In 2017, Ministry of Corporate Affairs (MCA) took a drastic step and de-registered almost 2.3 lakh companies. This also resulted in the de-activation of DINs (Director Identification Number) of almost 3.10 lakh directors. This has created panic and uncertainty in the financial and industrial sector.

Reasons for ‘Strike Off’

• Most of these companies were on the radar of MCA as they had not filed their returns for three years in a row.
• Some of them were shell companies.
• A lot of companies underwent heavy transaction and deposit during demonetization, without transparency.
• A large number of these companies were Dormant companies which were not active.
• The Directors did not perform their duties sincerely therefore these companies lacked ‘due diligence’.
• Some 3000 Directors were holding post in as many as 20 companies which is against the prescribed limit under specific law.

Impact of ‘Strike Off’ on Companies:

The Registrar of Companies act upon the erring companies’ u/s 248(1) of Companies Act 2013. These are some implications of this Section on the affected companies.

• Impact #1 These companies cannot function from the date of issue of notice regarding their disqualification.
• Impact #2 Their Bank Accounts are frozen and no transaction can take place.
• Impact #3 Liabilities and dues will not be pardoned.
• Impact #4 Their Directors registration is deactivated.
• Impact #5 These Directors will be barred from other companies Board of Directors too.
• Impact #6 Penalty and fine is imposed according to the Rules prescribed under the Act.

The actions taken by MCA in 2017 will continue in present fiscal year and the number of Defaulters might be much more than our expectations. Caution and Quick-action are the key to success.
                    Isha Malik (Company Secretary, MUDS Management Pvt Ltd)

Provisions for Revival of the Company:

Affected Companies biggest concern is to exonerate themselves and start functioning again. Under Section 252 of Companies Act 2013 there are certain provisions for the revival of the de-registered companies as well as re-activation of DINs.

1. Appeal to Tribunal:

 Section 252(3)- An aggrieved company or its member or creditor or workman can appeal to the Tribunal by the way of filing an application within twenty years of the name being struck off.
The Tribunal has the power to restore the Company and its Directors if it’s satisfied by the explanation and evidence.

Rule 87(A) NCLT (National Company Law Tribunal) (Amendment) 2017- An application can be filed by the affected company or its members or workmen with the NCLT within three years of publication of notice. Due documents have to be submitted, affidavit verified and stipulated fee submitted.
The Tribunal will then hear the case as per the specified Act. At the end, if the Tribunal is satisfied by the documents and evidence, it will revive the company.

2. Condonation of Delay Scheme (CODS), 2018:

As the number of struck off companies and DIN de-activation in 2017 was of humongous proportions, the aggrieved people as well as the Industry appealed to the Government for a swift and fast redressal system. In response to this, MCA has come up with CODS, 2018 through a general Circular No. 16/2017.

Eligibility and Procedure:

• Only those Defaulting Companies, which have been de-registered because of non-filing of Income tax returns, can take advantage of this scheme.
• Defaulters under Section 248(5) of the Companies Act, 2013 cannot appeal/apply in this scheme.
• There are five prescribed forms that has to be duly filled and submitted.
• Then the DINs will be re-activated temporarily so as the Directors can file the returns and relevant documents.
• The defaulting Company would then fill the E-Forms and pay the prescribed fee.
• After this, the struck off company would file e-CODS on the portal of MCA and deposit 30,000 as the fee.
• The Directors are also supposed to file their documents and e-CODS, in absence of which their DINs would be de-activated on expiry of the scheme.

Conclusion:

In the present scenario the CODS scheme is the one which can help in restoring and reactivating companies and DINs in the fastest manner. The MCA through various circulars has laid down the provisions clearly.

Since the implementation of the scheme, approximately 14,000 companies and Directors have benefited from it. As the process is on, many more companies will get reprieve and resume functioning.

Hence, the best way out for defaulters is to take swift action and get going.

“Due-diligence, transparency and professional ethics are the basic principles which will keep Companies health and growth intact.”
– Shweta Gupta (Founder and CEO, MUDS)
 

For any query or help please feel free to contact us:
call at 9599653306 or mudsmanagement@gmail.com

The post ALERT DIRECTORS – MCA Is Watching!! appeared first on MUDS.

