News By/Courtesy: Lalit Sharma | 05 Aug 2018 8:41am IST

HIGHLIGHTS

  • The government task force identified 16000 companies as shell companies, 17000 were sorted as they had a common director among identified shell companies, and 80000 were put on a suspected list
  • To stop shell companies from being used for routing funds; and for identification of benami holding
  • An undertaking is taken by key managing personnel for the payment of liabilities on behalf of the company and this undertaking will be executed, even after the company is dissolved

Minister of State for Corporate Affairs stated that more than 2.25 lakh companies have been identified for striking off under Section 248 of the Companies Act. Last year, the government struck off the names of some 238000 companies under the same provision.  After the demonetization, government task force identified 16000 companies as shell companies, 17000 were sorted as they had a common director among identified shell companies, and 80000 were put on a suspected list. The reasons behind the government’s move are to stop shell companies from being used for routing funds; and for identification of benami holding. Related provisions for striking off companies name are Section 248 to Section 252 of Companies Act, 2013. Under Section 248, a company’s name can be removed if the company -

1) has not started its business within 1 year of incorporation;

2) or a company is operating for the last 2 financial years and no application for dormant status has been made by the company;

3) company may also file an application to remove its name with special resolution or 75% voting approval of paid-up share capital members.

After this, the registrar may strike off the name of the company and notify the same through the Official Gazette. The moment this notification is published in the Gazette, the company stands dissolved. Before publishing the notification, the registrar has to fulfill pre-condition i.e. she/he has to satisfy her/himself that sufficient provision has been made for enabling the company to receive what is due to it and paying off all its liabilities. An undertaking is taken by key managing personnel for the payment of liabilities on behalf of the company and this undertaking will be executed, even after the company is dissolved as if the company still exists. A company shall not make an application under section 248 if, in the previous three months, it has

  1. Changed its name or shifter registered office from one state to another;
  2. Has disposed of valuable property or right, immediately before the trade has ceased for gaining in the normal course of business;
  3. Engaging in other activity apart from the one necessary for the application under Section 248 or concluding the affairs of the company or complying with any government requirement;
  4. An application for arrangement or compromise has been made and the same is pending in the court;
  5. The company is being wound up under the Insolvency and Bankruptcy Code.

On the violation of the above-mentioned restriction, the registrar would reject the application under Section 248 and the company shall be liable for a fine which may extend up to one lakh rupees. In cases of fraudulent application by companies for the purposes of “evading” their liability or with “intent” to deceive any creditor or “defraud” any other person, the person in charge of the management of the company would be jointly and severally liable to people who have suffered losses; and punishable for fraud as provided under Section 447; and registrar may recommend prosecution of the same person(s). Section 252 provides for an appeal, wherein, the company may appeal against the order of the registrar. But, more importantly, the provision which allows other stakeholders in the company like workmen and staff may also appeal against the order if they are aggrieved by the company’s name being struck off.

Section Editor: Shilpa Rani | 05 Aug 2018 16:43pm IST


Tags : #India #Business #CompaniesAct #Amendment #Strikingoff #Provisions #Conditions #Registrar

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