Meaning
When a new business starts in the form of a new limited company, the respective company is then placed on the register called the company’s house register. But even if the company is functioning & performing well, there are certain circumstances that might cause a company to be removed from the mentioned register. This removal of the company from the register is termed as a strike-off because the company is being removed from the register.
Causes for Company Strike-Offs
And of course, this means that there are a number of different conditions for a company that causes the company to be struck from the register. Before understanding the revival of struck off companies let us understand different kinds of struck-offs and their causes:
- Voluntary Strike-Off:
If at some point the people of the company decide that they no longer want to carry on the business, then they can apply to the Companies House to have their company voluntarily removed from the register. This whole procedure is done using the Form DS01 & submitting the form directly to the Companies House. After this, the Companies House perform some checks to ensure that companies are not seeking removal because of some inappropriate reason. For this to be verified, they should meet the following conditions:
- The company must have not done any trades in the last 3 months of its functioning.
- The company name should not be changed.
- No assets should be disposed of inappropriately.
- Nothing should be done in the past which might end up impeding the strike off.
- Non-Operating Strike-Off:
According to Section 1000 of the Companies Act of 2006, where if the Companies House has a valid reason to believe that a company is not operating or carrying on with the business anymore, then the Companies House may strike that company from the register once all the proper procedures have been followed. This may take place in some instances where a third party has reported a cease in trading of the company or for other reasons. If a director of the company wishes to then they may apply to show that they intend to carry on or are still carrying on with the business of the company and can prevent the company from being struck off the register.
- Non-Compliance Strike-Off (Accounts):
A limited company is required to submit the proper accounts and annual return each year by the laws placed for the companies. This is very basic & simple accounting compliance that has to be done by all the companies and failure in properly filing these accounts can lead to a company being struck off the register. This also leads to director disqualification for 5 years.
- Insufficient Directors:
According to the law stated, it is necessary for a private limited company to have one director at the very least, whereas for a public limited company the requirement is two. If the company does not have a sufficient number of directors, then the company cannot legally function properly and so it can then be removed from the register. In the case that the company is left without the necessary number of directors, the registrar will take action against the company to strike it off. If the company was being run by a single director who then later died but couldn’t appoint another director in his place, then this will turn out to be another circumstance where the company might be struck from the register.
- Non-Natural Directors:
The Companies Act of 2006 has put in place that the legal requirement of a company is that it must have at least one “natural” director, meaning, a person of at least the age of 16 years. It is possible for a different company to be the director of another limited company but the thing is that there can’t be the sole director of the company. So, any company which does not fulfill the mentioned conditions could be struck off the list, i.e. that the company has one sole director who’s aged less than 16 years old. Another condition is that if it was a company as of the 1st October 2010, then it will also be struck off. It is very important that every limited company must have at least one natural director of the correct age to avoid and fulfill the conditions.
- Potential Fraud:
When the director or the company itself as a whole has operated in such a way that it has wrongfully traded or committed fraud, then it might be possible that the company will be removed from the register. If a person ends up objects, it may also cause the company to dissolve because of its misdeeds.
The Restoration Procedure After Strike Off
Even if the company is removed from the register, it is possible for a company to be restored to the register after it has been struck off which can take place under certain circumstances. This whole procedure is known as company restoration & as mentioned above requires certain criteria & conditions to be fulfilled. After this procedure is completed, the company will then be added back to the register. The process requires the removal of directors’ disqualification for its disqualified directors and payment of requisite penalties to RoC. Also, it can be removed by NCLTs orders in some cases.