It is relevant here to mention that even the operational companies who  have not filed their financial statements & Annual returns were presumed to be non operational hence struck off from Register of Companies maintained by ROCs.

Another relevant issue was that all the directors associated with these struck off companies were disqualified under section 164(2) of companies act 2013, such disqualified directors could not be appointed in any company whatsoever. This gave rise to serious concerns of such directors and their companies. For a better understanding we have categorized such companies into 3 scenarios

• Active Companies
• Struck off Companies which are operational
• Struck off Companies which are non operational

Scenario I – Active Companies
Companies who are active on the register of Companies and which have not filed the financial statements and Annual return can do such filings: that is fine! But the problem arises if directors of such companies have been disqualified under section 164 and their DIN blocked.

Such directors were not able to file any form or return with the ROC before 1st Jan 2018. Considering the fact that no way-out to such directors was provided under companies Act 2013, an amnesty Scheme was issued by MCA called CODS 2018.

The purpose of this Scheme is to give an opportunity to the non-compliant, defaulting companies to rectify their defaults pertaining to non-filing of overdue financial statements. but this scheme is applicable only to such defaulting companies which are still active for filing but cannot file their financial statements due to disqualification of directors whose DINs are blocked.

Therefore it can be said that the directors (disqualified) associated with only active companies can remove their disqualifications by availing CODS scheme which is valid till 31st March 2018. The procedure to avail this scheme is very simple.

The defaulting companies shall file their overdue documents. Thereafter they shall file E-Form CODS with prescribed fee for condonation of delay for removal of disqualification of Directors. It may be noted that if any disqualified director has not availed this scheme till its validity i.e. 31st March 2018, The DIN of such directors shall be permanently blocked & they cannot act as a director in any company.

Scenario II – Struck off Companies which are operational
Companies which have been struck off by ROCs even if they are operational shall not be eligible to avail CODS 2018 and file documents under this Scheme. Therefore the disqualified directors associated with struck off Companies cannot remove their disqualification through CODS 2018.

Such companies can however, make application to NCLT for revival and upon successful order for revival avail benefits of this Scheme during the period of its validity only. Therefore all the disqualified directors associated with struck off companies should without wasting time file the application to NCLT for Revival so that Revival order comes before expiry of CODS scheme 2018.

Scenario III – Struck off Companies which are non operational
We have discussed above the remedy for disqualified directors associated with struck off companies which are operational. But what about non operational struck off companies and their disqualified directors. Since they cannot even revive the company how can the directors associated with such companies remove their disqualifications? The only way as of now for such directors is to move to the high court.

A writ petition can be filed in the high court praying initially for a stay on disqualification and availing the benefits of CODS scheme. Only thing to be kept in mind is that such prayer to high court can only be made during the validity of CODS scheme as it is obvious that once the scheme is expired we cannot take the benefits of it. We have numerous judgements of Delhi high Court where relief was granted in favour of Disqualified directors.

Akshay Tiwari Vs Registrar of Companies and Ors (Delhi High Court)

The petitioner has filed the present petition, impugning a “lists of disqualified directors” published by respondent to the extent that it includes the petitioner’s name. The petitioner claims that he is the Director of a private company named M/s Semnote Pvt. Ltd.

The learned counsel appearing for the petitioner unequivocally states that the Company has not carried out any business since past three years. The petitioner also did not file the requisite returns as required under the Companies Act, 2013.

Consequently, the petitioner has incurred the disqualification under Section 164(2) of the Act.

The learned counsel appearing for the petitioner makes an unequivocal statement, on instruction of the petitioner, that the petitioner is desirous of availing of the Condonation of Delay Scheme – 2018 (hereafter „CODS – 2018‟). However, since the Company has been struck off from the Registrar of Companies, the petitioner has been disabled from availing the benefits of CODS – 2018.

