Revival of Companies through National Company Law Tribunal

In this article, we will discuss about that how a company can be revived through an application to NCLT. The revival situation arises when name is struck off from Registrar of Companies or where a company has been declared sick. It is a well-known fact that Companies Act, 1956 was replaced by Companies Act, 2013. Both the acts gave power to the Registrar of Companies to strike-off the name of companies and also both the acts have provisions for revival of the companies. These provisions are changed however, or we may say they have evolved according to the current business scene. Let us get started

Table of Contents

When can a company’s name be struck-off?

As per Section 248 of Companies Act, 2013 the name of a company can be struck-off by the Registrar of Companies in following cases:-

  • If a company has failed to commence its business within one year of its incorporation.
  • If a company is not carrying on any business or operation from previous 2 financial years and has not applied for the status of a dormant company.
  • If the company is not carrying on any business or operations, as revealed after the physical verification of its registered office
  • The subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration has not been filed in this regard within 180 days.

A company can also give an application on its own on the basis of any or all of above  grounds provided-

  • Company has extinguished all its liabilities
    AND
  • Has obtained consent of shareholders holding 75% of paid-up capital of shares or have passed a special resolution to this effect.

ROC will issue notice in both the cases, and same will be issued through official gazette also for general public.

If ROC is satisfied and deems fit the name of the company will be struck off after ensuring that necessary arrangements have been made to settle the outstanding liabilities etc. of the company.

Effect of struck-off of Company

As discussed above, where a company’s name is struck-off from the Registrar of Companies then

  • The company will cease to operate as a company
  • The certificate of incorporation will be deemed to be cancelled from the date of such order.
  • However, nothing will affect the company’s liability to discharge the liabilities and obligations.

To prevent the name of companies from being struck-off from Registrar of Companies for being non-operational government had launched Companies Fresh Start Scheme, 2020 under which along with other relaxations companies were given an option to get the status of dormant company for their companies and continue to be on Registrar of Companies.

What if the company is declared sick?

  • As per Section-253 of the Companies Act, 2013 if any company has failed to repay the outstanding amount of debt of at least 50% of secured creditors, within 30 days of demand note served on the company than such creditors can apply to NCLT for declaring the company as sick.
  • The company shall be given a chance to provide an explanation.
  • The tribunal in this case will also assess that what is the reasonable time in which the company can repay its debts given its current financial condition.
  • After considering all the facts, if tribunal deems fit than the company will be declared sick by an order of tribunal.
  • Such order will initially be applicable for 120 days.

Who can apply for revival through NCLT?

1. In case of Struck-Off

In case a company’s name is struck-off from the registrar of companies, following people can apply for revival through NCLT within a period of 3 years.

  • Representatives of the company who are aggrieved from the order.
  • Registrar itself can also apply where it is satisfied that struck-off order was given inadvertently or on the basis of wrong information.

Following people can apply for revival through NCLT within a period of 20 years.

  • Company or its member
  • Creditors or workman

In this case if tribunal is satisfied about the company’s business and operations then tribunal can restore the name of the company.

2. In case of declaration as Sick Company

In case a company is declared as sick than following people can apply for revival of the company through NCLT within a period of 60 days

  • Any secured creditor of the company
  • Company itself

Any application for revival cannot be given or will not be considered in case ¾Thsecured creditors of the company have proceeded to recover their debts under the provisions of SARFAESI Act, 2002.

Also in case the assets of the company have been taken over by any securitisation company or reconstruction company then such application cannot be made without approval of such company.

What are the points considered for revival?

There is nothing specific specified in law on to this regard, except for the fact that tribunal is satisfied for revival. In practical scenario normally these things are considered.

  • Company is still carrying on the business.
  • Company is still complying all compliances under other laws like income tax, GST and other statutory dues.
  • If company is still getting its licenses renewed.
  • If the bank accounts are still operational and active.

Procedure to be followed at NCLT

1. In case of Struck-off

The following procedure should be followed at NCLT while applying for revival:-

  • The petition should be filed with NCLT under form NCLT-9.
  • A date of hearing will be provided and intimation of such date and copy of petition should be given to NCLT.
  • The necessary documents like copy of petition, receipt of the fees paid and other documents required to support the case.
  • Hearing will be held on the date scheduled and both the parties i.e. company and ROC will be heard.
  • On the basis of hearing the tribunal will give its decision.
  • In case the order of restoration is given, the copy of such order should be provided to ROC within 30 days.
  • Thereafter, ROC will publish such order in official gazette.

2. In case of declaration as Sick Company

  • In case of a sick company the act specifies that the application for revival and rehabilitation should be accompanied by following documents-
  • Audited Financial Statements of the preceding financial year
  • Documents and particulars required to substantiate the case
  • Receipt of the prescribed fees
  • A draft scheme of revival and rehabilitation.
  • After receipt of the application, the tribunal can appoint an interim administrator for discussion with creditors of the company and form a committee. The interim administrator shall follow instructions of tribunal so as to preserve the assets of the company and manage them properly.
  • The date of hearing will be held within 90 days of receipt of such application.
  • The interim administrator should submit his report to the tribunal.
  • On the date of hearing the tribunal will refer the report filed by interim administrator and if it deems fit the order of revival and rehabilitation for the sick company.
  • A company administrator will be appointed who will be responsible for review of all assets and liabilities, formation of a revival plan and proper execution of such plan.

Conclusion

Revival of Companies through NCLT is an option given to the companies both in cases where the name of the company is struck-off or where the company has been declared sick. The procedures to be followed are laid in the act and might take time as the dates from tribunal and other paper work is time consuming. The best method that has been made available under Companies Act, 2013 is filling the form and paying necessary fees and declaring the company as a dormant company. Revival of Companies through NCLT is given as a remedy to company and its stakeholders by the law which gives a second life to the company and a chance for its stakeholders to get their dues back.

CategoryCompany Law

CS Madhavi Singh Rajawat is a commerce graduate from IIS University, Jaipur and an associate member of Institute of Company Secretaries of India. She is also an LLB aspirant. Her interest lies in the field of corporate and securities laws, general corporate advisory matters and FEMA matters and compliances, litigation services, and also in NCLT related services. She has proficiency in the drafting of documents

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