Removal of Defunct Company

REMOVAL OF DEFUNCT COMPANY

The Companies Act, 2013 introduces a concept of a dormant company within its ambit. It is the first time that such a concept is thought of, i.e. company which is no more active. There is no such clear definition of what constitutes a dormant company.

There are many companies which are registered under company act 1956, but because of various reasons they are not operative since incorporation. Some companies come into operation immediately after the date of incorporation, but become inoperative after some years

The fast track exit mode scheme is applicable to the defunct company. Here the meaning of “Defunct Company” is as follows:

  • NIL assets and NIL liability
  • Not commencing any business or activity from the date of incorporation Or Not been carrying any business operation since last one year before making any such application under the Fast Track Exit Scheme.

The powers of the Registrar: Section 248 of the Companies Act, 2013 gives powers to the ROC to remove the name of the company from the Register of Companies. Section 248(1) of the Act provides that where the Registrar is having a reasonable cause to believe that-

  • A company has failed to commence its business within one year of its incorporation
  • The subscribers to the memorandum have not paid the subscription, which they had undertaken to pay within the time period of 180 days from the date of incorporation and a declaration under Section 11(1) to this effect has not been filed within 180 days from the date of incorporation; or
  • A company is not carrying on any business or operation for a period of two immediately preceding financial year and has not made any application within such period for obtaining the status of a company which is dormant under Section 455, he may initiate the procedure for removal of the name of the company from the Register of Companies.

Procedure for application of the closure of defunct companies under the Fast Track Exit (FTE) Scheme is ceased and to be replaced by new rules which have been notified by MCA on 27/12/2016.