Sec 560 – Defunct Company

sec 560 defunct companyA company after receiving Certificate of Incorporation from the Registrar is required to commence its business & other operations. But if a company after obtaining Certificate of Incorporation (COI) does not start its operations within 1year then such Company becomes Defunct Company and the Registrar after inquiring is required to strike off the name of the Company from the Registers of Companies.

Defunct Company is a Company which has not commenced its business within 1year after receiving certificate of incorporation without any sufficient cause. Also, if a company does not file its Balance Sheet for many years it will be treated as a Defunct Company in the eyes of law.

Conditions under which ROC can strike off the name:

The ROC is authorized to strike off the name of Company from the registers only if –

a)      The company is wound up and no liquidators are acting.

b)      The affairs of the company have been completely wound up.

c)      No returns have been filed for 6 consecutive months.

Procedure for striking off the name of Companies by the Registrar

The Registrar can strike off the name of Companies u/s 560 of Companies Act after being satisfied that the Company is not functioning from at least 1year after incorporation. Striking off can be done in 2types –

1)  Striking off by the Registrar in its own motion : The Registrar can strike off the name after satisfying the following conditions –

  • Letter of Enquiry – If Registrar has reason to believe that the Company is not functioning he will send a letter of enquiry to enquire whether the Company is in operation or not.
  • Notice threatening striking off – If within 1 month after sending letter of enquiry no reply is received from the Company, then the Registrar shall send a second notice stating that if reply is not received within 1month then a notice shall be published to the official gazette to strike off the name of the Company.
  • Final Notice – If again no reply is received after second notice also the Registrar shall believe that the Company is no more in operation and shall strike off the name from the registers. It can strike off the names in 2ways –

 a)  A notice is send to the official gazette that with the expiration of 3months from the date of notice, the name of the Company is strike off.

 b)  The above notice will be send to the Company as well as to the Income Tax Department. Similar procedure for publication of notice in the official gazette is being conducted.

  • Strike off Completely – After the expiry of 3months from the notice if no reason has been shown by the Company, then the name of the Company shall be strike off from the Registers and shall be published in the official gazette.

2)      Striking off on Company’s application: The name of Company’s may be strike off from the registers on an application by the Company itself. The following procedure needs to be followed –

  • Board Resolution – If a Company itself wants to strike off the name then it needs to pass a resolution in the Board Meeting and mention the same in the resolution. Also the resolution to be sent to the ROC with an application for the same.
  • Documents required – The following documents should be attached with the application –

a)  An affidavit signed by the Directors and he confirms that the company has no assets or liabilities and the Company is no more in operation.

b)  Indemnity from the Director, in case any liability is there it needs to be paid off by the Director before striking the name form the registers of Companies.

  • Striking off the names – If the Registrar is satisfied with the above formalities regarding the application and other formalities, then the Registrar shall proceed to strike off the names from the registers and shall publish the same in the official gazette.

In this way a defunct company’s name get strike off from the registers by the Registrar or by the Company itself.

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