Legal Law Winding Up of a Company

FAQ on Fast Track Exit Scheme 2019

Many companies often run here and there to close down their company. The Ministry of Corporate Affair has introduced a scheme called fast Track Exit Scheme. The fast Track Exit Scheme is for faster disposal of the companies. It gives an opportunity to the defunct companies to struck off from the register under the Companies Act, 2013.

The FAQ on Fast Track Exit Scheme

1. What is the Fast Track Exit Scheme?

Under the Companies act 2013, a defunct company from the register subject to a certain condition under the Fast Track Exit Scheme can strike off their name.

2. What is a Defunct Company?

A Defunct Company is a company who has nil asset and Liability for the purpose of Fast Track Exit Scheme. Moreover, if a company since the incorporation has not commenced any business activity or operation or the Company is not carrying any business activity or operation from last 1 year before making the application under Fast Track Scheme is also be known as a defunct company.

3. What is the date of implementation of these Guidelines?

The Guidelines started implemented with effect from 3^rd July 2011

4. What is the eligibility criterion for making an application under FTE?

There are only two criteria-

• A company applying under Fast Track Exit Scheme should not have any asset or liability.
• The company should not have commenced any business activity or operation since incorporation or at least 1 year has been passed since the last business activity or operations.

5. Can a Dormant Company apply under Fast Track Exit Scheme?

Yes, any company, which has been identified as a dormant company by the Ministry of Corporate Affairs, can apply under Fast Track Exit Scheme.

6. Can a company identify as defaulting company under Fast Track Exit Scheme?

A company having 4-5 year of a track record for not filing any statutory documents like Balance Sheet and Annual Return for any of the financial year is known as a defaulting Company. Director of such companies is debarred from filing any of further document until they correct the default.

7. On which company FTE is not applicable?

Following are the companies where the Fast Track Exit Scheme is not applicable-

• Listed companies and companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws,
• Under section 25 Companies act, 1956 (old law)
• Vanishing companies
• Any Company subject to investigation or inspection;
• Any Company against which prosecutions are pending the court;
• Companies that accepted public deposits which are either outstanding or the company is in default in repayment of the same;
• The company having secured loan,
• Or company having management dispute;
• Any Company in respect of which filing of documents have been stayed by any competent authority;
• Company with dues of taxes or banks and financial institutions or any other authority.

8. What is the procedure for making application to strike off the Company’s name under FTE?

The Company willing to get its name strike off from the Register shall file an online application in the prescribed Form with the Registrar. The form shall be filed with an affidavit, an indemnity bond, statement of account duly certified by a Chartered Accountant in practice or auditor of the company and a copy of board resolution permitting the authorization for filing the form.

Furthermore, the procedure for closure of private limited company under Companies’ act 2013 is quite different. Read our article on How to close a private limited company in India.

9. What is the application Fee for filing the Fast Track Exit Scheme form?

The application fee required for filing the Fast Track Exit Scheme Form along with the application is Rs 5000/-.

10. Who can sign the Form FTE?

Firstly, if there are any active signatories available in the MCA21 system then the Form shall be signed by an authorized signatory of the companies.

But in case, there are no active signatories existing in the MCA 21 system, then a physical copy of the Form duly filled in shall be signed manually by a director authorized by the Board of Directors along with the Form. Such form will be uploaded by the practicing professional like Chartered Accountant, Company Secretary after the certification of the form.

Therefore, the application shall be accompanied by a certificate from a Chartered Accountant or Company Secretary in whole time practice along with the membership number, certifying that the applicants are present director of the company. In such cases, the applicants shall not be asked to file Form DIR-12 and CIN Form.

11. Can a shareholder raise objection? What shall be done?

If a stakeholder has objections related to Striking off the name then it may raise an objection to ROC. secondly,  It shall be made by email to concerned ROC Office within 30 days from the date of filing FTE Form. The List of applications filed under FTE is available on the portal.

12. If there is any pending prosecution against the company and its director?

If the pending prosecutions are only for non-filing of Annual Returns and Balance Sheet, then such application may be accepted provided the applicants have already filed the compounding application. However, steps for the final strike of the name of the company will be taken only after the disposal of compounding application by the competent authority.