Stricter guidelines were introduced by the Ministry of Corporate Affairs (MCA) pertaining to the closure of companies. These regulations were introduced under the Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023, which came into effect on 10 May 2023.
The new regulations define certain additional requirements for removal of a company’s name from the Register of Companies. They emphasize complying with financial reporting and transparency requirements. In addition, these new guidelines aim to improve the examination process and increase control when it comes to removing company names from the register.
Overview of the Rules
The process of removing an organization’s name from the Register of Companies has been defined under the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. Although first introduced in 2016, there have been several amendments to rules over the years.
- The Registrar is granted power by Section 248 of the Companies Act, 2013 to remove the names of companies from the Register of Companies considering the circumstances stated under the provision.
- New regulations related to the application process for removing a company’s name from the Register of Companies were issued by the MCA under the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2023.
- Rule 4 (1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 discusses the application to remove a company’s name and states that such an application for removal of name of company under Section 248 (2) must be made to through Form No. STK-2 to the Registrar. It further notes that the application must be submitted along with a fee of INR 10,000.
What are the new Amendments?
Three new provisions were introduced in Rules 4 (1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016. The requirements added for companies when filing for name removal under this amendment are as follows:
- Companies must not submit an application until all pending financial statements and annual returns of the financial year in which the company is barred from operating have been filed.
- If the company aims to file the name removal application after the registrar uses its power to initiate the name removal process and has ample reasons to believe that (1) the company failed to start their business within one year from being incorporated, (2) the company has not conducted any business for two immediately preceding financial years or (3) the subscribers to the memorandum are due to pay their subscription, the must submit all the financial statements and annual returns that are due before filing the application.
- If the Registrar initiates the name removal process for a company and publishes an official notice for the same, the company shall not be allowed to file an application for name removal itself. This basically means that a company itself cannot file an application to remove its name after the Registrar decides to remove it from the Register of Companies and publishes a notice about the same.
Restrictions after Registrar Removes a Company’s Name
Consider the Registrar removes a company’s name from the Register of Companies and publishes information about it in its official gazette. In such cases, no application, under Rule 4 (1) of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, shall be filed by the company.
It is strongly advised that companies adhere to the new guidelines introduced under the amendment to enable a smooth name removal process while making sure that they comply with the intricacies of the process as well.
How to Remove Company’s Name from Register of Companies?
The following process must be complied with to remove a company’s name from the Register of Companies:
- Ensure Compliance: All due financial statements and annual returns until the end of the financial year when the company is barred from operating must be submitted.
- Filing the Application: Once the above-mentioned submissions are made, you need to file an application for removal of the company’s name along with all relevant documents such as financial statements, board decisions and consent letters.
- Publishing a Public Notice: The Registrar of Companies shall publish a notice on their official website and in its gazette inviting anyone to raise an objection to the closure within a specific period – generally 30 days.
- Objection Period: During this period, anyone that objects to the company’s closure may submit a written objection along with supporting documentation to the Registrar.
- Decision of the Registrar: The Registrar shall assess the application and the objection and determine whether the company’s name should be removed or not. If required, they may ask the company for some additional information.
- Order to Remove: If the application is approved, a removal order shall be issued. It shall specify the effective date – generally 30 days – as well.
- Publishing Notice of Removal: The Registrar shall issue a notice stating that the company’s name has been removed from the Register of Companies in its official gazette.
Conclusion
It is strongly advised that companies adhere to the new Amendment Rules, 2023 and submit all relevant documentation for a seamless name removal process.
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