The expression defunct company for the purposes of Section 560, means a company which is not

operating or functioning; not carrying on any business or in operation. enera!!y it is e"ident from
the !atest a"ai!ab!e ba!ance sheet of a company. #gain, if a company is not fi!ing its ba!ance sheet
for many years then a!so the concerned $egistrar of %ompanies &$'%( has reasonab!e cause to
be!ie"e that the company is not in operation.
# company after recei"ing %ertificate of )ncorporation from the $egistrar is re*uired to commence
its business + other operations. ,ut if a company after obtaining %ertificate of )ncorporation &%')(
does not start its operations within -year then such %ompany becomes .efunct %ompany and the
$egistrar after in*uiring is re*uired to stri/e off the name of the %ompany from the $egisters of
%ompanies.
# company in winding up stage is not a defunct company.
ST$)0)1 '22 1#34S '2 %'35#1)4S
The $'% is authori6ed to stri/e off the name of %ompany from the registers on!y if 7
a( The company is wound up and no !i*uidators are acting.
b( The affairs of the company ha"e been comp!ete!y wound up.
c( 1o returns ha"e been fi!ed for 6 consecuti"e months.
'nce registered, the name of the company can not be remo"ed from the $egister un!ess it is
disso!"ed by the process of !aw, either as a resu!t of its winding up or upon its ama!gamation with
another company. 8owe"er, in case the company is a defunct company, the %ompanies #ct pro"ides
a short9cut to the winding up process, name!y stri/ing the name of the %ompany off the $egister of
%ompanies by the $'% under Section 560. Thus it is an a!ternati"e mode of disso!ution to the
winding9up of a company pro"ided the company does not ha"e ade*uate rea!i6ab!e assets or has
such assets as wou!d not be sufficient to meet the costs of !i*uidation.
3inistry of %orporate #ffairs &3%#( has issued the 4asy 4xit Scheme, :0-0 under which
inoperati"e companies &defunct companies to use the technica! expression( are gi"en an
opportunity to get their names struc/ off the register under Section 560 of the %ompanies #ct, -;56
The remar/ab!e distinction between the disso!ution pursuant to section 560 and others is that the
former is a resu!t of an adminstrati"e act of the $egistrar whereas any of the others succeeds the
comp!ete winding up of the company<s affairs and can be caused at the instance of or with the
/now!edge of the =i*uidator.
Section 560 &-(, &:(and &>( are go"erning the process of disso!"ing a company by the $egistrar of
%ompanies. ?here he has a reason to be!ie"e that a company is not carrying on business or is non9
operati"e, he has been bestowed with the powers to remo"e the name of the company from his
register. #fter two se*uentia! notices to the company by ordinary post and registered post
respecti"e!y and a notice in the 'fficia! a6ette at the prescribed inter"a!, un!ess sufficient contrary
cause is shown to him, the $egistrar sha!! erase its name off the register, and again pub!ish a notice
thereof in the 'fficia! a6ette; and on the pub!ication of this notice in 'fficia! a6ette, the
company stands disso!"ed, in a contingency, the =i*uidator being inacti"e in case of a winding up
of a company, the $egistrar can ta/eo"er the forma!ities and fo!!ow the route of pub!ishing notice in
the 'fficia! a6ette onwards.
5. 5'=)%@ #S $4#$.S ST$)0)1 '22 .42A1%T %'35#1@B
CThe po!icy which is fo!!owed with regard to weeding out the difunct companies is that where it
appears from the !atest a"ai!ab!e ba!ance sheet of a defunct company that it has ade*uate rea!i6ab!e
assets, steps are ta/en to ta/e the company into compu!sory !i*uidation. ,ut where the !atest
a"ai!ab!e ba!ance sheet shows that the company has no assets or has such assets as wou!d not be
sufficient to meet the cost of !i*uidation, steps are ta/en to stri/e their name off the register under
section 560.
4S%84#T or ,'1# D#%#1T)#
# fine !ine of distinction between the two terms is that is 4scheat, the State becomes the owner of
the property when a person dies without heir or successor as his u!timate heir, whereas in ,ona
Dacantia there is not e"en an owner of the property and the State mere!y ta/es possession of the
property of the property, which is an abandoned one.
The disso!ution under section 560 is a state of <suspended animation< ti!! twenty years pass from the
date of disso!ution.