Overview

Fast Track Exit (FTE) under Section 248 of the Companies Act, 2013 read with Rule 4 of The Companies (Removal of Name of Companies from the Registrar of Companies) Rules, 2016 is a process by which a Company can be voluntarily wound up and dissolved within a shorter period of time than the traditional process of winding up under the Act.

Situation where Company Closure already initiated Suo moto by Registrar where notice is sent in form STK-1 to remove the name of Company under FTE scheme where Registrar has reasonable cause to believe and Company Status at MCA coming “under process of striking off”, Company sue moto cannot obtain for the closure and as a result if does would be be liable for the consequences of not complying with the process in case of defunct or failed to commence its business at any time.

The voluntarily process is intended for Companies where:

Companies where no subscription amount has been made by the First Subscribers to the Memorandum which they had undertaken to pay nor filed any declaration in form INC-20A.
No business commencement within one year of its incorporation being no longer viable and do not have any assets or liabilities.
Not carrying out any business or operation, neither declared as dormant for a period of two immediately preceding financial years or not filed any financials during the last two fiscal years
If Company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12 where ROC has been given the power to Visit at a Registered Office address and can verify the address through Copy of the agreement/ownership/rent agreement, No objection Certificate, Photograph of the registered office inside or outside the building or Any other document as they deemed feet for the said purposes.

Through Companies (Amendment) Act,2019, MCA came up with more stringent provisions on the closure of the Company sue moto by the Registers on failure of the basis compliances laid down under the Act through amendment under section 248.

To initiate the Closure of the Company process, the Company must follow procedures as laid under the Companies Act, 2013 in accordance with the Rules. The application in Form STK-2 is to be made with the Registrar of Companies along with the necessary documents and filing fees of INR 10,000. The Registrar will then process the application and, if all requirements are met, will issue a certificate of dissolution, effectively terminating the Company.

Pre-requisites

Conditions which shall be fulfilled before proceeding with closure of the Company under FTE scheme that-

The Form AOC-4 (financial statement) should be filed with ROC till the end of the financial year in which Company has ceased to carry its business activities.
The Form MGT-7 (annual return) should be filed ROC till the end of the financial year in which Company has ceased to carry its business activities.
The Company should not have any assets and Liabilities before filing an application for closure.
The Company if commenced its business after its incorporation must insure that form INC-20A should have been filed with MCA within 180 days from the date of Incorporation.
All directors should confirm DIR-3 KYC is updated.
are not any pending dues against the Company with Income Tax authorities. Where, the MCA sends a confirming letter that Income Tax has no objection in closure of the Company.
ITR should be filed or updated with Income Tax authorities.
The bank account in the name of the Company should be closed and a closure bank account certificate should be taken.
GST should be surrendered if any.
No change or modification should be made in the name of the Company or its registered office from one State to another during the previous three months of filing the application.
The Company should not have any pending litigations.

Process for FTE scheme

The application for closure of the Company under Fast Track exit (FTE) scheme is stated in below steps:

1. Board Meeting (BM) –

The Company should convene a Board meeting of Board of Directors (BOD) to obtain approval and consider the closure of Company proposal by the management and call of an Extraordinary General Meeting (EGM) for the Shareholders Approval which is the primary requirement to proceed for the winding up under Section 248. The Certified true copy of Board resolution (BR) will be required for the purpose of filing an application under STK-2 with ROC.

2. Extra Ordinary Meeting (EGM) –

The Company shall conduct an EGM subject to the Notice along with Explanatory statement should be sent to each Stakeholders at least 21 days before the meeting as per Section 102 and if any shorter notice take the application consent letter from the shareholders and once Extraordinary General Meeting held, pass a Special resolution (SR) for the closure of the Company by passing a Special resolution (75% members in terms of paid-up share capital). All the requisite documents are to be signed by the Directors or other authorized signatory if any and then submit the same with ROC in e-form MGT-14 within 30 days of passing the special resolution.Further, MGT-14 not required to be filed or can say Shareholders Meeting not required to be held in case of consent of 75% of the members of the Company in terms of paid up share capital as on the date of application has been received.

3. File application –

The form STK-2 filed in name of Company to be closed with ROC along with the requisite forms such as:

DSC of one Director (Authorized signatory) to file STK-2
Brief Objects of the Company
The Indemnity Bond shall be given by by all Director in Form STK-3 (to be given individually or collectively by the director(s)) where it should be printed on the Stamp paper and duly notarised by the gazetted officer
Affidavit is Form STK-4 by every Director present in the Board where it should be printed on the Stamp paper and duly notarised by the gazetted officer
Prepare Statement of Accounts not older than 30 days before filing the Closure form and get certified by Chartered Accountant.(either Statutory Auditor of the Company or Chartered Accountant in whole-time practice)
Closure certificate for the Bank account along with PAN & COI of the Company
GST Surrender Certificate if any
KYC of every director duly self-attested with copy of identity proofs
Any other document as required to be file with ROC (certified copy of special resolution)
A statement regarding pending litigation if any.
Others as requested by the ROC.

The ROC shall after examining publish the notice in the Official Gazette and the same is placed on the website of the MCA Portal and published in newspapers in two languages (English and vernacular of the State the registered office is situated) for one month.

4. Closure of the Company –

Once the publication of the notice in the official gazette is published, the name of the Company is struck off from the register of Companies and the Company stands dissolved.

ROC may seek for additional information or clarification as required before approving the form for the closure of the Company name under the Fast Track Exit scheme. The ROC also informs the same to other statutory authorities like GST, income tax etc. about the application for closure of the Company.

Category of Companies which shall not be closed under FTE are:

Companies registered under Section 8 and Section 25 of the Companies Act, 2013.

Companies where there is pending litigation, inspection, any offense, prosecution, proceedings in the Court
Companies which accepted public deposits which is either outstanding or defaulted in repayment
Companies having pending charges for satisfaction
Listed Companies
Vanishing Companies
Companies which have been delisted due to non-compliances.
Companies application for compounding is pending;
Any Notices issued to the Company under section 206 or section 207 of the Companies Act, 2013 (new Act)and reply is yet to be submitted

Thus, the Fast Track Exit (FTE) scheme allows companies in India to close their business operations in a time-bound and efficient manner. The scheme was introduced by the Ministry of Corporate Affairs (MCA) vide Notification No. 16/2016 on 26th December 2016 as a way to streamline the process of winding up or closing a Company easily in a short span of time.

The whole process under the FTE scheme is intended to be less time-consuming and less costly than the traditional process of winding up a Company through the courts/NCLT. Companies can file an application as discussed above in the article to close their business operations with the Registrar of Companies (ROC) and, if the application is approved, the Company will be struck off the register within a period of 180 days and issued the certificate, having the name removed from ROC.