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Fast Track Exit Scheme

Fast Track Exit (FTE) Scheme

Fast Track Exit (FTE) Scheme

The Ministry of Corporate Affairs (MCA) vide Notification No. 16/2016 on 26th December 2016, introduced a scheme to strike off the name of a company from the Register of Companies through Fast Track Exit (FTE). The scheme is proposed to provide an opportunity to the defunct companies to get their names struck off from the Register of Companies according to Section 560 of the Companies Act, 1956.

Highlights of the Scheme

  • The company applying under FTE should not have any asset and liability.
  • The company should not have started any business activity or operation from its incorporation, or for at least one year from its last business activity or operation.
  • The scheme does not apply to the following companies.
    1. Listed companies.
    2. Companies that are de-listed due to non-compliance of listing agreement or any other statutory laws.
    3. Section 25 companies.
    4. Vanishing companies.
    5. Companies under inspection/investigation.
    6. Companies against which prosecution for a non-compoundable offence is pending in court.
    7. Companies that have outstanding public deposits or secured loan or dues towards banks and financial institutions or any Government Departments or having management disputes.
    8. Company for which filing of documents has been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority.

Documents Required

The following are the required documents to file an application with a prescribed fee of Rs. 5,000.

  • An affidavit
  • Indemnity Bond
  • Statement of Account
  • Copy of Board Resolution

Pre-requisites

Litigation: Fast track exit scheme does not specify that a company against which litigation is pending cannot apply for striking off the name of the company from the register maintained by the ROC. Therefore, a company against which litigation is pending can apply under the scheme. In addition to this, the details of the pending litigations have to be filled up in e-form FTE that has a reference in affidavit format. Any pending litigations that involve the company have to be disclosed while applying under this scheme.

NOC: There is no requirement of NOC from Income Tax/Sales Tax/Central Excise/other government authorities. It is mandatory for all directors to confirm there are no dues pending against the company with such authorities. MCA sends a confirming letter that Income Tax has no objection for striking off the name of the said company.

Objections: The applicant Company replies to the objections that are raised by RBI, Income Tax Department or any other Department. There is no time allocated by the ROC to give a reply to the applicant company. If RBI, Income Tax or the relevant Department is satisfied with the given reply, ROC permits the striking off name of such company.

Application Procedure

The application procedure to get the name of a company struck off under Fast Track Exit scheme is given below.

Step 1: Registration

The company eligible to apply for striking off its name has to apply to the Registrar of Companies in Form FTE.

Step 2: Fee Payment

The FTE has to be filed electronically on the Ministry of Corporate Affairs portal by remitting ROC fee of Rs. 5000.

Step 3: Examination

The Registrar of Companies examines and gives notice to the Company under Section 560(3) of the Companies Act, 1956 by e-mail, mentioning thirty days unless the cause of showing to the contrary, its name be struck off from the Registrar and the company will be dissolved.

Step 4: Raising Objection

The registrar of companies includes the name of the applicants(s) and the date of making the application under the scheme in the MCA portal, giving thirty days to raise objections, if any, by the stakeholders to the concerned Registrar.

Step 5: Intimation

The Registrar of Companies sends intimation of such companies that avails Fast Track Exit mode to the office of the Income Tax Department providing thirty days for their objection.

Step 6: Approval

The Registrar of Companies approves if satisfied and strikes its name off the Register and sends a notice under Section 560(5) of the Companies Act, 1956 for publication in the official Gazette.

Stamp Duty

Stamp duty has to be paid on Affidavit and Indemnity Bond according to the concerned State Stamp Act. As per the Delhi Stamp Act, an affidavit has to be on non-judicial stamp paper of Rs. 10 and Indemnity Bond on non-judicial stamp paper of Rs. 200.

Liabilities of Directors

Given below are the liabilities of directors after striking off the name of the Company by ROC.

  • To pay and settle all lawful crimes that arise in the future once the name of the company is struck off.
  • To indemnify any individual for any losses that arise after striking the name of the company.
  • To settle all lawful claims and liabilities that are not noticed even after striking off the name of the company.

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