Revival of Struck-Off Companies in India

When a company is marked as "struck-off," it means its name has been removed from the official register maintained by the Registrar of Companies (ROC). This signifies that the company ceases to exist as a legal entity, and it cannot carry out any business activities.

However, directors may still be held liable for any pending dues or legal obligations even after the strike-off. Remember, if the company is not revived within 20 years, it will be considered permanently dissolved.

Why Do Companies Get Struck-Off?

Companies can be struck-off for various reasons, primarily related to non-compliance or inactivity:

• Failure to commence business within one year of incorporation.
• Not carrying on any business or operations for two consecutive financial years, without applying for dormant status under Section 455 of the Companies Act, 2013.
• Failure to file annual returns and financial statements consistently.
• ROC's initiative (suo motu action) if it believes the company is non-operational after an inspection.
• Voluntary application by the company for striking off its name.

How Companies Get Struck-Off: ROC Action vs. Voluntary Application

The striking off can happen in two ways:

1. Suo Motu Action by ROC: The Registrar of Companies can initiate the striking off process under Section 248(1) if a company fails to comply with statutory requirements, especially regarding financial filings. The ROC will typically issue notices before formally striking off the company's name.
2. Application by the Company (Fast Track Exit): A company can voluntarily apply to the ROC for strike-off under Section 248(2) if it intends to close operations. This is often done under the "Fast Track Exit" scheme when there are no significant assets or liabilities.

Difference Between Struck-off vs. Winding Up

While both striking off and winding up of the company lead to the cessation of a company's legal existence, they differ significantly:

Being struck-off has serious consequences for a company and its directors:

1. Company Loses Its Legal Identity

A struck-off company loses its legal corporate identity, meaning it cannot carry on business operations, enter into contracts, sue, or be sued in its name.

2. Company Assets and Bank Accounts

When a company is struck-off, it may appear inactive, but its financial and asset-related implications remain significant. Here’s what happens:

• Freezing of Bank Accounts: Bank accounts of a struck-off company are frozen by the concerned bank upon receiving notice from the ROC.
• Assets remain vested in the company: While a struck-off company loses its active status, its assets (both movable and immovable) legally remain vested in it. However, the company cannot access, manage, or transfer these assets.

3. Director's Liabilities

Directors of a struck-off company may still be held liable for the company's outstanding liabilities. The strike-off does not automatically absolve directors of their duties and responsibilities.

4. Disqualification of Directors and Fines

Under Section 164(2) of the Companies Act, 2013, directors of struck-off companies may be disqualified from joining other companies for up to five years due to non-compliance. They may also face penalties and fines.

The primary legal route for reinstating a struck-off company in India is through the National Company Law Tribunal (NCLT). Here’s the details:

Revival of Struck-Off Company Under Section 252

Section 252 of the Companies Act, 2013, governs the revival of struck-off companies. It allows aggrieved parties to file an application with the NCLT for the restoration of the company's name.

An appeal for revival if the company was struck-off due to:

• Non-compliance – Failure to file annual returns, financial statements, or other statutory requirements.
• Inactivity – No business operations for two or more consecutive financial years.
• Administrative oversight – The Company was wrongly or inadvertently struck-off by the ROC.

Restoration can be requested if there is a genuine intent to operate the business again, settle liabilities, or protect company assets and legal rights.

Who Can Apply for Revival?

An application for revival can be filed using Form NCLT-9 by:

• The company itself (through its directors or members).
• Any member of the company.
• Any creditor of the company.
• Any workman of the company.
• The ROC, if it is later found that the company was wrongly or inadvertently struck-off.

Time Limit for Revival

The time limit for filing a revival petition under Section 252 is crucial:

• For the company, its members, creditors, or workmen: The application must be filed with the NCLT within 20 years from the date of the strike-off notice in the Official Gazette.
• For the Registrar of Companies: The ROC can apply for restoration within 3 years if the strike-off was inadvertent or based on incorrect information.

Under Section 252 of the Companies Act, 2013, the NCLT will consider various factors to determine if a struck-off company should be revived. The key is to demonstrate that the company was either actively carrying on business at the time of striking off or that it is just and equitable to restore its name to the register.

