Companies Act Section 248

Companies Act, Section 248: Power of Registrar to Remove Name of Company from Register of Companies

Section 248 of the Companies Act, 2013 empowers the Registrar of Companies (ROC) to strike off the name of a company from the register of companies under specific conditions. This process is aimed at identifying and removing defunct, inactive, or non-operational companies from the corporate records, thereby maintaining the integrity and accuracy of the corporate database maintained by the Ministry of Corporate Affairs (MCA).

This provision applies both when the Registrar initiates the process suo motu and when a company voluntarily applies for removal after extinguishing its liabilities.

Sub-section (1): Circumstances Under Which the Registrar May Initiate Removal

The Registrar may take action to remove the name of a company from the register when he has reasonable cause to believe that any of the following circumstances exist:

(a) Failure to Commence Business

If a company has not commenced its business within one year from the date of its incorporation.

(c) Inactivity for Two Financial Years

If a company has not carried on any business or operation for two consecutive financial years, and during that time, it has not applied for dormant company status under Section 455 of the Act.

(d) Non-payment of Subscribed Capital by Subscribers

If the subscribers to the company’s memorandum have not paid their subscription amounts undertaken at the time of incorporation, and the company has not filed a declaration under Section 10A(1) within 180 days from its incorporation.

(e) Non-operation Detected by Physical Verification

If, during physical verification of the company's registered office under Section 12(9), it is revealed that the company is not carrying on any business or operations.

In such cases, the Registrar shall issue a notice to the company and all its directors stating his intention to remove the company’s name from the register. This notice shall request the company and its directors to submit their representations along with supporting documents, if any, within 30 days from the date of the notice.

Voluntary Application by the Company for Removal

In addition to the Registrar’s own powers, a company may itself initiate the process of removal of its name from the register of companies. This may be done after extinguishing all its liabilities, by:

Passing a special resolution of shareholders, or Obtaining consent of at least 75% of members in terms of paid-up share capital.
The company may then file an application in the prescribed manner to the Registrar for removal of its name based on any of the grounds specified in sub-section (1).

Upon receipt of such an application, the Registrar shall cause a public notice to be issued in the prescribed manner, to inform the general public and stakeholders.

Note: If the company is governed by a special Act (e.g., RBI, SEBI, IRDAI regulations), it must obtain prior approval from the relevant regulatory authority and attach that approval with its application for removal.

Sub-section (2): Exception for Section 8 Companies

The voluntary removal process outlined in sub-section (2) does not apply to companies registered under Section 8 of the Act (i.e., not-for-profit companies formed for charitable purposes). These companies are excluded from this fast-track removal mechanism due to their unique public interest roles.

Sub-section (3): Publication of Notice

Every notice issued by the Registrar under either sub-section (1) or (2) shall be:

Published in the prescribed manner, and published in the Official Gazette to ensure it reaches the general public.
This ensures transparency and allows stakeholders, creditors, or concerned parties to raise objections if necessary.

Sub-section (4): Final Striking Off and Dissolution

After the expiration of the 30-day notice period, if no satisfactory response is received from the company, or if the cause shown is not sufficient, the Registrar may strike off the company’s name from the register of companies.

A notice of such striking off shall be published in the Official Gazette, and upon such publication:

The company shall stand dissolved from that date.
It ceases to exist as a legal entity.
Sub-section (5): Safeguards Before Striking Off

Before finalising the order to strike off a company’s name, the Registrar must ensure that:

Adequate provision has been made for realising all dues payable to the company.
All liabilities and obligations of the company have been paid or discharged within a reasonable time.
If needed, the Registrar may obtain undertakings from the Managing Director, any Director, or other persons responsible for the management of the company, confirming such arrangements.

Proviso: Despite obtaining undertakings, all the assets of the company shall remain available for the settlement of its liabilities even after its name has been struck off.

Sub-section (6): Continuing Liability Post-Dissolution

Even though a company may be dissolved under this section, the following persons remain liable for the company’s debts, liabilities, or obligations:

Every Director, Manager, or Officer who exercised management powers before dissolution.
Every Member (Shareholder) of the company.
Such liabilities shall be enforceable as if the company had not been dissolved. This ensures accountability and prevents misuse of the striking off provision to escape liabilities.

Sub-section (7): No Restriction on Tribunal’s Power to Wind Up

This section does not affect the jurisdiction or authority of the National Company Law Tribunal (NCLT) to initiate or carry out winding-up proceedings, even in cases where the company’s name has been struck off from the register of companies.

The Tribunal may still order winding up under the appropriate provisions of the Act if deemed necessary in the interest of justice or to protect the rights of stakeholders.