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Legalities
Fast Track Exit (FTE) Closure of Companies: Meaning, Conditions, Procedures and FAQs
Fast Track Exit (FTE) Closure of Companies: Meaning, Conditions, Procedures and FAQs
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Fast Track Exit (FTE) Closure of Companies: Meaning, Conditions, Procedures and FAQs. INTRODUCTION: Ever since its enactment, the Companies Act, 2013 (hereinafter referred to as ‘the Act), has covered some very interesting provisions in its ambit. One such provision is the Strike Off/Closure of Company which is laid down in Section 248 of the Act. Companies that do not intend to carry on their business for some reason, can apply for REMOVAL OF THEIR NAME from the Register of Companies according to the procedure laid down in the Act. Unlike winding up, the provisions as contained in Section 248 of the Act, are less cumbersome and provide for the faster exit of corporates. CONDITIONS STIPULATED FOR CLOSURE OF COMPANY: The provisions under removal of the name of the Company/Strike off by the ROC are stipulated under Section 248(1) of the Companies Act 2013. A company’s name can be struck off in either of the following modes- Strike off by the ROC under Section 248(1) of the Companies Act 2013, Strike off by a Company voluntarily under Section 248(2) of the Companies Act, 2013. I. STRIKE OFF BY THE ROC UNDER SECTION 248(1) OF ACT: Section 248(1) of the Companies Act, 2013 provides the Registrar of Companies (RoC) to suo- moto remove the name of the Company on any of the following grounds: A company has failed to commence its business within one year of its incorporation; or A company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such a period for obtaining the status of a dormant company under Section 455; or the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under subsection (1) of section 10A, or The company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12. PROCEDURE OF STRIKE OFF: In case a company falls in any of the above-mentioned criteria, then the Registrar may proceed to follow such procedure as may be prescribed. The same is listed below: The Registrar shall send a notice in writing to the Company and all the directors of the Company at the addresses available on record, citing its intention to remove the Company’s name from the Register of Companies and also seeking their representations along with the copies of relevant documents if any within 30 days from the date of issue of notice; [Sec 248(1)] A notice issued as above, under sub-section (1) or sub-section (2) of Section 248 shall be published in the prescribed manner and the Official Gazette for the general public; [Sec 248(4)] At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of Companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved. [Sec 248(5)] The Registrar, before passing an order under sub-section (5), shall satisfy himself that sufficient provision has been made for the realization of all amounts due to the company and the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company. In furtherance of the above provisions, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the Register of Companies. Further, nothing contained in this section shall affect the power of the Tribunal (NCLT) to wind up a company whose name has been struck off from the register of companies. NON-APPLICABILITY However, according to Rule 3 sub-rule (1) of the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016, the above provisions shall not apply to the following class of companies: 1. Listed Companies 2. Companies that have been delisted due to non-compliance with listing regulations or any other statutory laws 3. Vanishing Companies 4. 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 5. 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 the report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any, is pending with the Court 6. Companies against which any prosecution for an offense is pending in any court 7. 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 8. Companies having charges which are pending for satisfaction; and Companies registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013 9. Companies, which have accepted public deposits which are either outstanding or the company is in default in repayment of the same II. STRIKE OFF BY A COMPANY ON ITS OWN ACCORD UNDER SECTION 248(2) OF THE COMPANIES ACT, 2013: Section 248(2) of the Companies Act, 2013, without prejudice to the provisions of Sub-Section (1), Company may, after extinguishing all its liabilities, by a special resolution or consent of 75% of members in terms of paid-up share capital, file an application to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner. In the case a company is regulated under a special Act, approval of the regulatory body constituted or established under that Act (in the form of a No Objection Certificate) shall also be obtained and enclosed with the application. PROCEDURE OF STRIKE OFF: Procedure to be followed in case the application is made by the Company: Convene a Board meeting and pass a Board resolution for strike off the Company name subject to the approval of member; Convene a general meeting of members of the Company and obtain shareholder’s approval by passing a Special resolution or consent of 75% members in terms of paid-up share capital. Proceed to file e-form STK-2. Filing Form STK-2 which shall be accompanied by: Indemnity Bond duly notarised by every director in Form STK-3, Statement of Accounts in Form STK-8 containing assets and liabilities, made up to a day, not more than 30 days before the date of application and certified by Chartered Accountant Affidavit by every director of the company in Form STK -4, Copy of special resolution duly certified by each of the Directors of the Company [or] consent of 75% of the Members of the Company in terms of paid-up share capital as on the date of application. A statement regarding pending litigations, if any, involving the company; copy of the latest copy of ITR Filled; copy of PAN of the Company; latest Form ADT 1 filled by the Company and its Challan; copy of Board resolution for Strike off. After applying strike off by the Company, the ROC shall publish a public notice in Form STK-6 inviting objections to the proposed Strike off, if any. The objections are to be sent to the respective ROC within thirty days from the date of publication. The notice shall be placed on the website of the Ministry of Corporate Affairs, published in the Official Gazette and published in a leading English newspaper and at least in one vernacular newspaper where the registered office of the company is situated. 