Circumstances under which company may be wound up by Tribunal as per section 271 and section 272 of the Companies Act, 2013

1. Powers of Registrar for making an application of winding up

• Section 271 sub section (e) of the act provides that if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years, an application for winding up of the Company can be made by the Registrar (ROC).
• Also, as per Section 272 sub section (e) of the act the Registrar (ROC) can file a petition for ordering winding up of a Company.
• However, the Registrar shall be entitled to present a petition for winding up under subsection (1) on any of the grounds specified in sub-section (1) of section 271, except on the grounds specified in clause (b), clause (d) or clause (g) of that sub-section:
• Provided that the Registrar shall not present a petition on the ground that the company is unable to pay its debts unless it appears to him either from the financial condition of the company as disclosed in its balance sheet or from the report of an inspector appointed under section 210 that the company is unable to pay its debts;
• Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of a petition
• Provided also that the Central Government shall not accord its sanction unless the company has been given a reasonable opportunity of making representations.

2. Striking off Names of Companies as per section 248 of the Companies Act, 2013

• Chapter XVIII of the Companies Act, 2013 (‘Act’ for short) provides the procedures for removal of names of companies from the Register of Members in Sections 248 to 252 which came into effect from 26.12.2016.  For this purpose the Government made ‘The Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (‘Rule’ for short) which came into effect from 26.12.2016.
• Section 2(74) of the Act defines the term ‘Register of companies’ as the register of companies maintained by the Registrar on paper or in any electronic mode under this Act

3. Powers of the Registrar

• Section 248(1) provides that where the Registrar has reasonable cause to believe that:
  • A company has failed to commence its business within one year of its incorporation; or
  • A company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application with such period for obtaining the status of a dormant company,
  • he shall send a notice to the company and all directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of relevant documents, if any, within a period of 30 days from the date of the notice.
• Section 248(5), provides that at the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette in Form No STK – 7. The same shall be placed on the Official Website of the Ministry of Corporate Affairs..   On such notification, the company shall stand dissolved.
• Section 248(6) provides that the Registrar, before passing an order, shall satisfy himself that sufficient provision has been made for the realization of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and if necessary, obtain necessary undertakings from the Managing Director, director or other person in charge of the management of the company.
• The assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies.
• Section 248(7) provides that the liability, if any, of every director, manager or other officer who was exercising any power of management and of every member of the company dissolved, shall continue and may be enforced as if the company had not been dissolved.
• Section 248(8) provides that nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies.

Companies that cannot be removed as per section 248 of the Companies Act, 2013

Rule 3 provides that the following categories of companies shall not be removed from the register of companies:

• listed companies;
• companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
• vanishing companies;
• companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
• companies where notices under Section 234 of the Companies Act, 1956 or Section 206 or 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under
• Section 208 has not yet been submitted or follow up of instructions on report under Section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;
• companies against which any prosecution for an offence is pending in any court;
• companies whose application for compounding is pending before competent authority for compounding the offences committed by the company or of any of its officers in default;
• companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
• companies having charges which are pending for satisfaction; and
• companies registered under Section 25 of the Companies Act, 1956 or Section 8 of the Act.

Conclusion

• If the Company is a closely held Company and there are no major debts/ liabilities in the books of the Company then the Registrar can order for Striking off of the name of the Company from the register of Companies.
• However, in case of a Company with Outside liabilities and Assets held in joint ownership with any other Company/ Individual/ entity, the Registrar can make an application to the tribunal for order of Winding up of the Company proceeded by Liquidation of assets and liabilities of the Company.