Fast Track Exit for Defunct Companies

Defunct companies or any company having NIL assets and NIL liability can file to ROC for striking their name off the registrar of the companies to avoid annual compliance cost under Fast Track Exit Scheme.

Defunct Company

A defunct company can be defined as a company who has not been in business either since one year of its incorporation or has failed to deliver any business in the preceding two financial years. Such companies become non-operative and hence are required to file for dormant status.

Under what condition can a company apply for FTES?

A company can file for FTE status when;

the company fails to start a business within the first year of its incorporation
the company is not in business for the preceding two years and have not filed for the status of the dormant company as well
Where the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporatio of a company and a declaration to this effect has not been filed within 180 days of its incorporation.
Where the Company is not carrying any business or operations, as revealed after the physical verification carried out under Section 12 subsection (9) of the Act.

Procedure for going under FTES

To close a company under fast track exit scheme, the company has to file for form STK-2 and pay a fess of INR 5000 to the ROC for striking off the name of the company. The detailed procedure includes:

Step-1: Board Meeting

A special resolution is passed in the meeting regarding the closing of the company which has to be approved by 75% of the board members.

Step–2: application for name removal

An application is sent to ROC with form STK-2, with the prescribed fees along with

Indemnity bond duly notarised from every director individually in form STK-3
Statement of accounts which contains assets and liabilities of the company
An affidavit in Form STK 4, by each of the existing directors stating that the company did not carry any business since the incorporation of the company or that the company was in business for some time, but then it was discontinued.
A copy of the special resolution 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;
Statement regarding pending litigations

Step–3: Notice from ROC

After receiving the application the Registrar of the Company shall examine the same, and if satisfied, they shall give notices to the company in form STK-5, STK-6 on the official website of the Ministry of Corporate Affairs, Official Gazette and at least in one leading English newspaper

The ROC shall also intimate the concerned authorities such as the income tax department, centre excise department to object if any within 30 days. If no objection is raised, then ROC can issue a notice in form STK-7 for striking off and dissolution of the company on the official website of MCA.

When can an application be rejected for filing FTES?

An application shall not be accepted for striking off the name of the company when a company:

Changed its name or has shifted its registered office from one State to another in recent years.
Made disposal for value of property or rights held by it, immediately before termination of trade or carrying on of the business, for disposal for gain.
engaged in another activity except for the one which is necessary to make an application under that section or complying with any statutory requirement
made an application to the Tribunal for the sanctioning of a compromise or arrangement and the matter has not yet concluded

Fast Track Exit for Defunct companies