Can strike off company sell property?
Can Strike-Off Company sell Property?
Property is one of the most valuable assets in India, and it is not uncommon for companies to own property and other assets. When a company is struck off or dissolved, it arises whether it can still sell its property or must first liquidate. In India, a strike-off company can sell its property, provided it is done per the law.
Reasons for Company Strike-Off
- Poor Financial Performance: Poor financial performance can lead to a company strike-off if it cannot pay its bills or meet other financial obligations.
- Fraud Allegations: If a company raises suspicion of fraud or other illegal activity, the government may take action and strike the company off the register.
- Non-Compliance with Regulations: Companies must comply with specific regulations or face strike-offs. This includes filing annual accounts or other required documents.
- Unsatisfied Creditors: If a company has unpaid creditors, they may petition to strike off the company.
- Inactivity: Companies that have been inactive for an extended period can be struck off.
- Lack of Shareholders: Companies that do not have enough shareholders may be struck off as they may not be able to meet the requirements of the Companies Act.
- Insolvency: If a company is insolvent and cannot pay its debts, it may be struck off. This will also be the case if a company has ceased trading and has no assets to liquidate.
- Failure to File Documents: Companies must file certain documents with the Companies House to remain on the register. Failure to do so will result in the company being struck off.
- Misuse of Funds: If a company is found to be misusing funds, it may be struck off. This includes using funds for personal gain or illegal activities.
- Mergers: Companies may be struck off if they merge with another company and no longer exist as a separate entity.
Sale of Strike-Off Company Property
Under the Companies Act 2013, a strike-off company can still sell its property. However, the sale must be approved by the Registrar of Companies (ROC). The ROC must be satisfied that the sale of the property is in the best interest of the creditors and the shareholders. The ROC may also request the creditors’ approval before sanctioning the sale.
Before the property sale is approved, the company must appoint an auditor or a chartered accountant to file an inspection report. The report should include the market value of the property and the terms and conditions of the sale. The company must also submit a copy of the sale agreement to the ROC.
Once the ROC approves the sale, the sale proceeds must be distributed among the creditors. This is done following the provisions of the Companies Act 2013. The creditors must be paid in the order of their priority. The remaining amount, if any, is distributed among the shareholders.
The law also states that the property sale must be reported to the Income Tax Department. The company must file an income tax return for the year the property was sold. The company must also pay any taxes due on the sale proceeds.
In conclusion, a strike-off company in India can sell its property provided it is done per the law. The ROC must approve the sale, and the proceeds of the sale must be distributed among the creditors. The company must also file an income tax return and pay any due taxes.
