The Registrar of Companies (ROC) has initiated the process of issuing the notice in Form STK-1 u/s 248 of Companies Act, 2013 to companies which are not carrying any business or operation for a period of immediately preceding two financial years, but has filed their financial statements and returns under Companies Act, 2013 and has also not made any application within such period for obtaining status of dormant company under section 455.
According to ROC Notice, it has reasonable cause to believe the above scenario and it intends to remove the name of the company from the register of companies.
The companies on which the notice has been served along with all the directors of the companies have the opportunity to give their representation within 30 days of the date of notice along with the copies of relevant documents to cease the above said proceeding by ROC.
The representation to this notice can be prepared as per the actual situation and future plans of the company. The most likely situations as per our understanding have been described below:
- If the interpretation made by ROC regarding the status of business or operations of the company is correct?
- If the company is in the process of initiating its business in the coming financial years?
- If the company wants to cease the business or operations?
In situation 1, if ROC has made incorrect interpretation regarding the company’s status of the business and the company is carrying on its business, it shall submit the documentary proof providing the detailed financial statements depicting business activities of the company.
In situation 2, there can be 2 scenarios:
a. The Company is planning to initiate its business in near future-
In such case, the company shall submit the representation detailing the company’s future plan & prospectus regarding the operations of the company and ROC may, on its discretion and subject to certain conditions, allow the company to remain active.
b. The company is inactive and will commence its business in upcoming financial years.
In such cases, the company can submit the application to Registrar in Form MSC-1 to obtain the status of the dormant company under section 455 of Companies Act, 2013 read with Rule 3 of Companies (Miscellaneous) Rules, 2014.
For understanding the concept of dormant company and process to obtain the status of dormant company, please refer below link:
However, the Registrar is empowered to take suo moto action in case he is satisfied that the dormant company has been functioning directly or indirectly. In such a case, he can initiate proceedings for enquiry under Section 206 of the Companies Act, 2013 and provide the company with a reasonable opportunity of being heard. If after such hearing, he finds that the company has been functioning, he has the power to remove the name of the company from the register of dormant companies and treat it as an active one.
In situation 3, the company can apply for strike-off suo-moto by filing Form STK-2 as per the section 248 of Companies Act, 2013.
Hence, the reply to the ROC notice is based upon the status of operations of the company.
If no representation made, the ROC itself will either remove the name of the company from the register of companies, or can enter the name of the company in the register of dormant companies and the directors shall be liable for appropriate action under the Act.
Hope this article will help!!
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