Fast Track Exit (FTE) is one of the quick ways to shut down a company, when it is non-operational over a period of time. It gives an option to Defunct Companies to get their names struck off from the Register of Companies. In its place, under the Companies Act, 2013 has brought in a process called Removal of Names of Companies from Register (Section 248 of Companies Act, 2013), with effect from 26th December 2016.
A company can apply for a shut down under the new process when:-
- A company has failed to commence its business within one year of its incorporation
- Not carrying any business or operation for a period of two years (earlier it was one year) and has not sought to call itself a dormant company
Following Type Of Companies Are Not Covered Under FTE Route:-
- Listed companies,
- Companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
- Vanishing companies; i.e. a company registered under the Act or previous company law or any other law for the time being in force and listed stock exchange which has failed to file its returns with the Registrar of Companies and stock exchange for a consecutive period.
- Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
- Companies where notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court;
- Companies against which any prosecution for an offence is pending in any 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, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same.
- Companies having charges which are pending for satisfaction; and
- Companies registered under section 25 of the Companies Act, 1956 or section 8 of CA, 2013.
A company can’t go through FTE route in following cases:-
An application under FTE route shall not be made if, at any time in the previous three months, the company-
- 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, whether voluntarily or by the Tribunal.
Procedure of Striking Off:-
- Call Board Meeting to pass Board resolution for the purpose of strike off and to authorize any director to file application.
- After passing of Board resolution, if there is any liability in the company, company will set off all liabilities.
- Call general meeting and pass special resolution.
- File MGT-14 within 30 days of passing special resolution.
- An application for removal of name of the company under sub-section (2) of section 248 shall be made in Form STK-2 along with the fee of INR 5000 along with necessary attachment. E-Form STK-2 shall be signed by authorized director. Where the Director Concerned does not have a Digital Signature certificate, a physical copy of the form duly filled in shall be signed manually by the Director duly authorized in that behalf and shall be attached with the Form STK-2 while uploading the Form.
- E-Form STK-2 shall be certified by Company secretary in whole time practice or Chartered Accountant in whole time practice or Cost Accountant in whole time practice.
Attachments to E-Form STK-2 Are As Follows:-
- Indemnity bond duly notarized from every director in Form STK 3;
- Statement of accounts containing assets and liabilities of the company made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
- An affidavit in Form STK 4 from every director of the company;
- A copy of the special resolution duly certified by each of the directors of the company or consent of seventy five percent of the members of the company in terms of paid up share capital as on the date of application;
- Statement regarding pending litigations, if any, involving the company
Key Changes From Old FTE Scheme:-
Earlier Board Resolution was Sufficient for approval for making application for removal of name, however, now it is mandatory to Pass Special Resolution or take consent of 75% members in terms of paid up share capital
Earlier the eligibility for applying for FTE was a companies not carrying any business operations since last one year, however, now it is changed to a company not carrying any business or operation for a period of two immediately Preceding Financial Years.
Additional requirement of certifying the special resolution by each of the directors of the company or consent of the 75 % of the members of the company in terms of paid up share capital as on the date of application.
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Tags :Corporate Law