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. The Registrar of Companies after having apprised with the consequence shall strike off the name and dissolve the Company and a Notice of striking off and its dissolution to be published in the Official Gazette in Form STK 7. On the publication in the Official Gazette of this notice, the company shall stand dissolved with effect from the date mentioned therein. The same shall also be placed on the official website of the MCA. The liability, if any, of every director, manager, or anyother officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5), shall continue and may be enforced as if the company had not been dissolved. The application shall be processed under Approval Route and may take at least 6 months unless any objection is raised by the concerned ROC. COMPANIES THAT CANNOT FILE AN APPLICATION U/S 248 OF THE ACT: 1. An application under sub-section (2) of section 248 on behalf of a company 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 ceasing the trade or otherwise carrying on of business, for 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 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 the Insolvency and Bankruptcy Code, 2016 2. If a company applies to ROC under sub-section (2) of section 248 in violation of subsection (1) of Section 249, it shall be punishable with a fine which may extend to one lakh rupees. 3. An application filed under sub-section (2) of section 248 shall be withdrawn by the company or rejected by the Registrar as soon as conditions under sub-section (1) of Section 249 are brought to his notice. LIST OF FORMS INVOLVED IN THE PROCESS OF REMOVAL OF NAME OF THE COMPANY Form STK-1: The Notice by Registrar for removal of the name of a Company from the Register of Companies. Form STK-2: An Application by Company on suo-moto to Registrar of Companies for removing the name of the company from register of companies. Fees- Rs.10,000/- Form STK-3: An Indemnity bond that needs to be given by every director of the company either individually or collectively while filing STK-2. Form STK-4: An Affidavit to be given by each director individually while making a strike-off application under section 248(2). Form STK-5 & STK-6: A Public Notice issued by Registrar Of companies under sub-section (1) or sub-section (2) of 248. Form STK-7: Notice under sub-section (5) of section 248 of striking off and dissolution of company to be published in the official gazette and same shall be placed on the official website of the Ministry of Corporate Affairs. Form STK-8: A Statement of Accounts containing assets and liabilities of the company FREQUENTLY ASKED QUESTIONS (FAQs) 1. When can a Company file application for its strike off? A company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five percent members in terms of paid-up share capital, file an application in e-form STK 2 to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in Section 248(1). 2. What is meant by a Vanishing Company? A Vanishing Company means a company that fulfills the following conditions: · A Company registered under the Companies Act 2013 or any previous Company Law for the time being in force; · Listed on Stock Exchange; · Has failed to file its returns with Registrar of Companies (hereinafter referred to as “ROC”) and stock exchange for a consecutive period of 2 years; · Has not been maintaining its registered office at the address notified with ROC or Stock Exchange; · None of its directors are traceable 3. Is any stamp duty required to be paid on any documents? Stamp Duty is required to be paid on Affidavit and Indemnity Bond as per the respective State Stamp Act. As per the 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. 4. Are Affidavit and Indemnity Bond required to be attested/notarized? 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. 5. Is DSC of Director is mandatory for filing an online application with ROC? Or can a Company file application with ROC without having the DIN and DSC of any of its directors? DSC of Director is not mandatory for filling online application i.e. e-form STK-2 with ROC. If DSC is not available take the printout of e-form STK-2 and obtain the physical signature of the director authorized to sign it as per Board Resolution and attach the same to e-form STK-2. 6. Can a Company with pending income tax/ sales tax/ central excise/ other Govt dues go for the Fast track exit mode? No. A Company that has not paid income tax/ sales tax/ central excise/ other Govt. dues cannot make an application under fast track exit mode. Format of affidavit mentioned in the form STK-4 and e form STK-2 requires confirmation from directors that there are no dues as mentioned above are pending. 7. How old can be the Statement of Accounts which is required to be attached to the application? Statement of Accounts certified by a chartered accountant to be attached to e-form shall not be older than 30 days preceding the date of application in e-Form STK-2. 8. What is the effective date of closure of the Company? The Applicant Company under fast track exit mode shall stand dissolved from the date of publication of the notice in Official Gazette. HOW CAN COMPLIANCE CALENDAR LLP HELP? At Compliance Calendar, we enable you to provide a one-stop solution and a hassle-free process for striking off the name of a company. We aim to provide you with a well thought and evaluated plan of action by considering all factors surrounding the fast-track exit of a company. Our primary efforts would include that the entire procedure gets completed within a reasonable time with less/no objections. In case of any query, please reach out to us at info@ccoffice.in or WhatsApp/Call at 9988424211Click Here to know more about how to close your company in fast track exit mode.
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Dormant Status of Company
Mandatory Compliances
Appoinment of Auditor
Annual Filings of Company
Annual Filings of LLP
Annual DIN/DPIN KYC
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Half Yearly MSME Return
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