Section 248: Select closure route — inactive company

A company that has stopped operating is not automatically dissolved. Under section 248(1) of the Companies Act, 2013, the Registrar may act on specified grounds after giving the company and its directors notice and an opportunity to make representations. A company-initiated application under section 248(2) has separate conditions, including that all liabilities be extinguished. This guide separates those two routes and the statutory dormant-company option in section 455. Companies Act, 2013, sections 248 and 455

Two distinct strike-off routes

Registrar-initiated action — section 248(1). The Registrar may have reasonable cause to believe that a company failed to commence business within one year of incorporation, or did not carry on business or operations for the two immediately preceding financial years and did not apply during that period for dormant-company status under section 455. The provision also lists other grounds. Before removing a name, the Registrar must send the company and each director a notice of the intention and allow 30 days from the notice for representations and supporting documents. Companies Act, 2013, section 248(1)

Company-filed application — section 248(2). A company may apply to the Registrar after extinguishing all its liabilities, with a special resolution or consent of members holding at least 75% of the paid-up share capital. The Registrar then causes public notice to be issued. This subsection does not apply to a company registered under section 8. These conditions describe the company’s application; they should not be treated as the grounds for Registrar-initiated action under subsection (1). Companies Act, 2013, section 248(2)–(3)

Check the statutory restrictions and effects

Section 249(1) bars a company’s application under section 248(2) if, at any time in the previous three months, it has done any of the following:

• changed its name or shifted its registered office from one State to another;
• made a disposal for value of property or rights held by it, immediately before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
• engaged in activity other than activity necessary or expedient to apply, decide whether to apply, conclude the company’s affairs, or comply with a statutory requirement;
• applied to the Tribunal for sanction of a compromise or arrangement that has not been finally concluded; or
• become subject to winding-up under Chapter XX of the Act or the Insolvency and Bankruptcy Code, 2016.

An application made in violation of section 249(1) is punishable with a fine that may extend to one lakh rupees; the company must withdraw it or the Registrar must reject it when the restriction is brought to notice. Companies Act, 2013, section 249(1)–(3)

On publication of the strike-off notice in the Official Gazette under section 248(5), the company stands dissolved. Section 248(6) requires the Registrar to be satisfied that sufficient provision has been made to realise amounts due to the company and pay or discharge its liabilities and obligations. The company’s assets remain available for those liabilities and obligations after removal; the liabilities of specified directors, managers, officers and members continue and may be enforced as if the company had not been dissolved. Companies Act, 2013, section 248(5)–(7)

Dissolution does not extinguish the purpose of realising amounts due to the company or paying or discharging its liabilities and obligations. Where an application under section 248(2) was made to evade liabilities, deceive creditors or defraud another person, section 251 makes the persons in charge jointly and severally liable for resulting loss or damage and makes them punishable for fraud under section 447. Companies Act, 2013, sections 250–251

Consider dormant-company status separately

Under section 455(1), a company formed and registered for a future project or to hold an asset or intellectual property, with no significant accounting transaction, may apply for dormant status. An inactive company may also apply. For this section, “inactive company” means a company that has not carried on business or operations, has not made a significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years. Section 455 lists exceptions to what counts as a significant accounting transaction. Companies Act, 2013, section 455(1) and Explanation

The Act says that prescribed requirements apply to retaining dormant status; this page does not set out those filing particulars. Check the operative rules and forms before relying on a filing procedure. Companies Act, 2013, section 455(5)–(6)

Practical review checklist

Before choosing or responding to a strike-off route, assemble the company’s current liability position, assets and amounts due to it, business and filing history, any proposed or completed transactions, and pending Tribunal or winding-up matters. These are review inputs, not an additional statutory form or a substitute for checking the statutory conditions above.

• Identify whether the matter concerns Registrar-initiated action under section 248(1) or a company application under section 248(2) [Companies Act, 2013, section 248(1)–(2)].
• For a company application, test the liability-extinguishment, member-approval and section 249 restrictions against the company’s records [Companies Act, 2013, sections 248(2) and 249].
• If the Registrar has issued a notice, calendar the 30-day period stated in section 248(1) and prepare any representations and supporting documents [Companies Act, 2013, section 248(1)].
• Consider section 455 separately where the company meets its statutory description; verify prescribed requirements in the applicable rules before filing [Companies Act, 2013, section 455].
• Keep the dissolution effects and continuing liability provisions in sections 248(6)–(7), 250 and 251 in view [Companies Act, 2013, sections 248, 250 and 251].

FAQ

Does stopping business automatically dissolve the company?

No. Section 248 describes Registrar-initiated removal on specified grounds and a separate company application route. Registrar-initiated removal includes a notice and an opportunity to make representations. Companies Act, 2013, section 248(1), (5)

Does the 75% member-approval condition apply to every strike-off?

No. Section 248(2) states that condition for an application made by the company. Section 248(1) addresses action initiated by the Registrar. Companies Act, 2013, section 248(1)–(2)

Does strike-off erase liabilities?

No. Section 248(6)–(7) preserves the availability of assets for liabilities and obligations and the continuing liability of specified persons; section 250 also preserves the purpose of paying or discharging liabilities and obligations. Companies Act, 2013, sections 248(6)–(7), 250

Can every inactive company apply for dormant status?

Section 455(1) allows an inactive company to apply and defines “inactive company” in its Explanation. The prescribed requirements and filing procedure must be checked separately in the applicable rules. Companies Act, 2013, section 455(1) and Explanation

Sources

• India Code, Companies Act, 2013, sections 248–251 and 455: https://indiacode.gov.in/handle/123456789/496128
• This article summarises the cited Act provisions; verify applicable rules and forms before filing.

What to send for a review

Send the Registrar’s notice, if any, the company’s liability and asset schedules, relevant member approval records, recent transaction history, and details of pending proceedings. The review can then distinguish which statutory route and conditions require attention.