register of Companies maintained by the Registrar of Companies (RoC). These rules govern the process through which a company, which is no longer operational or has ceased its business activities, can be struck off from the official records of the Ministry of Corporate Affairs (MCA).

The objective of these rules is to ensure that companies which are not functioning or have become inactive are removed from the records, thus reducing the burden on regulatory authorities and ensuring the integrity of the companies' registry.

Key Provisions of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016

1. Applicability

These rules apply to:

• Inactive Companies that have ceased operations, and whose members and creditors have no objection to their removal from the Register.
• Companies that have failed to comply with regulatory requirements and have voluntarily opted for winding up or cessation of business.

The removal process can also apply to companies that have been struck off by the Registrar of Companies for failing to meet compliance requirements over an extended period.

2. Procedure for Removal of Company’s Name

2.1. Application for Removal of Name

A company wishing to get its name removed from the Register of Companies can make an application to the Registrar of Companies (RoC) by submitting the prescribed form, Form STK-2, along with the necessary documents. The application can be made by:

• The Company itself: The company can apply for the removal of its name if it is no longer conducting any business and has complied with all necessary statutory requirements.
• The Members or Directors: The application can also be filed by the members or directors of the company, if they meet the requirements.

2.2. Conditions for Filing Application

• No business activity: The company must not have commenced any business or activity in the last two years.
• Clearance of Liabilities: The company should have cleared all its liabilities, or should have no liabilities at all.
• No Pending Disputes: There should be no pending legal cases or disputes that involve the company.

The company is also required to obtain No Objection Certificates (NOCs) from relevant authorities, such as tax authorities and government departments, ensuring that the company has no outstanding dues or liabilities.

2.3. Filing the Application

The following documents must be attached with Form STK-2 for the removal of a company's name:

• A statement that all compliance requirements under the Companies Act have been met.
• A board resolution from the company’s directors authorizing the application.
• Affidavits declaring that the company has no outstanding liabilities or assets.
• NOCs from concerned authorities (such as income tax, GST, etc.).
• Indemnity bond signed by the directors and the company’s shareholders, guaranteeing that they will hold the Registrar harmless in case of any future claims or liabilities.

Once the application is complete, it should be submitted to the Registrar of Companies along with the prescribed fee.

3. Scrutiny by the Registrar of Companies

Upon receiving the application, the Registrar of Companies will scrutinize the application and documents. The RoC will review whether the company meets the conditions for striking off, and if all compliance requirements have been fulfilled.

The Registrar may:

• Acknowledge the application if the company is found to be eligible for removal.
• Send a notice to the company, stating its intention to strike off the name, and give time for any objections to be raised.
• In case of objection or discrepancies, the application may be rejected, and the company will be notified accordingly.

4. Notice of Removal of Name

If the Registrar of Companies is satisfied with the application and does not receive any objections from other authorities or interested parties, it will issue a notice of removal. The company’s name will be struck off from the Register of Companies, and it will no longer exist as a legal entity.

• The notice is usually published in the Official Gazette, informing the public and other stakeholders about the company's removal from the Register.
• Once the name is removed, the company will be dissolved, and its legal existence will cease.

5. Effect of Removal of Name

After the company’s name has been removed from the Register of Companies:

• The company ceases to exist legally.
• The company cannot continue its operations or enter into new contracts.
• It will no longer be subject to the Companies Act and its various provisions.
• The liabilities of the company are extinguished, unless otherwise stated in the notice of removal or by the authorities.

6. Penalties for Non-Compliance

If a company fails to comply with the removal process or makes false declarations in its application, penalties may be imposed under the Companies Act, 2013. Non-compliance or fraudulent activity can lead to:

• Fines being imposed on the company or its officers.
• Striking off the company’s name even if the company is still operational, if any misleading information is discovered.

If a company continues to operate without being legally recognized, it can also face legal consequences.

7. Fast-Track Procedure for Removal

The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 also include a fast-track procedure for companies that meet certain criteria:

• If a company has not carried out business for a long period.
• If the company has no assets or liabilities.

This fast-track process involves:

• Simplified documentation.
• Shortened timelines for approval from the Registrar.

It is important to note that even under the fast-track procedure, the process involves necessary due diligence and verification of compliance.

8. Withdrawal of Application

In certain circumstances, the company may withdraw its application for removal, subject to the approval of the Registrar of Companies. If the company decides to continue operations or has any unresolved matters, it can request to withdraw the application before the name is struck off.

9. Re-Registration or Restoration of Name

If a company’s name has been removed from the Register and it wishes to be re-registered, it may file an application for the restoration of the company’s name under Section 252 of the Companies Act, 2013, within a period of 20 years.

This process may be initiated in cases where the company believes that the removal was wrongfully executed or that the company has resumed operations.

10. Conclusion

The Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016 provide a streamlined process for striking off inactive companies from the register, ensuring that only active, operational companies remain on the records. This helps in maintaining an updated and accurate registry, reducing the administrative burden on authorities, and ensuring compliance with the Companies Act.

These rules contribute to enhancing the efficiency of corporate governance by facilitating the timely removal of companies that are no longer functioning, and thereby promoting transparency in the corporate sector.