To prove that your company was operational or has a valid reason for revival, you need to provide compelling evidence. This can include:

• Ownership of Immovable Property: Proof that the company owns land or other immovable assets, indicating ongoing interest and potential for future activity.
• Active Bank Accounts: Bank statements showing active transactions, even if minimal, indicating the company's financial presence. A letter from the bank regarding the freezing of the account due to a strike-off can also be helpful.
• Statutory Compliance with Other Departments: Evidence of compliance with other regulatory bodies like GST, Income Tax, Provident Fund, ESIC, etc., even if ROC filings were missed. This shows a broader operational presence.
• Ongoing Licenses or Registrations: Proof of valid and active business licenses or registrations (e.g., trade licenses, professional tax registration, FSSAI license, Shop & Establishment registration, etc.) that require the company to be a legal entity.
• Pending Litigation or Contracts: Documentation of any pending legal cases (as a plaintiff or defendant) or unfulfilled contracts, demonstrating a need for the company's legal existence to continue or resolve these matters.
• Filing of Income Tax Returns (ITR): Copies of filed ITRs, even if "Nil," can indicate an ongoing legal existence.
• Existence of Assets/Liabilities: Any evidence of assets or outstanding liabilities (e.g., loans, trade payables/receivables) that require the company's revival for proper handling.
• Board Resolutions: A copy of the Board Resolution authorizing the filing of the NCLT petition for revival.

When drafting and filing the NCLT petition, ensure you have the following documents ready:

• Petition in Form NCLT-9.
• Affidavit verifying the petition in Form NCLT-6.
• Certified copy of the ROC’s strike-off notice or Official Gazette publication.
• Memorandum and Articles of Association (MoA & AoA) of the company.
• Certificate of Incorporation.
• Board Resolution authorizing the filing of the NCLT petition.
• Audited financial statements (Balance Sheet, Profit & Loss Account, Auditor's Report) for the years preceding the strike-off. Even if the company was not in active business, "Nil" balance sheets should be prepared.
• Bank statements of the company for the relevant period to prove business operations, if any.
• Income Tax Returns (if available).
• List of directors and shareholders.
• Proof of service of the petition to the ROC and the Income Tax Department.
• Vakalatnama/Memorandum of Appearance.
• Any other documents proving the company's operational status or reasons for revival (e.g., property documents, active licenses, pending litigation documents).

The process for reviving a struck-off company through the NCLT involves several steps:

Step 1: Drafting and Filing the Revival Petition with NCLT (Form NCLT-9)

The process begins with the preparation and submission of a petition in Form NCLT-9 to the appropriate bench of the National Company Law Tribunal, stating:

• Reason for strike-off
• Grounds for revival
• Relief sought
• Supporting documents (financials, returns, etc.)

File an affidavit verifying the petition (Form NCLT-6) and other supporting documents (board resolution, MOA, AOA, etc.). A prescribed filing fee (usually ₹1,000) must be paid as per current NCLT procedures.

Step 2: Serving Copies to the ROC and the Income Tax Department

A copy of the petition, along with all supporting documents, must be served on the ROC and the Income Tax Department at least 14 days before the hearing date (or as directed by the Tribunal). This allows these authorities to review the petition and present their observations or objections to the NCLT.

Step 3: The Hearing at the NCLT

The NCLT will schedule a hearing where the petitioner (or their authorized representative, such as a Company Secretary or lawyer) will present their case. The ROC may also present its views or objections. The Tribunal will assess the evidence and arguments presented by both sides.

Step 4: The NCLT Order for Restoration

If satisfied that the company was active or it's just and equitable, the NCLT may order the restoration of the company's name to the Register of Companies. The order may include specific directions, such as filing all pending annual returns and financial statements and paying any outstanding fees or penalties.

Step 5: Filing the NCLT Order with the ROC (Form INC-28)

Once the NCLT order is issued, a certified copy of the order must be filed with the Registrar of Companies in Form INC-28 within 30 days from the date of the order. This formally notifies the ROC of the NCLT's decision to restore the company's name.

