How to close defunct company in fast track exit mode?

Meaning of defunct company

There are many companies which are registered under company act 1956 but due to various reasons they are not operative since incorporation. Some companies become operative immediately after incorporation but become inoperative thereafter.

The fast track exit mode scheme is applicable to the defunct company. Here “Defunct Company” means the company which has

•   NIL assets and NIL liability
•   Not commenced any business or activity sinceincorporation Or Not been carrying any business operation since last one year before making an application under Fast Track Exit Scheme

Any defunct company which has active status or identified as dormant by the Ministry of Corporate Affairs, may also apply for getting its name struck off from the Register of Companies.

About Scheme

The guidelines of scheme of Fast Track Exist Mode is given in the general circular 36/2011 dated 7^th June 2011. The scheme is applicable from 3^rd July 2011. It is still applicable as on today’s date.

To whom the Fast tract exit mode scheme is not applicable

The scheme is not applicable to the

•  Listed companies,
•  Companies de-listed due to non-compliance of statutory laws,
•  Companies registered under section 25 of the Companies Act, 1956,
• Vanishing companies;  (Listed company failed to file the returns to ROC and stock exchange for consecutive period of two years and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable)
• Companies whose inspection or investigations are pending in the court,
• Companies where order under section 234 of the  companies Act, 1956 has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court,
• Companies against which prosecution for a non-compoundable offence is pending in court,
• Companies accepted public deposits which are either outstanding or the company is in default in repayment of the same,
• Company having secured loan,
•  Company having management dispute,
• Company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;
• Company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities

Why it is necessary to close defunct company?

The New Company Act 2013 is very stick and there are high penalties for even for small defaults. If company is inoperative and there is least possibility to become it operative then it is advisable to close the company by using this
scheme.

Before applying the scheme:

Before applying the scheme the applicant should check whether his comply all conditions of the scheme.  There should be nil assets and nil liabilities of the company. If some assets or liability exist it should be nullify. At the end there should be only share capital and profit and loss account in the balance sheet.

Step by step procedure:    

1. Make the application in form FTE which is available on MCA portal. Fees require for this form is Rs.5000

2. Along with Board resolution of striking of the name of the company under section 560 of the company act 1956,  the documents require to attach the FTE form are as below

Annexure- A – Affidavit required to give individually by each director

Annexure –B – Indemnity Bond to give individually or collectively by every director

Annexure –C – Statement of accounts duly certified by statutory auditors

 Format of all three documents are given in the circular.

 3. The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by email on its e-mail address intimated in the Form, 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.

4. The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under fast track exit mode, on daily basis, on the MCA portal giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar;

5. In case of company(s) like Non-Banking Financial Company(s), Collective Investment Management Company(s) which are regulated by other Regulator(s) namely RBI, SEBI, the Registrar of Companies, at the end of every week, shall send intimation of such companies availing fast track exit mode during that period to the concerned Regulator(s) and also an intimation in respect of all companies availing fast track exit mode during that period to the office of the Income Tax Department giving thirty days time for their objection, if any;

6. The Registrar of Companies immediately after passing of time given in sub-paras (a) to (c) of this Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under sub-section (5) of section 560 of the Companies Act, 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.