The petitioner is also not in a position to seek revival of the Company by filing an appeal under Section 252 of the Act as, admittedly, the Company has not carried out any business and was liable to be struck off from the Register. The petitioner states that, in fact, he would voluntarily seek dissolution of the Company under Section 248(2) of the Act, if the petitioner is given an opportunity to do so.

This Court is of the view that since the Company is not carrying out any business for over three years; the petitioner ought to be provided the benefit of the CODS – 2018. Accordingly, this Court directs as under :-

• The petitioner may file all the requisite returns in relation to the Company to avail the CODS – 2018.
• The petitioner may also file the necessary resolutions and documents for voluntarily striking off the name of the Company as required under Section 248(2) of the Act.
• The petitioner would also make a necessary application under CODS – 2018 along with the requisite charges
• The aforesaid documents and applications will not be submitted online but in hard copies to the Registrar of Companies.
• The Registrar shall scrutinize the same, and if the same are found to be otherwise in accordance with Section 248(2) of the Act, the petitioner would be granted the benefit of the CODS – 2018

The post Companies Post Strike Off Scenarios appeared first on MUDS.

Any person aggrieved by an order of the Registrar, notifying a company as Struck-off under section 248, may file an appeal to the NCLT within a period of three years from the date of the order of the Registrar and if the concerned person can prove to the satisfaction of the NCLT is of the opinion that the removal of the name of the company from the register of companies is not justified in view of the absence of any of the grounds on which the order was passed by the Registrar, it may order restoration of the name of the company in the register of companies:

Step by Step procedure for Revival of Company:

1. Draft an appeal under section 252, in Form No. NCLT 9, with such modifications as may be necessary.

2. Serve a copy of the appeal, to the Concerned ROC and Income Tax department.

3. Submit the original appeal to NCLT.

4. On the date of the hearing notified by NCLT appear before NCLT and present the case producing sufficient grounds for revival of Company and repudiate the claim of ROC that Company is not carrying on the business or ceased to be in business for the past two years.

5. After hearing both the parties NCLT shall pass the order restoring the name of a company in the register of companies.

6. File the copy of order with Registrar of Companies within a period of 30 days from the date of the order.
7. File pending financial statements and annual returns with the Registrar within such time as may be directed by the Tribunal.

8. The Registrar of Companies will change the status of Company from Struck-off to ‘Active’.

For more information, visit Muds Management for complete information.

The post How to revive a Struck-off company by NCLT route? appeared first on MUDS.

The much awaited relief to disqualified directors was given by government through Condonation of Delay Scheme, 2018 notified by the MCA on December 29, 2017.

The introductory paras of the Scheme says  that Ministry of Corporate Affairs (MCA) had received numerous representations from industry, defaulting companies and disqualified directors seeking an opportunity to become law compliant and removal of disqualification.

This assumes more importance in the light of the fact that no remedy is provided under companies Act 2013 for removal of disqualification incurred by directors for non filing of financial statements and Annual Return under Section 164(2) of Companies Act 2013, except waiting for five long years and then making application for removal of Disqualification.

Stakeholders were very optimistic about this scheme as this was supposed to be a golden opportunity to remove the disqualification of Director, But as the Scheme is being unfolded, it turns out that this scheme is not for every disqualified director.

For example, the disqualified directors of a Struck off Company can not avail this scheme unless the company is not revived. This assumes more seriousness in the case that if a disqualified directors do not want to revive their struck off company but they are only interested in removal of disqualification.

Even if the disqualified directors want to revive the Company they may not be successful in their endeavors, because defunct companies cannot be revived. Therefore the disqualified Directors are caught in a vicious circle of Revival and removal of Disqualification.

In such cases Role of High Courts assumes more importance. The Disqualified directors can move the high court by filing a writ petition for stay/ removal of disqualification.

Time limit of this Scheme i.e. three months seems very less for those defaulting companies whose names have been removed from the register of companies under section 248 of the Act and which have filed applications for revival under section 252. As per the Scheme the Director’s DIN shall be re-activated only after NCLT Order of revival subject to the company having filing of all overdue documents.