Step 6: Filing All Pending Documents and Paying Penalties

As per NCLT directions, the company must file all pending annual returns (Form MGT-7) and financial statements (Form AOC-4) with the ROC, along with applicable late filing penalties under Sections 92 and 137 of the Companies Act, 2013.

Step 7: ROC Publishes Order and Your Company is "Active"

Upon successful filing of the NCLT order and all pending documents, the ROC will publish the restoration order in the Official Gazette. At this point, the company's status in the MCA records will change back to "Active," and legally, the company is then considered to have never been struck-off.

The costs associated with company revival include:

1. Government Fees

• NCLT Filing Fees: A statutory fee of Rs. 1,000 for filing the petition in Form NCLT-9.

2. Professional Charges

These include fees paid to Company Secretaries, Chartered Accountants, or Advocates for:

• Drafting the petition
• Preparing supporting documents
• Representing the company at NCLT hearings

Charges may vary based on complexity and professional experience and typically range between ₹15,000 to ₹50,000 or more.

3. Documentation and Notarization Costs

Expenses related to:

• Notarizing affidavits
• Printing, scanning, and compiling required documents
• Preparing Power of Attorney, Board Resolutions, etc.

Estimated cost: ₹2,000 to ₹5,000

Penalty & Late Filing Fees for ROC Returns (Post-Revival)

As per the Companies (Registration Offices and Fees) Rules, 2014 (latest amendments):

• ₹100 per day of delay per form, per filing (no upper cap).
• This applies to most key compliance forms, like:
  • Form AOC-4 – Financial Statements
  • Form MGT-7 – Annual Return
  • Form MGT-7A – (for small companies/OPCs)

• Besides the ₹100/day penalty, the standard filing fees based on the company's nominal share capital also apply.
• For companies with share capital, the normal filing fee per form ranges from ₹200 to ₹600, depending on the capital.

Overall, the total cost for reviving a struck-off company can range from ₹30,000 to ₹1,00,000 or more, largely depending on the professional fees and the accumulated penalties.

The revival process is a legal one, and its duration can vary. Generally, it can take anywhere from 2 to 6 months, depending on factors such as:

• Documentation Errors: Incomplete or missing documents are the primary cause of delays, requiring additional submissions and extending the process.
• NCLT Caseload: The bench's schedule and workload can impact hearing dates.
• Delays in their review or the need for clarification from these departments can extend the timeline.
• Significant objections from the ROC, Income Tax, or other parties, or the NCLT's need for further evidence, can lead to multiple hearings and prolong the process.
• A poor compliance record may lead to increased scrutiny and a longer review period.

With the help of experienced professionals, the process can be expedited through meticulous preparation and prompt responses.

Once the NCLT order for revival is obtained and filed with the ROC, the company must diligently complete the following post-revival compliances:

Clearing All Pending ROC Filings and Other Statutory Dues

This is mandatory per the NCLT order. The company must:

• File outstanding annual returns: Submit Form MGT-7 (Annual Return) and Form AOC-4 (Financial Statements) for all pending years, with late fees and penalties under Sections 92 and 137 of the Companies Act, 2013.
• Settle other statutory dues: Clear outstanding Income Tax, GST, PF, ESIC, and other applicable taxes/levies to avoid further penalties.
• Comply with NCLT Directions: Fulfill any specific NCLT costs or penalties to ROC/designated funds, and file any required affidavits of compliance.

Reactivating Bank Accounts and Other Registrations

With "Active" MCA status, normalize operations by:

• Reactivating Frozen Bank Accounts: Provide the bank with the NCLT order and MCA active status proof to unfreeze accounts, crucial for financial transactions.
• Reactivating/Renewing Licenses: Reactivate or renew business licenses, permits, or registrations (e.g., GST, IEC) impacted by the strike-off.
• Updating KYC Information: Update company and director KYC details with banks and financial institutions for smooth operations.
• Notify Stakeholders: Inform key clients, suppliers, and lenders about the revived status to rebuild trust and resume business.

Diligence in these compliances is crucial to avoid future legal issues and ensure seamless, law-abiding operations.