Defunct

Introduction

A defunct company is a company who has no asset and no liability and failed to commence business within one year of incorporation. The most awaited fast track exit came into existence on 5th April 2017 for striking off the defunct companies.

The Ministry of Corporate Affairs (MCA) introduced strike-off mode to allow the defunct companies to get their names removed from the Register of Companies (ROC).

Understanding the Fast Track Exit

Fast track exit can be done on suo moto by the registrar by striking off the name of a company, if:

• The company has failed to commence any business in a year of its incorporation
• The company is not doing any business activity for the preceding two financial years
• The company has not sought the status of Dormant Company under the Companies Act

The Registrar of Companies (ROC) should send a notice to the company, and every director of the company stating the intention to remove the name seek the representation of the company in 30 days. The companies can also apply for the voluntary removal of name from the registrar.

Difference between Dormant & Defunct Companies

As per the Companies Act, 2013, the company names are entered in the register of dormant companies when the company is not carrying on business or operation during the last two financial years. On the other hand, the company is treated as a defunct company and shall be entitled to go on strike off if it satisfies the above-mentioned conditions.

It can be interpreted that ROC can issue a notice to change the status of the company from Active to Dormant, or it can even strike off of companies once the conditions mentioned above are triggered.