Meaning

The Scheme is introduced by Ministry of Corporate Affairs for giving opportunity to non-operating companies for getting their names struck off from the records of Ministry of Corporate Affairs. Fast Track Exit mode is an easy mode of closing non-operating companies at cheaper cost with lesser formalities.

Defunct Company means a Company registered under the Companies Act 2013 (hereinafter referred to as “the Act”), or under any previous company law which is not carrying over any business activity or operation since incorporation or is not carrying on any business or operation for a period of two immediately preceding financial year.

What is Companies act 2013?

What is business? An activity carried out with an intention to earn profit.

To conduct business various forms of business organization can be adopted. For instance if one wants to start a general store then sole proprietorship form of organization is most suitable. Similarly, the other forms of business organization are partnership firm, company, cooperative society and so on.

When the business has to be conducted on a large scale and the funds to be put in are huge then the company form of organization is most suitable. So there has to some concrete law which will regulate/govern the incorporation (coming into existence) of the company, the working of the company and also the winding up of the company. These laws are basically called as the Company laws. In India the company law is contained in the Companies Act, 2013. So every company incorporated in India has to ensure it complies with the provisions of the Companies Act, 2013.

Which company can apply for fast track exit mode?

  • A Company has failed to commence its business within one year of its incorporation; or
  • A Company not carrying on any business or operation for a period of two preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455 of the companies act, 2013

Which Companies cannot apply under fast track exit mode?

  • Listed Companies
  • De-listed Companies due to non- compliance of Listing Agreement or any other statutory Laws
  • Section 25/Section 8 Companies of companies act 2013
  • Vanishing companies
  • Companies where investigation/ inspection ordered and yet to be taken up or pending
  • Companies where notice u/s 234 of the Companies Act, 1956 or Section 206 or 207 has been issued by ROC (Registrar of the company) and reply is pending or report under section 208 not yet submitted or is pending
  • Companies where prosecution for an offence is pending in court
  • Companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default
  • Companies accepted deposits which are outstanding or default in repayment
  • Company having outstanding loan secured or unsecured
  • Company having management dispute;
  • Company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;
  • Company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities
  • If at any time in the previous 3 months the company has
    • Has changed its name or shifted its registered office from one State to another;
    • Has made a disposal for value of property or rights held by it, immediately
    • Before cesser of trade or otherwise carrying on of business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on of business;
    • Has engaged in any other activity except the one which is necessary or expedient for the purpose of making an application under that section, or deciding whether to do so or concluding the affairs of the company, or complying with any statutory requirement;
    • Has made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or
    • Is being wound up under Chapter XX of this act or under the Insolvency and Bankruptcy code, 2016

MANDATORY TO KEEP IN MIND WHILE INITIATING FAST TRACK EXIT MODE

It is important for the Company to disclose pending litigations against the Company. If the pending prosecutions are only for non-filing of Annual Returns under and Balance Sheet, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application.

PROCEDURE TO BE FOLLOWED BY REGISTRAR

1. Notice: On receipt of application notice shall be given under Section 560(3) giving thirty days time, unless the cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved.

2. Inviting Objections: The Registrar shall put the name of applicant and date of making the application on the MCA (Ministry of Corporate Affairs) portal http://www.mca.gov.in, allowing thirty days time for raising an objection, if any, by the stakeholders.

3. Notice to tax and other relevant authorities: The Registrar need to inform Income Tax Department about companies availing FTE mode and ask for objections within thirty days. RBI, SEBI, etc is to be notified in case of Non-Banking Financial Company and Collective Investment Management Company.

4. Striking off name: The Registrar of after expiry of such time mentioned above shall strike its name off the Register and shall send notice under Section 560(5) of the Companies Act 2013, 1956 for publication in the Official Gazette and the applicant company shall stand dissolved from the date of publication of the notice in the Official Gazette. 5. Restoration order: Under section 560(6) an application for restoration shall be made by the aggrieved company, member or creditor. A company shut down under FTE can be restored on the Register by a Court order within 20 years of it striking off.

Which form is required to be filed with ROC (Registrar of Company) for making application under fast track exit mode?

E-Form STK-2 is required to be filed with ROC (Registrar of Company) for making application under fast track exit mode.