Example suppose a struck off company has been revived and all the default made good by disqualified directors, even after taking efforts for revival, such directors will still continue to remain disqualified, for removal of default such disqualified directors will then have to avail scheme but till the revival order is passed by NCLT the time limit of scheme may have already expired, in such situation the original Sin of disqualification will still remain unpardoned. In the light of above discussions one can only hope that MCA comes out with some relief for disqualified Directors of Struck off Companies which is not improbable considering the need of the hour.

It seems from the above that companies which have been struck off and want to revive themselves should, without wasting even a day’s time, file the application for revival and obtain a favourable order soon enough to have sufficient time to avail benefits under this Scheme. Such revived entities should also be required to file their overdue documents (including e-Form CODS 2018) under this Scheme up till March 31, 2018 only.

Despite all of these limitations, MCA has notified this Scheme with a sole intent to provide an opportunity to non-compliant, defaulting companies to rectify their default by completing their pending annual filings up to 30.06.2017 in a limited window period from January 1, 2018 to March 31, 2018.

FAQ’s of the CODS Scheme 2018:

1. What is the purpose of this scheme?

The purpose of this Scheme is to give an opportunity to the non-compliant, defaulting companies to rectify their defaults pertaining to non-filing of overdue documents.

2. What is the Eligibility to avail the benefits of CODS?

The following are eligible to avail benefits of this Scheme:

• Defaulting companies which are still active for filing but cannot file their financial statements due to disqualification of directors whose DINs are blocked
• Companies which had made or will make application u/s 252 during the validity of this Scheme (subject to NCLT’s order for revival of such companies)

3. Who are Non-eligible to avail the Scheme?

Companies which have been struck off by ROCs by the ROCs shall not be eligible to file documents under this Scheme. Such companies can however, make application to NCLT for revival and upon successful order for revival avail benefits of this Scheme during the period of its validity only.

4. What is the time limit of the Scheme?

The Scheme shall be applicable from January 1, 2018 to March 31, 2018.

5. What is the Position of disqualified DINs after the expiry of Scheme?

The DINs of the disqualified directors shall be temporarily enabled during the period of the Scheme to allow filing of overdue documents. based on verification and scrutiny of documents including e-Form CODS filed with the ROCs under the Scheme, The disqualification of directors shall be extinguished/condoned.

6. What is the Remedy available for disqualified directors who have not filed application before NCLT for revival?

Such disqualified directors shall not be eligible to avail benefits under this Scheme as the Scheme clearly lays down that only companies whose application of revival has been filed before NCLT can avail benefits of this Scheme, subject to favourable order from NCLT for revival. Hence, in order to avail benefit under this Scheme, first application has to be made to NCLT u/s 252 and favourable order for revival is also to be obtained during the validity of the Scheme and thereafter overdue documents to be filed within the prescribed time limit under the Scheme.

7. If NCLT rejects application for revival of company, then how can disqualified directors of such companies avail benefits of this Scheme?

In our view, in such situation, such companies and disqualified directors associated with such companies shall not be eligible to avail benefits of this Scheme. They shall have to move to High Court by making Writ Petitions.

8. Can disqualified directors associated with active companies (non-defaulting) file their overdue documents during the period of Scheme as their DIN will be activated?

In our view, DIN shall be activated for filing only overdue documents of only defaulting companies and therefore, active companies (non-defaulting) shall not be allowed to file any documents (including overdue documents) with DIN of the disqualified directors during the period of this Scheme. Such companies shall continue to appoint new directors through back-end process notified by concerned ROCs.

9. What is the procedure to avail benefits of this Scheme?

The defaulting companies shall file their overdue documents . Thereafter, they shall file e-form CODS for condonation of delay for removal of disqualification of Directors. The ROC may seek some additional Documents forms for further clarification

10. What is the Filing  fees for Condonation  under this scheme?

The filing fee for availing benefits under this Scheme is Rs.30,000/- which is the fee required to be paid at the time of filing the e-Form CODS 2018. However, before filing e-Form CODS 2018, the defaulting companies shall be required to upload all their overdue documents with additional fee for the delayed period for each one of them, as may be levied as per section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014.

11. Whether the defaulting Company has to pay additional fees for delay in filing the overdue documents?

Yes, additional fee as may be applicable as per section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014 shall be required to be paid for each form which is pending to be filed upto 30.06.2017.

