Companies Act 2013 Section 248

Companies Act Section 248 empowers the Registrar of Companies (ROC) to remove a company’s name from the register under specific conditions. This section plays a vital role in ensuring that the corporate register remains accurate and free from inactive or defunct companies.

Understanding Section 248 is crucial for directors, shareholders, and professionals involved in company management and compliance. It helps in managing dormant companies and streamlining corporate governance by legally dissolving companies that no longer operate.

Companies Act Section 248 – Exact Provision

This section authorizes the ROC to strike off companies that are inactive or have failed to start business within a stipulated time. It helps maintain the integrity of the corporate registry by removing companies that are no longer functional or have become dormant without formal status.

• ROC can remove names of non-commencing companies after one year.

• Companies inactive for two consecutive financial years are liable for removal.

• Companies must apply for dormant status to avoid removal.

• Ensures corporate register accuracy and reduces clutter.

Explanation of Companies Act Section 248

This section sets out conditions under which the ROC can remove a company's name from the register.

• Applies to companies incorporated under the Act.

• Targets companies not commencing business within one year.

• Includes companies inactive for two consecutive financial years.

• Companies can avoid removal by applying for dormant status under Section 455.

• Removal is an administrative action by the ROC.

Purpose and Rationale of Companies Act Section 248

The section aims to strengthen corporate governance by removing inactive companies from the register, protecting stakeholders and ensuring transparency.

• Maintains an updated and accurate corporate register.

• Protects shareholders and creditors from dormant companies.

• Prevents misuse of corporate identity.

• Enhances transparency and accountability in company records.

When Companies Act Section 248 Applies

The section applies when companies fail to commence business or remain inactive for specified periods.

• Companies not starting business within one year of incorporation.

• Companies inactive for two consecutive financial years.

• Companies that do not apply for dormant status under Section 455.

• Applies to all companies registered under the Act.

• Triggered by ROC’s administrative review or complaints.

Legal Effect of Companies Act Section 248

Section 248 creates a legal mechanism for the ROC to remove companies from the register, effectively dissolving them. This action restricts the company from operating or entering contracts post-removal. Non-compliance with filing or business commencement timelines triggers this provision. The ROC’s decision is subject to prescribed procedures and notices. It interacts with MCA rules regarding name removal and public notices.

• Creates duty for companies to commence business timely.

• ROC’s removal leads to company dissolution.

• Non-compliance results in loss of corporate status.

Nature of Compliance or Obligation under Companies Act Section 248

Compliance involves either commencing business within one year or applying for dormant status if inactive. It is a conditional, ongoing obligation to maintain company status. Directors and officers are responsible for timely compliance to avoid removal. Internal governance must monitor business activity and filings to prevent unintended dissolution.

• Mandatory compliance to avoid name removal.

• Ongoing monitoring of business activity required.

• Responsibility lies with directors and company officers.

• One-time application possible for dormant status.

Stage of Corporate Action Where Section Applies

This section applies primarily after incorporation and during the company’s operational phase when business activity is assessed.

• Post-incorporation monitoring stage.

• During annual filings and financial year closure.

• Before company becomes dormant or inactive.

• Prior to ROC initiating name removal proceedings.

Penalties and Consequences under Companies Act Section 248

Removal of the company’s name results in legal dissolution. The company ceases to exist as a legal entity. Directors may face restrictions on future company management. Additional penalties may apply if non-compliance involves concealment or fraud. The company cannot carry on business or hold assets post-removal.

• Company legally dissolved upon name removal.

• Directors may face disqualification risks.

• Possible monetary penalties for related violations.

• Company loses all rights and liabilities.

Example of Companies Act Section 248 in Practical Use

Company X was incorporated but did not start any business within one year. The ROC issued a notice under Section 248 to remove its name. Company X failed to respond or apply for dormant status. Consequently, the ROC removed its name, dissolving Company X legally. This prevented misuse of the corporate identity and cleared the register.

• Companies must respond promptly to ROC notices.

• Applying for dormant status can prevent removal.

Historical Background of Companies Act Section 248

Section 248 replaces provisions from the Companies Act, 1956 regarding removal of company names. It was introduced in the 2013 Act to streamline the process and incorporate modern compliance requirements. Amendments have enhanced procedural safeguards and clarity on dormant companies.

• Replaces earlier provisions under Companies Act, 1956.

• Introduced to improve corporate register accuracy.

• Amended to include dormant company provisions.

Modern Relevance of Companies Act Section 248

In 2026, Section 248 is crucial for digital compliance and maintaining clean corporate records. The MCA portal facilitates online notices and filings related to name removal. It supports governance reforms by ensuring only active companies remain registered. The provision aligns with ESG and CSR trends by promoting responsible corporate conduct.

• Supports digital filings and MCA e-governance.

• Enhances corporate governance and transparency.

• Prevents misuse of inactive companies.

Related Sections

• Companies Act Section 2 – Definitions relevant to corporate entities.

• Companies Act Section 455 – Dormant companies.

• Companies Act Section 252 – Power of Registrar to restore name.

• Companies Act Section 3 – Incorporation of company.

• Companies Act Section 434 – Compounding of offences.

• SEBI Act Section 11 – Regulatory oversight for listed companies.

Case References under Companies Act Section 248

No landmark case directly interprets this section as of 2026.

Key Facts Summary for Companies Act Section 248

• Section: 248

• Title: Power of Registrar to remove name of company from register

• Category: Compliance, Corporate Governance

• Applies To: All companies incorporated under the Act

• Compliance Nature: Mandatory business commencement or dormant status application

• Penalties: Company dissolution, director disqualification risks

• Related Filings: Application for dormant status, ROC notices

Conclusion on Companies Act Section 248

Section 248 is a vital provision ensuring that the register of companies remains accurate and free from inactive or non-operational entities. It empowers the Registrar to remove names of companies that fail to commence business or remain inactive, thereby protecting stakeholders and maintaining transparency.

Directors and company officers must understand their obligations under this section to avoid unintended dissolution. The provision supports good corporate governance and aligns with modern compliance practices, making it essential knowledge for all corporate professionals.

FAQs on Companies Act Section 248

What triggers the Registrar to remove a company's name under Section 248?

The Registrar can remove a company's name if it has not started business within one year of incorporation or has been inactive for two consecutive financial years without applying for dormant status.

Can a company avoid removal if it is inactive?

Yes, a company can apply for dormant status under Section 455 to avoid removal if it is not carrying on business but intends to remain registered.

What happens once a company's name is removed under Section 248?

The company is legally dissolved, ceases to exist, and cannot carry on business or hold assets. Directors may also face restrictions on managing companies.

Is the removal process under Section 248 automatic?

No, the Registrar must follow prescribed procedures including issuing notices and allowing the company to respond before removal.

Can a company restore its name after removal under Section 248?

Yes, the company or any interested party can apply for restoration of the name under Section 252 within a specified period following removal.