What is Fast Track Exit (FTE)?
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. 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 26 December 2016.
On 26 December 2016, Ministry of Corporate Affairs (MCA) issued a Notification notifying Section 248, 249, 250, 251 and 252 of Companies Act, 2013 (Chapter XVIII). This chapter deals with Removal of Names of Companies from Register of Companies.
A company can apply for a shut down under the new process when:
- A company has failed commence business within one year of incorporation,
- The subscribers to MOA have not paid the subscription amount within 180 days and no declaration filed to this effect,
- 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,
- When a company voluntarily wants to shutdown, it can, after clearing all its liabilities, by obtaining consent of at-least 75% of shareholders in terms of paid-up capital.
Which type of Companies are not covered under FTE mode-
- listed companies,
- companies that have been delisted due to non-compliance of listing regulations or listing agreement or any other statutory laws;
- vanishing companies;
- 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.
Application for removal of name of Company—
- 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 an Indemnity Bond from directors, Statement of Accounts certified by a chartered accountant, Affidavit from directors, Shareholders special resolution signed by every director, a statement that there are no pending litigations involving the company.
- The registrar on receipt of application shall examine the same and if application found in order, it shall intimate to all the directors at the address on record.
- ROC will further intimate and seek objections if any, from income tax, central excise, service tax authorities. There is a time line of 30 days within which such authorities has to respond and if no response is received, then it is presumed that such authorities do not have any objection.
- Based on the company’s business, such as NBFC, insurance, housing finance, collective investment schemes, asset management companies, then ROC requires a no-objection certificate from the applicable regulatory bodies.
The attachments to Form STK-2 are as follows:-
The application in Form STK 2 shall be accompanied by –
- Indemnity bond duly notarised by every director in Form STK 3;
- a 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 by 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 per cent 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.
Dissolution of the Company:
The notice of striking off the name of the company from the register of companies and its dissolution to be published in the Official Gazette in Form STK 7 and the same shall also be placed on the official website of the Ministry of Corporate Affairs by the ROC
Note. Sample of Form STK-2 and STK-3 are also attached to this articles, blogger can also get help of that.