12. Does the Scheme removes disqualification of directors? If so, how can disqualified directors apply for re-activation of their DIN?

The motive of the Scheme is to provide opportunity to the defaulting companies to complete their filings and subsequently removal of the disqualification imposed upon directors. Although there is lack of clarity as to the procedure  for removal of director disqualification from therefore after filing eForm CODS 2018 one has to wait for Ministry’s response w.r.t. disqualification removal.

13. What are the disclosures required in CODS-2018?

SRN of each document filed during the period of this Scheme needs to be mentioned, besides this there are mainly 3 disclosures required under the CODS-2018. They are:

• Whether any appeal(s) was filed against any notice issued or complaint filed before the competent court for violation of the   provisions under the Act in respect of the above mentioned document(s). lf yes, attach proof of withdrawal of such appeal.
• Whether any prosecution(s) is pending in court against the company and its officers in respect of belated documents filed under the scheme. If yes, provide details thereof as an attachment.
• Whether any director(s) of the company is declared as proclaimed offender or facing criminal case(s) for economic offences. If yes, provide details of such director(s) as an attachment.

14. Is this scheme an immunity from prosecution for defaulting companies?

Yes this Scheme is providing an immunity vide Para 6 against matters related to filing of the overdue documents only. The other acts of default under any other provisions shall equally be liable to action as provided under the provisions of law.

15. Can company file all its overdue documents under this scheme?

A defaulting company can file only its overdue financial statements & Annual Return  documents which were due to filed upto 30.06.2017 under this Scheme. Any other overdue document which was due for filing from 01.07.2017 shall not be allowed to be filed under this Scheme.

16. As per the provisions of section 167(2) every director will attract penalty as per the provision of the Act who is aware of his disqualification and still functions as director. However as per CODS-2018 the DIN of disqualified directors are reactivated for filing of document. Will this attract the penalties of section 167(2)?

The main motive behind the Scheme is to make the default good and not to incur further liability so the disqualified directors shall not attract penalty under the provisions of Section 167(2) The DIN will be re-activated for filing the overdue documents under the Scheme.

17. What will be the status of pending proceedings/prosecution post registering into the scheme?

The pending prosecution proceedings w.r.t. the overdue documents shall be withdrawn by the ROCs. The applicants availing the benefits of the Scheme shall also withdraw their application from all forums w.r.t. the overdue documents and other non- compliances under the Act. Proof of withdrawal of such applications must be attached in e- Form CODS 2018

The post Condonation Of Delay Scheme, 2018 For Removal Of Directors Disqualification appeared first on MUDS.

(1) Related Parties

(2) Who are Relatives

1. Member of HUF
2. Father/Step-father
3. Mother/Step-Mother
4. Son/Step-son
5. Son’s Wife
6. Sister/Step-sister
7. Daughter
8. Daughter Husband

(3) Required of Related Party Disclosure/Approval Section 188(1) of the Companies Act, 2013

Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may be prescribed, no company shall enter into any contract or arrangement
with a related party with respect to —

1. sale, purchase or supply of any goods or materials;
2. selling or otherwise disposing of, or buying, property of any kind;
3. leasing of property of any kind
4. availing or rendering of any services;
5. appointment of any agent for above purpose
6. such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and
7. underwriting the subscription of any securities or derivatives thereof, of the company:

Provided that nothing in this sub-section shall apply to any transactions entered into by the company in its ordinary course of business other than transactions which are not on an arm’s length basis

Explanation

Such transactions may be prejudicial to the interest of Company or its stakeholders and hence require scrutiny. Even a related party relationship could have an effect on the financial position and operating results of a Company

1. office or place of profit” means any office or place—
   1. if the director is holding it then he receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
   2. where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the holder receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
2. the expression “arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest. Provided that no contract or arrangement, in the case of a company having a paid-up share capital of not less than such amount, or transactions not exceeding such sums, as may be prescribed, shall be entered into except with the prior approval of the company by a resolution:[Expl. 2 of Rule 15 of Companies (Meetings of Board and its Powers) Rules, 2014 – In case of wholly owned subsidiary, the resolution passed by the holding company shall be sufficient for the purpose of entering into the transactions between WOS and holding company.]Provided further that no member of the company shall vote on such resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party: [Exempt for Pvt. Ltd. Cos. – MCA Notification dated June 5, 2015]

