Strike off Rules

MCA has vide its notification dated 8th May, 2019 made some amendments to the rules governing strike off of companies. This is the Companies (Removal of Names of Companies from Register), Rules, 2016.

Well, first and foremost, they have doubled the fees for making an application for strike off from Rs.5000/- to Rs.10,000/-.

Secondly, they have clarified that all pending annual e-forms have to be filed by the company before making an application for strike off in form STK-2. Hitherto, this was not required and different ROCs interpreted it differently. This brings in uniformity. But MCA should have provided for closure of the companies without having to file the baggage annual e-forms. It will lead to huge cost to the company to file all delayed annual e-forms because the late fees is now Rs.100 per day from 1st July, 2018 onwards. It is not ease of doing business.

Thirdly if the company intends to file an STK-2 application after the MCA has initiated steps to close down the company, then also the company has to file all pending and overdue annual e-forms to make it upto date.

However, once the MCA has issued a notice to the company in form STK-7 after initiating closure action against the company as per above, then the company cannot file the form STK-2. Meaning once the action gets initiated at the MCA end, then the company cannot subvert it by filing a STK-2 application.

The accounts of the company which has to be attached to the form STK-2 is provided in form STK-8.

The copy of the notification is available at the MCA site. 

strike off companies

Presently when any company has been struck off by the MCA for any reasons, the only option available is to file a petition with the NCLT to revive the company. This is a time consuming process as well as effort involved. Many such companies have been rendered as "strike off" stage due to various reasons beyond the control of the existing Directors. 

Now since July 2018 the additional filing fees for annual forms is on the basis of Rs.100 per day calculation and it is going to hurt companies to remain as non compliant. Filing of petition with NCLT involves time and cost and also clogging of the judicial system with routine applications. NCLT is already over burdened due to the number of cases filed under the Insolvency & Bankruptcy Code, 2016 and other petitions like mergers, amalgamations, oppression cases. In such scenario what is the justification for routine applications involving revival of strike off companies to be filed with NCLT it is not clear and not justified also. 

Many companies have various reasons and these are legacy reasons which are genuine in nature due to which they failed in filing the annual documents. Admitted that they are non compliant and have suffered much due to the Director's DIN becoming de-activated. MCA should now look at an easy process for revival of strike off companies at the ROC/ RD level without involving the judicial bodies in this regard. They can levy a fine or penalty similar to the compounding fines and close the matter. Anyways MCA is gaining due to higher fees from the per day fee structure so the companies are already being penalised in this regard. They should not be further penalised by forcing them to seek redressal from the judicial courts of the country. 

strike off companies - no business

MCA has been striking off companies for not filing its annual returns and annual financial statements for a period of 3 years consecutively. Also lately it has been issuing show cause notices to companies who have not done any business for the last two years, to strike their names off from the register of companies. While there is a provision in the companies act, 2013 in section 248 for issuing of such show cause notices, the moot question to ask is whether it is just to send show cause notices to companies just because they have no business income for the last 2 years. According to me it is grossly unfair because businesses have upturns and downturns and when there is downturn, it could last lot more years, sometimes half a decade also. When there is general recession, then businesses fail, like in the real estate industry there is a recession for so many years. Shipping industry has its worst over woes for nearly a decade or so. Businesses suffered huge setback due to the ill advised demonetisation and there was disruption in the business due to the GST rollout. Plus industry itself goes through one crises after another, there could be technological changes taking place rapidly, disruption etc. which could all affect the business in one way or another. Industries are starved of bank funds due to which they are unable to do capex or even meet working capital requirements. Therefore in light of the above, what is the justification for issuing strike off show cause notices to companies just because they have no business income for two consecutive years. Especially when the companies have been doing the compliance all properly all along - appointing auditors, filing the statutory annual forms and event based forms etc.