About (FTE) Fast Track Exit in the New Companies Act, 2013
It is a fast process to close a company without adopting a lengthy procedure for company closure by passing special resolution, applying to high court, appointment of liquidator and so on…… which may take not less than six months and also it is a very expensive process which cannot be affordable to small companies and companies which are sick companies.
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The Ministry has issued Guidelines for Fast Track Exit Mode to give the opportunity to the defunct companies to get their names struck off from the register under section 560 of the Companies Act, 1956.
As any separate procedure is not given by newly introduced companies act 2013 and the circular issued in the year 2011 under Companies Act 1956 is still in force for the closure of the company.
The most important benefits of Fast Track Exit Scheme are as below;
- Neither an inoperative Companies which are not generating any revenue nor doing its annual filing are have got a new option to close company without paying huge additional fees.
- It is a short process in which company can be closed without huge documentation.
- It is a time-saving procedure.
WHO SHALL GO FOR FAST TRACK EXIT
The small companies which are
• Inoperative
• Not doing any annual or other filings with Registrar of Companies
• Operating in loss and lost a hope of making profit
• The company do not have any object or continue with it
Shall apply Registrar of Companies for the closure of the company.
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Consequences of not GOING FOR FAST TRACK EXIT
The above type of companies (given in the last slide) which do not have go for fast track exit, could suffer following consequences:
• There is a very strong possibility that for the companies which are inoperative and not doing any mandatory annual compliances under Companies Act 2013, could receive notice from Registrar of Companies, under which jurisdiction the registered office of the company falls, for not doing annual filing.
• In such a situation, Directors of the company shall have to appear before the court and explain the reason for non-filing of documents with Registrar of companies.
• After that, the company will have to complete their annual filing and other compliances and present proof of such filing to the court.
• On non-complying the directions of the court, directors may have to suffer huge penalties, imprisonment, etc.
Procedure to be FOLLOWED FOR FAST TRACK EXIT
The Company shall file an application in prescribed form FTE online with Register with form Fees Rs. 5000/-
Attachments:
• An affidavit which 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, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations, as the case may be;
• An Indemnity Bond, duly notarized to be given by every director individually or collectively, to the effect that any losses, claim and liabilities on the company, will be met in full by every director individually or collectively, even after the name of the company is struck off the register of Companies;
• Statement of Account duly certified by CA in practice or auditor of the company.
• Board resolution showing authorization for filing the form.
• In case, the application in Form FTE, is not being digitally signed by any of the director or Manager or Secretary, a physical copy of the Form duly filled in, shall be signed manually by a director authorized by the Board of Directors of the company and shall be attached with the application Form at the time of its filing electronically;
• In case, the applicant name is not available in the database of directors maintained by the Ministry, the application shall be accompanied by certificate from a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice along with their membership number, certifying that the applicants are present directors of the company. In such cases, the applicants shall not be asked to file Form 32 and Form DIN 3.
• The company shall disclose pending litigations if any, involving the company while applying under FTE.
• If the pending prosecutions are only for non-filing of Annual Returns 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 by the competent authority.
Companies not eligible to file form FTE:
(i) listed companies;
(ii) Companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws,
(iii) Companies registered under section 25 of the Companies Act, 1956 or section 8 of Companies Act 2013
(iv) Vanishing companies;
(v) Companies where inspection or investigation is pending or any proceedings are pending in the court
(vii) Companies against which prosecution for a non-compoundable Offence is pending in court;
(viii) Companies accepted public deposits which are either Outstanding or the company is in default in repayment of the same;
(ix) Company having secured loan;
(x) Company having management dispute;
(xi) the 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;
(xii) the 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.
Who are eligible to apply under for Fast Track Exit Scheme:
- Companies having assets and liabilities as NIL
- Company is inoperative since date of Incorporation or 1 Year or more
- The company has closed down its bank account.
PROCEDURE TO BE ADOPTED BY REGISTRAR OF COMPANIES IN THIS MATTER:-
(a) The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by email to its e-mail address intimated in the Form, giving thirty days’ time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;
(b) The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under fast track exit mode, on a daily basis, on the MCA portal http://www.mca.gov.in/, giving thirty days’ time for raising an objection, if any, by the stakeholders to the concerned Registrar;
(c) In case of company(s) like Non-Banking Financial Company(s), Collective Investment Management Company(s) which are regulated by other Regulator(s) namely RBI, SEBI, the Registrar of Companies, at the end of every week, shall send intimation of such companies availing fast track exit mode during that period to the concerned Regulator(s) and also an intimation in respect of all companies availing fast track exit mode during that period to the office of the Income Tax Department giving thirty days’ time for their objection, if any; Explanation (1) “Non-Banking Financial Company” means a company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934.
(2) “Collective Investment Management Company” means the company as defined in clause (h) of sub-regulation of 2 of Securities and Exchange Board of India (Collective Investment Companies) Regulations, 1999.
(d) The Registrar of Companies immediately after passing of time given in sub-paras (a) to (c) of this Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send the notice under sub-section (5) of section 560 of the Companies Act, 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.
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Closing a ltd company