Removal of Name from Register of Companies under Companies Act, 2013

The Companies Act, 2013 provides a mechanism for removing the name of a company from the register of companies when the company is no longer carrying on business or when statutory grounds exist for strike off. This mechanism is mainly contained in Section 248, and it is closely connected with Section 249, which lays down restrictions on making an application for removal, and Section 251, which deals with fraudulent applications for removal of name.

Removal of name from the register is commonly understood as a process through which a company is struck off and dissolved. It is often used where a company has become inactive, has failed to begin business, or no longer wishes to continue operations. At the same time, the law does not permit companies to use this route casually or dishonestly. The process is controlled by the Registrar of Companies, and several safeguards are built into the statutory framework to protect creditors, regulators, shareholders and the public.

Meaning of Removal of Name from the Register of Companies

Removal of name means deletion of the company’s name from the register maintained by the Registrar of Companies. Once the process is completed and notice is published in the Official Gazette, the company stands dissolved. In practical terms, the company ceases to exist as a legal entity for carrying on business.

However, this does not mean that all consequences automatically disappear. Even after dissolution, the liabilities of directors, managers and officers may continue in the manner recognised by law. Therefore, strike off is not merely an administrative act of closure; it has legal consequences both for the company and for the persons connected with its management.

Statutory Basis: Section 248 of the Companies Act, 2013

Section 248 gives the Registrar power to remove the name of a company from the register. It also allows a company itself to apply for removal of its name, subject to fulfilment of statutory conditions.

Thus, Section 248 covers two situations:

1. Removal initiated by the Registrar of Companies, where statutory grounds exist.
2. Removal initiated by the company, where the company voluntarily seeks strike off after complying with legal requirements.

This dual structure is important. In one case, the Registrar acts on the basis of default, inactivity or failure to comply with incorporation-related requirements. In the other case, the company itself takes the initiative to close down formally.

Power of Registrar to Remove the Name of a Company

The Registrar of Companies may begin the process of strike off if certain conditions exist. The law recognises that a company which exists only on paper, but is not carrying on business or has not complied with basic incorporation requirements, should not remain indefinitely on the register.

The Registrar shall send notice of intention to remove the name of the company if any of the following situations arise:

Failure to Commence Business within One Year of Incorporation

Where a company has been incorporated but does not commence business within one year, the Registrar may consider it a case fit for removal. Incorporation creates a legal entity, but that legal entity is expected to begin lawful business operations within a reasonable time. Failure to do so may indicate that the company is non-functional.

Non-Payment of Subscription Amount and Failure to File Declaration

If the subscribers to the memorandum have not paid the subscription amount undertaken by them at the time of incorporation and the company has not filed the required declaration under the Act, the Registrar may initiate action. The material also refers to failure to file Form INC-20A within 180 days of incorporation, which is a significant compliance requirement linked to commencement of business.

This ground reflects the principle that a company cannot remain on the register without satisfying the basic requirement of genuine subscription and statutory declaration.

No Business or Operations in the Two Preceding Financial Years

The Registrar may also act where the company is not carrying on any business or operation for the two immediately preceding financial years and has not made an application for obtaining the status of a dormant company. A company that remains inactive for such a period without regularising its status may be considered unfit to continue on the active register.

This provision prevents the continued existence of shell or inactive entities that have no real business activity.

Notice by the Registrar Before Removal

The Registrar cannot remove the name of a company without following due process. A notice must first be sent to the company and all its directors communicating the intention to remove the name of the company from the register.

The material states that this notice is issued in Form STK-1 and is sent to the addresses available on record, generally through registered post or speed post. The reasons for proposed removal must be stated in the notice. This requirement is significant because it gives the company and its directors an opportunity to know the case against them and respond before an adverse step is taken.

The directors may send a reply or representation, together with relevant documents, within 30 days of the notice. If the explanation is satisfactory, the Registrar may drop the proceedings. If the explanation is not satisfactory, the Registrar may continue the strike-off process.

This requirement reflects fairness in administrative action. Even where the Registrar possesses statutory power, that power must be exercised after giving an opportunity of response.

Publication of Public Notice by the Registrar

If the Registrar proceeds with the removal process, the next stage involves publication of notice for the information of the general public. The material refers to publication in Form STK-5, Form STK-6, and in the Official Gazette.

This step is important because removal of a company’s name can affect many persons apart from directors and shareholders. Creditors, employees, regulators, contractual parties and members of the public may have an interest in the continued existence of the company or may wish to object to its removal. Public notice allows such persons to raise objections within the specified time.

The material indicates that objections, if any, should be sent within 30 days of publication.

Inquiry by the Registrar Regarding Liabilities

Before passing an order under Section 248(5), the Registrar is expected to satisfy himself regarding the payment of all liabilities and obligations of the company. This is a very important safeguard. Strike off is not intended to become a device for escaping lawful debts or statutory obligations.

Even where the company is inactive or seeks closure, liabilities must be examined and settled. The law therefore insists that the company should set off or extinguish all liabilities before its name is removed from the register.

Once the Registrar completes the process and is satisfied that due procedure has been followed, the name of the company may be struck off and notice of dissolution is published in Form STK-7 in the Official Gazette and on the website of the Ministry of Corporate Affairs.

Upon such publication, the company stands dissolved.

Voluntary Application by Company for Removal of Its Name

Section 248 also enables a company to apply to the Registrar for removal of its own name. This is commonly used where the company does not want to carry on any further business and wishes to close down rather than continue bearing annual compliance costs without any operational purpose.

However, this route is not available automatically. The company must satisfy certain preconditions.

Extinguishment of Liabilities

A company may file an application for removal of its name only after extinguishing all its liabilities. This means that debts, obligations and claims must be settled before the application is made. The law does not permit a company to disappear while leaving behind unpaid liabilities.