WHAT ARE THE DOCUMENTS REQUIRED TO FILE FORM STK-2

  • An Affidavit: It is the proclamation takes by all the director(s) of the company that either it has not undertaken any business since its commencement or the business was terminated on the respective date (which needs to be specified on the documents).
  • Indemnity Bond: The bond has to be signed and must be given by every director either individually or collectively in the name of the company, that if any losses, debts, assets or liabilities incur even of striking off the name of the company, they will be paid by the directors individually or as whole in the name of their company.
  • Statement of Account: It is to be prepared by a professional Chartered Accountant or by a company secretary and has to be attached with the application form. The account statement so prepared must not be older than 30 days, preceding the date of application.

Process for filing application under fast track exit mode

The application procedure to get the name of a company struck off under Fast Track Exit scheme is given below.

Step 1: Registration

The company eligible to apply for striking off its name has to apply to the Registrar of Companies in Form FTE.

Step 2: Fee Payment

The FTE has to be filed electronically on the Ministry of Corporate Affairs portal by remitting ROC (Registrar of Company) fee of Rs. 5000.

Step 3: Examination

The Registrar of Companies examines and gives notice to the Company under Section 560(3) of the Companies Act, 1956 by e-mail, mentioning thirty days unless the cause of showing to the contrary, its name is struck off from the Registrar and the company will be dissolved.

Step 4: Raising Objection

The registrar of companies includes the name of the applicants(s) and the date of making the application under the scheme in the MCA (Ministry of Corporate Affairs ) portal, giving thirty days to raise objections, if any, by the stakeholders to the concerned Registrar.

Step 5: Intimation

The Registrar of Companies sends intimation of such companies that avails Fast Track Exit mode to the office of the Income Tax Department providing thirty days for their objection.

Step 6: Approval

The Registrar of Companies approves if satisfied and strikes its name off the Register and sends a notice under Section 560(5) of the Companies Act, 1956 for publication in the official Gazette.

What process ROC (Registrar of company) will initiate after filing application under fast track exit mode

  • Place on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;
  • Publish in the Official Gazette;
  • Published in English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated

In case of any application made under sub-section (2) of section 248 of the Act, the Company shall also place the application on its website, if any, till the disposal of the application.

The Registrar of Companies shall, simultaneously intimate the concerned regulatory authorities regulating the company, viz, the Income-tax authorities, central excise authorities and service-tax authorities having jurisdiction over the company, about the proposed action of removal or striking off the names of such companies and seek objections, if any, to be furnished within a period of thirty days from the date of issue of the letter of intimation and if no objections are received within thirty days from the respective authority, it shall be presumed that they have no objections to the proposed action of striking off or removal of name.

Is there any stamp duty required to be paid on any documents?

Stamp Duty is required to be paid on Affidavit and Indemnity Bond as per respective State Stamp Act. As per Bombay Stamp Act, (Maharashtra) affidavit should be on non-judicial stamp paper of Rs. 100/- and Indemnity Bond on non-judicial stamp paper of Rs. 500/- or franking of equivalent value for both.

Are there any Attestation / Notary required on Affidavit and Indemnity Bond?

An affidavit should be sworn by each of the existing director(s) of the Company before a First Class Judicial Magistrate or Executive Magistrate or Oath Commissioner or Notary. An Indemnity bond shall be duly notarized.

Whether Companies having some current assets or bank balance can apply under Fast track exit mode?

No. Company is required to have NIL Balance Sheets.

What is the effective date of closure of Company?

ROC (Registrar of Companies) will send notice (containing list of companies struck off) under section 248(5) of the Act for publication in the Official Gazette. The Applicant Company under fast track exit mode shall stand dissolved from the date of publication of the notice in Official Gazette.

Conclusion

The auditor’s report has a high level of affirmation and dependability since it contains the evaluator’s feeling on the fiscal reports. Where the inspector feels that the announcements don’t portray a genuine and reasonable perspective on the money related position of the business, he is additionally qualified to structure an unfavorable assessment on the equivalent. Furthermore, where he finds that he disappointed with the data gave and finds that he can’t express a legitimate assessment on the announcements; he will issue a disclaimer of the conclusion. A disclaimer of assessment essentially shows that because of the absence of data accessible, the money related status of the substance can’t be resolved.

References:

http://www.mca.gov.in/MinistryV2/fasttrackexitmode.html

https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

http://www.fasttrackexitmode.com/faqs-on-fte.htm

https://enterslice.com/learning/faq-fast-track-exit-scheme/

https://enterslice.com/learning/faq-fast-track-exit-scheme/

This Article is Written by Mr. Keval Tachak, Final Year Student of KES College of Law, Mumbai University.

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