Fast Track Exit (FTE) Mode: Process for Striking Off the Name of the Company

The Ministry of Corporate Affairs (MCA) had introduced a scheme in order to strike off the name of a corporation from the Register of Companies by means of Fast Track Exit (FTE). This scheme is planned to furnish an opportunity towards the defunct corporations for getting their names struck off from the Register of Companies as per Section 560 of the Companies Act, 1956. The Companies Act, 2013 has fetched a procedure known as Removal of Names of Companies from Register (According to Section 248 of Companies Act, 2013), with effect from 26th December 2016.

One of the immediate ways to close down a corporation being non–operational over a period of time is fast could continue for closure under these criteria:

1. Within 1 year of its incorporation in case a corporation fails to start its business;

2. Subscribers to MOA had not paid the subscription money within 180 days and no declaration filed towards this effect;

3. When a corporation voluntarily wants to close, it could after clearing all its liabilities, by means of obtaining the consent of at least 75% or more shareholders relating to paid-up capital;

4. Not able to carry any commerce for a period of 2 years in accordance with the new rule and has not sought after to call itself a dormant corporation.

Eligibility Criteria

Each and every corporation is not directly qualified for the application of FTE and there are some eligibility criteria which are required to be followed as under:

•    Towards applying for the Fast track Exit scheme, the corporation should neither have any asset nor any liability.

•    Either the corporation must not have started any business or other actions since its commencement or it must not have been involved in any kind of business for the past 1 year.

Corporations On Which FTE Is Not Applicable

The FTE scheme is not applicable to several corporations. These contain:

•    The corporations that have been listed.

•    Corporations falling under section 25 (Companies Act).

•    The corporations which are vanishing.

•    The corporations who are susceptible to an investigation or possibly even inspection.

•    The corporations which were undertaken or against whom trial is pending in the court.

•    Corporations that are under huge debt or the ones facing management concerns.

•    The corporations for which the filing of important documents was put to stay by the court or other higher authorities.

•    Corporations who have not filed in the taxes of banks or the additional financial institutions.

Documents Required

In case the corporation wants to get their name struck off from the registered list, the claimant is required to fill in the application form online with the registrar, and along with that, it is required to pay an application fee of INR 5,000.

After the successful application, many documents are required to be submitted which contain:

•    An Affidavit, which is basically a proclamation that is taken by all the directors of the corporation that either it has not started any business since its commencement or the business was ended on the respective date (which is required to be specified on the documents).

•    Indemnity Bond, which is required to be signed and should be given by every director either individually or collectively in the name of the corporation, that if any losses, debts, assets or liabilities incurred even of striking off the name of the corporation, they shall be paid by the directors individually or as whole in the name of their corporation.

•    Statement of Account must be prepared by any professional Chartered Accountant or by a company secretary and is required to be attached with the application form. The account statement as prepared should not be older than 30 days, preceding the date of application.

•    The Copy of Board Resolution shows the authorization for filing the application.

Application Process

The process to apply as well as fill in the form for FTE is:

Step 1: In case the corporation fulfils the eligibility criteria, they must register themselves with the Registrar of Companies for the FTE form.

Step 2: Once the registration is completed, the corporation is required to pay the ROC fee of Rs 5,000.

Step 3: The Registrar of Companies inspects the corporation and checks whether it had satisfied all the criteria, and then within 30 days of the application the corporation is dissolved, and the name of the corporation is also struck off from the list.

Step 4: After the application is filled, the stakeholders shall be given tenure of 30 days if they want to raise any objections.

Step 5: Once all the objection and intimation procedure has been completed, the Registrar of Companies shall finally approves as well as strikes off the name of the corporation and a notice shall be sent to the official gazette as per section 560(5) of the Companies Act, 1956.

Stamp Duty

The last procedure involves paying off the stamp duty on the Affidavit and Indemnity Bond pertaining to the State Stamp Act in accordance with the Indian Stamp Act, 1899

Post-Strike Off Liabilities of the Directors

The directors of the company should pay, and settle at the claims against the corporation which may perhaps arise in the future and should also pay off and settle all the liabilities in the name of the directors of the corporation.

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Author:

eStartIndia Team