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Declaring the Company as Defunct
This is the most easy & shortest method for dissolving of any company. Where the company is not carrying any business or operation or it has discontinued the operations completely, than it can make any application to the Registrar of Companies for declaring it as defunct company. After being declared as defunct, the name of the company is removed from the records of the Registrar of Companies.
Though declaring a company as defunct is the suo moto, power of the Registrar of Companies, the Government of India from time to time issues necessary exit scheme, whereby non operational companies can apply to the Registrar of Companies for striking their names. Currently, a company can apply under Simplified Exit Scheme 2005 for striking off their name.
Striking off the name of the company does not materially affect the creditors of the company because such creditors may:
- Enforce the claim against every director, secretaries, manager or any other officer of the company and against every member of the company, as if the name of the company had not been struck off; or
- Apply to the court for winding up the company, whose name has been striked off.
- Apply to court within 20 years from the date of publication of the notice intimating that the name has been struck off, for the restoration of the name of the company to the Registrar of Companies
Process of declaring the Company as defunct:
- Consent of Board of Directors The proposal to declare the LLP as defunct shall be approved by the Board of Directors
- Application to Registrar of Companies: An application in the prescribed form shall be made to the Registrar of Companies along with prescribed fees. The application shall be submitted with the following documents:
- Board resolution to make an application to Registrar for declaring the company as defunct.
- The application needs to be signed by two directors of the company which will include Managing Director or Whole Time Director, if there is one.
- An affidavit by two directors of the company which will include Managing Director or Whole Time Director, if there is one, duly notarized verifying that the company has not entered on any business or company did some business for a period upto date and then discontinued its operations, as the case may be and has no assets or liabilities.
- An indemnity bond in the prescribed form duly notarized to the effect that should there be any liabilities on the company , such liabilities will be met in full by the applicants even after the name of the company is stuck off the register of companies, the applicants shall be liable , jointly and severally.
- If the company has been filling regular financial statement with the Registrar of Companies, then they should file the financial statement for the latest year prepared upto a period which ended one month preceding the date of application. The application shall also file a declaration that the statement of accounts so submitted gives a true and fair view of the company’s financial position.
- Companies which discontinued their operations, after carrying the same for some period, shall file audited financial statement under the Companies Act 1956 for the period upto which they carried on the business provided such period is of one accounting year or more.
- Order for declaring Company as defunct: On receipt of application, if the Registrar is satisfied about the correctness of application as regards the basic condition stipulated in section 560 of the Companies Act 1956 and prescribed guidelines , than it will proceed towards striking the name of the company and declaring it as defunct and thereafter a publish a notice in this regard in the official gazette.
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Point to be noted: |
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The company has complied with all the provisions of the Companies Act 1956 |
| 2. |
There must not be any prosecution for a non-compoundable offence pending against the company. |
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The whole process to declare the company as defunct, takes around 2-3 months. |
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