Regulatory updates

Rule 4 of the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (the Rules) lays down the procedure to be followed by a company for making an application to remove its name from the register of companies.

On 17 April 2023, the Ministry of Corporate Affairs (MCA) had issued certain amendments to Rule 4 of the Rules. The amendments revised sub-rule (1) and inserted a new sub-rule (3A). These amendments have recognised the Centre for Processing Accelerated Corporate Exit (C-PACE¹The C-PACE has been set up to centralise the process of striking off of companies, promote ease of doing business and the ease of exit for companies) as the authority for removing the name of a company from the register of companies and have made it mandatory for companies to make an application to C-PACE for removal of a company’s name under Section 248(2)²Section 248: Power of registrar to remove name of company from register of companies of the Companies Act, 2013 (the Act).

Subsequently, on 10 May 2023, MCA issued the Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023, making further amendments to Rule 4(1). The amendments specify following requirements for a company while filling an application to remove its name from the register of companies:

• The company should not file an application unless the company has filed its overdue financial statements under Section 137³Section 137: Copy of financial statement to be filed with registrar of the Act and overdue annual returns under Section 92⁴Section 92: Annual return of the Act up to the end of the financial year in which the company ceased to carry out its business operations
• In case the company intends to file an application after the Registrar of Companies (RoC) has initiated steps to remove its name, then it can only file the application after filing all pending financial statements under Section 137 of the Act and all pending annual returns under Section 92 of the Act
• Once the Registrar of Companies (Registrar) has issued a notice for publication⁵ As per Section 248(5) of the Act, at the expiry of the time mentioned in the notice (sent by the registrar, mentioning his intention to remove the name of the company from the register of companies), the registrar may, unless cause to the contrary is shown by the company, strike off the name of the company from the register of companies. The registrar will also publish a notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved. pursuant to action initiated under Section 248(1) of the Act, then in such a case the company would not be allowed to file the application under this sub-rule.

Effective Date: The amendments have come into force from the date of their publication in the Official Gazette, i.e., 10 May 2023.

To access the text of the amendments, please click here

Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with the approval procedure of merger and amalgamation of certain companies. On 15 May 2023, MCA issued the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 (the amendment), thereby introducing certain amendments to Rule 25.

The amendment aims to streamline the approval process for mergers and ensure clarity with respect to deemed approvals in certain cases as given below. This is also depicted by way of a flow chart below.

(Source: Foundation for Audit Quality’s analysis, 2023)

• No objection received (Rule 25(5)): The amendment provides that if no objection/suggestion is received from the Registrar of Companies (registrar)/official liquidator, within a period of 30 days by the Central Government (CG), and if the CG is of the opinion that the scheme is in the interest of public or creditors, then CG can issue a confirmation order of such a scheme of merger or amalgamation in Form No. CAA.12 within a period of 15 days after the expiry of the said 30 days. However, if the CG does not issue a confirmation order within 60 days, it will be deemed that there is no objection, and a confirmation order will be issued by the CG
• Objections received from the registrar (Rule 25(6)): The amendment states that if objections or suggestions are received from the registrar/official liquidator, within the prescribed period of 30 days, then the CG must undertake the following action:

• Issue a confirmation order within 30 days, if the CG is of the opinion that the objections/suggestions are unsustainable, and the scheme is in the interest of public or creditors
• If CG is of the opinion that the scheme is against the interest of public or creditors, then it can file an application before the Tribunal within 60 days, stating the objections/opinion, requesting the Tribunal to consider the scheme under Section 232⁶Section 232: Merger and amalgamation of companies of the Act. Further, if the CG does not issue a confirmation order or file an application within a period of 60 days of the receipt of the scheme under Section 233⁷Section 233: Merger or amalgamation of certain companies of the Act, then it would be deemed that it has no objection to the scheme and a confirmation order should be issued accordingly.

Effective Date: The amendments would come into force w.e.f. 15 June 2023.

To access the text of the amendment, please click here