Companies Act Section 250

Companies Act, Section 250: Effect of Company Notified as Dissolved

Section 250 of the Companies Act, 2013 outlines the legal and operational consequences that follow once a company has been officially dissolved under the provisions of Section 248. Specifically, it describes the effect of such dissolution on the status, legal existence, and operational capacity of the company from the date of notification.

This section plays a crucial role in affirming the finality of the dissolution process and clarifies the limited exceptions under which the dissolved entity may still function for specific purposes.

Trigger for Section 250: Dissolution Under Section 248

Section 248 empowers the Registrar of Companies (ROC) to remove the name of a company from the register of companies on certain grounds, such as:

Failure to commence business within one year of incorporation;
Inactivity over two consecutive financial years without applying for dormant status;
Other grounds as detailed under Section 248.
When the ROC is satisfied that it is appropriate to strike off the company’s name, a notice is published in the Official Gazette as per Section 248(5). This notice confirms that the company stands dissolved.

It is at this point from the date specified in that Gazette notification that the consequences under Section 250 come into force.

Legal Effect of Dissolution under Section 250

Once the company is declared dissolved in accordance with Section 248(5), the following consequences immediately take effect:

1. Cessation of the Company’s Legal Existence

From the date mentioned in the official notice, the company shall be deemed to have ceased to exist as a legal person.
This means it can no longer carry on any business operations, enter into contracts, or exercise legal rights in its own name.
The company becomes a non-operational, non-existent entity in the eyes of the law, and all its operational capacities come to an end.
2. Deemed Cancellation of Certificate of Incorporation

The Certificate of Incorporation, which serves as the legal proof of the company’s existence, shall be considered cancelled from the same effective date.
This cancellation is automatic and does not require a separate order.
The company no longer enjoys the status of incorporation, and cannot be considered a body corporate under the Act.
Exceptions: Limited Legal Continuity for Specific Purposes

Despite the general cessation of the company’s legal existence, Section 250 carves out two specific exceptions for which the company is deemed to continue solely for limited purposes:

(a) Realisation of Amounts Due to the Company

The company may continue to exist to recover or realise any outstanding dues or receivables owed to it.
This ensures that any amounts that were supposed to be collected before the dissolution are not lost due to the striking off of the company.
(b) Payment or Discharge of Liabilities or Obligations

The company may also be considered as continuing for the purpose of settling its liabilities and obligations.
Creditors can still seek repayment or initiate action to recover dues from the assets of the company.
The company's assets are not immune from claims merely because its name has been struck off.
These exceptions preserve the rights of creditors, employees, or any other person who may have claims against the company and ensures the principle of accountability is maintained even after dissolution.