Removal of Names of Companies also known as Fast Track Exit Scheme notified
The Ministry of Corporate Affairs (MCA) vide its notification dated 26 December 2016 has notified sections 248 to 252 of the Companies Act, 2013 (Act) dealing with the removal of the name of the company from the register of companies. By the notification dated 28 December 2016, it has also notified the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (Rules), framed to define the procedure to be followed for the removal of the name of a company from the register of companies.
The salient features of the above-mentioned sections are:
- Unlike the Companies Act, 1956 where only the Registrar had suo moto powers to remove the name of a company from the register of companies on account of the company not carrying on business, the Act authorises companies themselves to apply to the Registrar for removal of their names from the register.
- The Registrar can strike off a company from the register if:
- A company has failed to commence business operations within one year of its incorporation; or
- A company has not been carrying on business for two immediately preceding financial years and has not applied for treating it as a dormant company.
- A company can also file an application before the Registrar for removal of its name from the register of companies on any or all of the grounds mentioned above.
- For filing such an application, a company has to establish that it has no liability and that it has obtained the approval of shareholders holding not less than 75% of the total shares.
- The Act states that in the case of a company that is regulated under a special Act, the approval of the regulatory body constituted or established under that Act needs to be obtained first.
- It prescribes 10 categories of companies which cannot apply under this section seeking removal of its name from the register.
- On receipt of the application in the prescribed form, the Registrar is supposed to issue a public notice and simultaneously send the same to the income tax authorities, central excise authorities and service tax authorities to see if they have any objections. If no objection is received within 30 days of issue of the notice, it shall be presumed that they have no objection to the proposed strike off.
- On expiry of 30 days of the notice issued, the Registrar will strike off the name of the company from the register and publish the notice in the Official Gazette. After the Gazette has been published, the company shall stand dissolved.
- It is to be ensured by the Registrar that the liabilities and obligations of the company are met and notwithstanding the strike off of the company, the assets are made available for meeting the liabilities of the company.
- It is provided that the liability of every director and manager who was exercising the power of management and every member of the company shall continue to exist and may be enforced as if the company has not been dissolved.