A company may go for closure when it becomes increasingly difficult for a company to pay its debts due to loss, ceasing trading or going into receivership or liquidation etc.
Most of the companies registered in India are the private limited companies. In case, when after some time there is no growth seen in their Business, that time they want to shut down the operations and close the company so that they need not to maintain the company returns & other thing. There are 2 ways for closing a company in India: –
- Fast Track Exit –it is most popular and best way to close a Company in India.
- Voluntary Winding up–it’s a long way and a traditional method to close a company in India.
Here, we discussed about the Fast Track Exit method which is considered to be best one.
Fast Track Exit Mode (FTE)
FTE mode is introduced by Ministry of Corporate Affairs for giving opportunity to non-operating companies which are desirous for getting their names struck off from the records of Ministry of Corporate Affairs easily. It is an easy mode of closing non-operating companies at cheaper cost with lesser formalities and in less time as compared to earlier Schemes for Exit of non-operating companies.[1]
Companies which can apply under Fast Track Exit mode
Any company registered under the Companies Act, 2013 which satisfies the following conditions can apply under the Fast Track Exit mode[2]:-
- Defunct Company
- A Company with Nil assets & liability.
- Had not commenced any business activity or operation since its incorporation;
- It is not carrying over any business activity or operation for last one year before making application under FTE.
- Status of company on MCA portal
- The status of the Company is “active” or identified as the “dormant” by the Ministry of Corporate Affairs.
Companies which cannot apply under Fast Track Exit mode
The following Companies cannot apply under FTE mode[3]:-
- Any listed companies;
- Companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws,
- Companies which are registered under section 25 of the Companies Act, 2013;
- Vanishing companies, i.e., listed Companies which have not filed their returns with Registrar of Companies and Stock Exchange for successive period of 2 years, and their registered office doesn’t exist at the address intimated to the Registrar of Companies or Stock Exchange and none of its Directors are traceable at all.
- Companies where inspection or investigation is ordered and being carried out or it is yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;
- Companies where order of investigation under section 234 of the Companies Act, 2013 has been issued by the Registrar of Companies and to those where reply 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 of law;
- Companies which have accepted public deposits which are either outstanding or the Company is in default in repayment of the same;
- Companies having secured loans;
- Companies having management disputes;
- Companies 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;
- Companies having dues towards Income Tax/ Sales Tax/ Central Excise/ Banks and Financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.
Step for closing your company under FTE mode:
- First of all, you have to make an application in form FTE. (Online).
- Then you have to pay prescribed fee of Rs. 5,000.
- It’s important that your FTE need to be digitally signed by the Director, or Manager or Secretary of the Company (In case there are no active signatories existing in the MCA 21 system, it shall be signed manually by a director authorised by the Board of Directors of the company and shall be attached with the Form FTE at the time of filing.)
- Another thing is that it shall be certified by a CA/CS/CWA.
- Apart from this your FTE form shall be accompanied by:
- You need to submit copy of Board resolution which give authorisation to a Director/Manager/ Secretary to file Form FTE
- Another thing is the affidavit, by each director, duly signed, giving assent to FTE.
- An indemnity bond needs to submit by every director, either individually or collectively (In case of NRIs and foreign nationals, the Indemnity bond and the Affidavits shall be attested as per the laws of respective countries).
- You also have to prepare Statement of Accounts on date not prior to more than one month preceding the date of filing of application in FTE form which should be duly certified by a statutory auditor or a CA.
After the company closing documentation part is over, we have to file e-form FTE- Fast Track Exit Scheme. Form FTE will take at least one month from the date of filing to get approved.
Benefits
- The company need not to regulate compliances such as ROC filing, Income Tax Filing etc which takes time and money. So as a whole it is cost efficient and less time consuming.
- As we know non- fulfilment of Annual formalities attract penalties on directors and the company. So, hence it immune the company from any existent penalties and prosecutions with regard to Annual Compliances.
- Many a times people just left their company without winding up and later suffer from high maintenance cost. So, if you have no plan to use your private limited company in near future then, it would be cheaper to wind up this company and incorporate again when you need.
- It takes very less time of around 100 days to close a company under the fast track exit.
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