(4) Register of Contract:

Register(s) to be maintained in form MBP-4

To be placed before the next meeting of the Board and signed by all the directors present at that meeting. To be kept at the regd. office and shall be open for inspection during business hours and extracts may be taken therefrom, and copies thereof may be furnished to any member. The register to be produced at the commencement of every AGM and shall remain open and accessible during the continuance of the meeting.

No entry required to be made in Form MBP-4:

(a) for the sale, purchase or supply of any goods, materials or services if the value of such goods and materials or the cost of such services does not exceed five lakh rupees in the aggregate in any year; or
(b) by a banking company for the collection of bills in the ordinary course of its business.

(5) Internal Control of Related Party transactions:

1. Duties of Independent Director: pay sufficient attention and ensure that adequate deliberations are held before approving related party transactions and assure themselves that the same are in the interest of the company
2. 177(4) Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall, inter alia, include approval or any subsequent modification of transactions of the company with related parties
3. Certification in form MGT-8 by a practicing Company Secretary
4. PCS to certify that with respect to the contracts / arrangements with related parties as specified in section 188 of the Act during the financial year, the Company has complied with provisions of the Act & Rules made there under.

(6) Related Party and Secretarial Standards

Secretarial Standard-1 (SS-1): Related Party transactions to be carried out in physical meetings of the Board only and NOT by circulation.

Secretarial Standard-2 (SS-2):A Member who is not entitled to vote on any particular item of business being a related party, if present, shall be counted for the purpose of Quorum.

(7) Proposed Change in Related Party Transaction

1. If 90% or more members, in number, are relatives of promoters or are related parties, they can vote on resolutions concerning related party transactions in General Meetings.
2. in sub-section (3), for the words “shall be voidable at the option of the Board”, the words “shall be voidable at the option of the Board or, as the case may be, of the shareholders” shall be substituted

(8) Related Party Transaction: Prior Approval

Rule 15(2) Where any director is interested in any contract or arrangement with a related party, such director shall not be present at the meeting during discussions on the subject matter of the resolution relating to such contract or arrangement.

A contract or arrangement entered into by a director or any other employee, without obtaining the consent of the Board or approval by a resolution in the general meeting under sub-section (1) may be ratified by the Board or, as the case may be, by the shareholders at a meeting within three months from the date on which such contract or arrangement was entered into.

Prior Approval by way of resolution is required.

*If consent is not obtained or such contract or arrangement is not ratified within 3 months, such contract or arrangement shall be voidable at the option of the Board and if the contract or arrangement is with a related party to any director, or is authorized by any other director, the directors concerned shall indemnify the company against any loss incurred by it.

*Without prejudice to anything contained in sub-section (3), it shall be open to the company to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions of this section for recovery of any loss sustained by it as a result of such contract or arrangement. [Section 188(4)]

(9) Penalties

On a director or any other employee of a company, who had entered into or authorized the contract or arrangement in violation of section 188 —

1. in case of listed company – imprisonment upto one year or fine of 25,000/- to 5,00,000/- or with both; and
2. in case of any other company – fine of 25,000/- to 5,00,000/-
   A person convicted for offence under section 188 stands disqualified from holding office of Director for a period of 5 years [Section 164(1)(g)

It was rightly said by Ralph Waldo Emerson– “Every Wall is a Door”
Thus, take a step forward to open the door for the new FDI norms.

Shweta Gupta from MUDS is recognized amongst the most-respected, knowledgeable and yes, pocket-friendly as well.

Why not give them a call right now at +91 9599653306 and start a conversation immediately.

The post Related Party Transactions appeared first on MUDS.

AMENDMENTS

It was rightly said by Ralph Waldo Emerson– “Every Wall is a Door”
Thus, take a step forward to open the door for the new FDI norms.