Special Resolution or Consent of Members

The company must pass a special resolution in a general meeting approving removal of its name. The material also refers to consent of 75% of shareholders having paid-up share capital as on the date of application. This requirement ensures that strike off is supported by a substantial majority of members and is not carried out without corporate approval.

Approval of Regulatory Authority Where Required

If the company is regulated under a Special Act or by any other authority, approval of the concerned regulatory body is necessary. This requirement recognises that certain companies operate in regulated sectors and cannot be permitted to exit the corporate register without clearance from the relevant regulator.

Filing of Annual Returns and Financial Statements

The company is also expected to file annual returns and financial statements up to the end date before removal of name. This ensures that the company’s compliance record is brought up to date prior to closure.

No Pending Litigation

The material notes that there should be no pending litigation against the company. A statement regarding pending litigation, if any, is required to accompany the application. This is a relevant factor because pending disputes may affect whether removal should be allowed.

Procedure Followed by Company for Removal of Name

The process followed by a company for voluntary strike off generally includes the following steps:

Board Meeting

The company first conducts a board meeting for approval of the proposal to remove the name of the company. At this stage, the board also approves the notice for the extraordinary general meeting.

Shareholders’ Approval

The company then obtains approval of shareholders by passing a special resolution in the general meeting. This gives formal corporate authority for making the strike-off application.

Approval from Other Authority, if Applicable

Where the company is regulated by another authority, approval of such authority must be obtained before proceeding further.

Filing of Application in Form STK-2

After approvals are obtained, the company files an application in Form STK-2. This application must be accompanied by relevant documents, including:

• Indemnity bond from all directors in Form STK-3
• Affidavit by all directors in Form STK-4
• Statement of assets and liabilities, not older than thirty days from the date of filing, along with certificate from a chartered accountant
• Certified copy of the special resolution or consent of the required shareholders
• Statement regarding pending litigation, if any

After receiving the application, the Registrar publishes public notice in Form STK-6. If there is no valid objection and all legal requirements are met, the Registrar removes the name of the company and publishes notice in Form STK-7 in the Official Gazette.

Companies Excluded from Removal of Name

Not all companies can avail the strike-off route. The material identifies several categories of companies that are excluded. These include:

Listed Companies

Listed companies are outside the scope of simple strike off because they involve public investors, securities regulation and wider public interest considerations.

Vanishing Companies

Vanishing companies are treated seriously under the law and cannot be allowed to disappear through the ordinary strike-off process.

Delisted Companies Removed Due to Non-Compliance

A delisted company that has been delisted on account of non-compliance with listing regulations, agreements or statutory law is not treated as fit for ordinary removal of name.

Companies in Default of Repayment of Public Deposits

Where public deposits are involved, the law protects depositors by preventing strike off before repayment issues are resolved.

Companies under Inspection, Investigation or Court Process

Companies whose inspection, investigation or proceedings are pending are excluded. The material also refers to pending actions under Sections 206, 207 and 208 of the Companies Act, 2013.

Companies with Pending Charges or Prosecutions

Where charges remain unsatisfied, compounding applications are pending, or prosecution for offence is pending, strike off is not permitted.

Section 8 Companies

Companies incorporated under Section 8 are specifically excluded from this route.

These exclusions show that strike off is intended for genuine closure of non-operative or compliant companies, not for those facing unresolved public, regulatory or legal issues.

Restrictions on Making Application: Section 249

Section 249 imposes restrictions on the making of an application for removal of name. A company cannot apply for strike off if, within the previous three months, it has engaged in certain specified activities.

These include the following:

Change of Name or Shifting Registered Office from One State to Another

A recent change in identity or registered office may suggest continuing or altered business activity. Therefore, the company is not permitted to apply immediately after such changes.

Disposal of Property or Rights Held for Gain

The material indicates that if the company has disposed of property or rights held by it for gain, it cannot seek strike off within the specified period. This restriction prevents misuse of the process after asset transfers.

Application to Tribunal for Compromise or Arrangement

Where the company has applied to the Tribunal for sanctioning a compromise or arrangement, strike off cannot be pursued until the matter is finally concluded.

Winding Up

A company that is being wound up, whether voluntarily or by the Tribunal, cannot use the strike-off mechanism as an alternative route.

The earlier material also notes that the company cannot be engaged in any activity other than what is necessary for making the application. This reinforces the view that strike off is meant for closure, not for a company that is still undertaking substantive transactions.

Fraudulent Application for Removal of Name: Section 251

Section 251 is a very important provision because it addresses misuse of the strike-off process. If an application for removal of name is made fraudulently:

• with intention to deceive creditors or other persons, or
• with the object of evading liabilities of the company,

the persons responsible become punishable for fraud under Section 447.

This provision serves as a strong warning. Strike off is not a means to defeat creditors, hide misconduct or escape legal responsibility. If the process is used dishonestly, the consequences can be severe.

Effect of Removal and Dissolution

Once the company’s name is removed from the register and the notice is published in the Official Gazette, the company stands dissolved. The immediate effect is that the company ceases business operations and its certificate of incorporation is, in practical effect, cancelled.

However, dissolution does not wipe out the liability of those who were responsible for the conduct of the company. The material clearly notes that the liabilities of directors, managers and officers remain the same as before dissolution.

Conclusion

Removal of name from the register of companies under the Companies Act, 2013 is an important legal mechanism for closure of companies that are inactive, non-compliant in specified ways, or no longer required to continue. Section 248 gives the Registrar power to strike off a company’s name and also permits a company to seek voluntary removal after satisfying legal conditions. Section 249 places necessary restrictions on applications for strike off, while Section 251 prevents fraudulent use of the process by attaching serious consequences.