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Published : June 11, 2016 | Author : Deepti Bajpai
Category : Company Law | Total Views : 789 | Unrated

  
Deepti Bajpai
Currently pursuing, BA, LLB (Hons), IV Year, Dr. Ram Manohar Lohiya National Law University, Lucknow
 

Fast Track Exit (“FTE”)

Registrar may strike off the name of a ‘defunct company’ from the register subject to certain conditions under the FTE mode. Procedure for FTE is given under Section 560 of the Companies Act, 1956 (“CA,  1956”).

GuidelinesforFTEmodefordefunctcompaniesunderCA, 1956 were notified vide General Circular Number 36/2011 dated June 07,2011. Theseguidelines havebeen implemented with effect from 3rd July,2011. The corresponding provisions for FTE in the Companies Act, 2013 are section 248 and 252. They have not been notified by the MCA.

Definition of a defunct company

Any company will be called as “defunct company” for the purpose FTE, which has nil asset and liability and
A. has not commenced any business activity or operation since incorporation; or
B. is not carrying over any business activity or operation for last one year before making application under FTE.
Any defunct company which has active status or identified as dormant by the MCA, may apply for getting its name strike off from the Register of Companies.

The FTE mode is not applicable to the following:

a. listed companies and companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws,
b. companies registered under section 25 of the CA, 1956;
c. vanishing companies;[1]
d. companies which are subject to investigation or inspection;
e. companies against which prosecutions are pending the court;
f. companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
g. company having secured loan ;
h. company having management dispute;
i. company in respect of which filing of documents have been stayed by any competent authority;
j. company having dues towards taxes or banks and financial institutions or any other authority.

Procedure to be followed by Applicant

Board resolution
Any defunct Company has to pass a board resolution for applying for the FTE and authorize one of the directors to sign any documents and affidavits.

Closing bank accounts
The Company shall close all bank accounts as the same has to be declared in the affidavit to be attached to the Form.

Application – Form FTE

a. Any defunct company shall then make an application in the Form FTE, annexed electronically on the MCA portal namely www.mca.gov.in accompanied by filing fee of INR 5,000/-.
b. If Form FTE is not being digitally signed by director /Manager/ Secretary, a physical copy of the Form duly filled in, shall be signed manually by a director authorized by the Board of Directors of the company and shall be attached with the application Form at the time of its filing electronically.

Certification
Form shall also be certified by a Chartered Accountant /Company Secretary/ Cost Accountant.
If the director’s name in not present in the database of directors of MCA, the application shall be accompanied by a certificate from Chartered Accountant/ Company Secretary /Cost Accountant, certifying that the applicants are present directors of the company. In such cases, the applicants shall not be asked to file Form 32 and Form DIN 3.

Pending litigations

Company is also required to disclose pending litigations against the Company. If the pending prosecutions are only for non-filing of Annual Returns under and Balance Sheet, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application.

The Form shall be accompanied by
a. Affidavit.
Form shall be accompanied by an affidavit, which should be sworn by each of the existing director(s) of the company before a First Class Judicial Magistrate/Executive Magistrate/ Oath Commissioner/ Notary, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations, as the case may be.[2]

b. Indemnity Bond
Form shall further be accompanied by an Indemnity Bond, duly notarized, to be given by every director individually or collectively, to the effect that any losses, claim and liabilities on the company, will be met in full by every director individually or collectively, even after the name of the company is struck off the register of Companies.[3]
Please note: Stamp Duty is required to be paid on Affidavit and Indemnity Bond as per respective State Stamp Act.

c. Statement of Account
Company shall also file a Statement of Account, prepared as on date not prior to more than one month preceding the date of filing of application in Form, duly certified by a statutory auditor/ Chartered Accountant.[4]

Procedure to be followed by the Registrar

Notice
On receipt of application he shall give a notice under Section 560(3) giving thirty days time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved.

Inviting objections

The Registrar shall put the name of applicant and date of making the application on the MCA portal www.mca.gov.in, giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar.

Notice to tax and other relevant authorities

The Registrar shall inform Income Tax Department about companies availing FTE mode and ask for objections within thirty days. RBI, SEBI, etc have to be notified in case of Non-Banking Financial Company and Collective Investment Management Company.

Striking off name

The Registrar of after expiry of such time mentioned above shall strike its name off the Register and shall send notice under section 560(5) of the CA, 1956 for publication in the Official Gazette and the applicant company shall stand dissolved from the date of publication of the notice in the Official Gazette.

Restoration order

Under section 560(6) an application for restoration can be made by any aggrieved company, member or creditor. A company dissolved under FTE can be restored on the Register by a Court order within 20 years of it being striked off.

End-Notes
[1] “vanishing company” means a company, registered under the CA, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar or Stock Exchange and none of its Directors are traceable.
[2]Annexure-A, Guidelines for FTE mode for defunct companies under CA,1956,please see: http://www.mca.gov.in/Ministry/pdf/Circular_36-2011_07jun2011.pdf
[3]Annexure-B, Guidelines for FTE mode for defunct companies under CA,1956,please see: http://www.mca.gov.in/Ministry/pdf/Circular_36-2011_07jun2011.pdf
[4] Annexure C, Guidelines for FTE mode for defunct companies under CA,1956,please see: http://www.mca.gov.in/Ministry/pdf/Circular_36-2011_07jun2011.pdf

 




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