Shweta Gupta from MUDS MANAGEMENT is recognized amongst the most-respected, knowledgeable and yes, pocket-friendly as well.

Why not give them a call right now at +919599653306 and start a conversation immediately.

The post Major Amendment in Secretarial Standard 2 appeared first on MUDS.

AMENDMENTS

It was rightly said by Ralph Waldo Emerson– “Every Wall is a Door”
Thus, take a step forward to open the door for the new FDI norms.

Shweta Gupta from MUDS MANAGEMENT is recognized among the most-respected, knowledgeable and yes, pocket-friendly as well.

Why not give them a call right now at +91 9599653306 and start a conversation immediately.

The post Major Amendment in Secretarial Standard 1 appeared first on MUDS.

Let’s start with what does strike off literally mean:

In layman’s language, strike off means “sudden attack”. But for us, it means temporary removal of the name of the company from ROC i.e. the company obtains the status of being dormant.

“But here is where the difference between “striking off” and “winding off” lies, while “striking off” means temporary closure allowing a company to restore itself in future, “winding off” means permanent closure of a company.”

        –Divya Gupta (Market Analyst, MUDS Management Pvt Ltd)

Earlier section 560 of Companies Act 1956 used to deal with such issues but from June 2017, Section 248 of Companies Act 2013  deals with striking off defunct companies off the register (an alternative to the winding up of the company). However, the remedy is available in form of section 252 of the Companies Act 2013, which provides such aggrieved companies a chance to restore themselves.

Now, let us try to understand which all companies could be strike off company:

1. The one those have failed to commence its business within a year of its incorporation.
2. Those who have not been carrying any business or operation immediately for a period of two financial years. (Note: The company has not even filed an application for obtaining a status of the dormant company)

Role of ROC:

Registrar of Companies or ROC is the one who has all the authority to strike off not only defunct companies but also even those companies which have failed to do all their statutory filings. The Registrar not only issued served notice mandated by law to all such companies but also subsequently struck off.

Who all can Apply for Revival:

Before jumping to the process of revival, let us look who all can make an appeal in NCLT to restore the company as per provisions of sections 252(3). It could be :

• Company
• Any member/ Creditor
• Workmen

Procedure of Revival of a Struck-Off Company:

• Filing of application: As per NCLT rules under section 252(1) and 252(3), an application shall be filed before the Tribunal along with other necessary information.
• Following attachments would be required along with submission of application:
  • Copy of MOA and AOA of the Company
  • List of Directors of the Company
  • CTC of the order of Registrar for strike off
  • Available signed Balance Sheets of the Company
  • CTC of Board Resolution passed by the company for making a petition to NCLT to make appeal against the order of Registrar
  • Affidavit verifying petition
  • Copy of bank draft evidencing payment of application fee
  • Memorandum of appearance

• Service of Application: A copy of application shall be forwarded to the Registrar by the company.
• Passing of Order:  Once the hearing of the application in which both the parties will present their points, the Tribunal may pass on order, as deems fit.
• Filing with ROC: After satisfaction of the Tribunal, the applicant will have to deliver a certified copy to the  ROC within 30 days of the date of order in INC 28 along with pending financial statements and annual returns.
• Order in Gazette: Once the copy is received, ROC will publish the order in Official Gazette in company’s official name and seal.

As all ROC’s has issued show cause notices to the Companies fallen u/s 248(1) (c).  In notice ROC mentioned that it can strike off Company if appropriate reply not filed within 30 days and ROC will take appropriate action against the Directors.

After that at the end of the June, 2017 ROC has struck off the 100,000 (One Lakh) Companies from its record.

Conclusion:

As ministry has taken action against over 100,000 companies due to non- compliance and non- filing of the statutory form with ROC.  It could be seen as a part of the government’s initiative :

• To clean up Corporate Structure
• To curb Tax Evasion
• To prevent money laundering
• To strengthen the norms of Corporate Governance.

“It could be seen as a farsighted move where the government could distinguish between companies that are black and those that are in grey”.

– Shweta Gupta, Founder, and CEO, MUDS

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