Fast Track Exit mode for defunct companies under Section 560 of the Companies Act, 1956

[vc_row][vc_column][vc_column_text]Need for Fast Track Exit Mode:

There are a number of companies, which are registered under the Companies Act, 1956, but due to various reasons they are inoperative since incorporation or commenced business but became inoperative or defunct later on. Such companies may be desirous of getting their names struck off from the Register of Companies maintained by Registrar of Companies.

Companies Act Provision:

As per Section 560 of the Companies Act, 1956, Registrar of Companies may strike off the name of companies on satisfying the conditions therein. As per present practice, a company desirous of getting its name struck off, has to apply to Registrar of Companies in e-form 61. All pending statutory returns are required to be filed along with e-form 61. However under the new scheme i.e. fast track exit mode, there are no filings to be done, an application in  Form FTE has to be made irrespective of all pending statutory returns.

“Fast Track Exit mode” by MCA:

In order to give an opportunity for fast track exit by defunct companies, for getting  its name struck off from the Register of Companies, the Ministry decided to modify the existing route through e-form – 61 and has prescribed the new Guidelines through General Circular No. 36/2011 dated 7th June, 2011.

The Guidelines for “Fast Track Exit mode” for defunct companies under Section 560 of the Companies Act, 1956 are enclosed herewith. These Guidelines have been implemented   w.e.f. 3rd July, 2011.

Applicability:

A Defunct Company, meaning a company which has nil asset and liability and

(i) has not commenced any business activity or operation since incorporation
(ii) is not carrying over any business activity or operation for last one year before making application under FTE.

Non Applicability

• Listed Companies or Companies that have been de-listed due to non-compliance of Listing Agreement or any other statutory Laws;
• Section 25 Companies;
• *Vanishing Companies;
• Companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation 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.

Procedure to be followed by the Company:

Make an application in the Form FTE, along with filing fee of Rs. 5,000/- with the below mandatory attachments :

• Affidavit by each director (individually) as provided in the guidelines.
• Indemnity Bond by directors (individually or collectively) as provided in the guidelines.
•Statement of Accounts not prior to more than one month preceding the date of filing of application.
• Board Resolution (not mandatory)

Signature on e-form :

In case, e-form FTE, is not being digitally signed by any of the director or Manager or 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;

However in all cases, it shall be certified by a practicing professional (CA/CS/CWA);

Note :

1. If the applicant’s name is not available, certificate from practicing professional (CA/CS/CWA) along with their membership number, certifying that the applicants are present directors of the company shall suffice. Therefore, the applicants shall not be asked to file Form 32 and Form DIN 3.

2. If the pending prosecutions are only for non-filing of Annual Returns under Section 159 and Balance Sheet under Section 220 of the Companies Act, 1956, 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 by the competent authority.

3. The company shall disclose pending litigations if any, involving the company while applying under FTE

4.In the case of 100% Government companies, if no Board is in existence, an officer not below the rank of Deputy Secretary of the concerned administrative Ministry may be authorized to enter the concerned administrative Ministry may be authorized to enter    his name and other details in Form FTE and in Annexure A, B and C in place of name and   other details of the directors and also to sign the said documents before filing.

Procedure adopted by the Registrar of Companies:-

(a) 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

(b) 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 www.mca.gov.in, giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar;

(c) 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 or their objection, if any;

Explanations:

“Non-Banking Financial Company” means a company as defined under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934.

“Collective Investment Management Company” means the company as defined in clause (h) of sub-regulation of 2 of Securities and Exchange Board of India (Collective Investment Companies) Regulations, 1999.

*“vanishing company” means a company, registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of  Companies and Stock Exchange for a 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.

Conclusion:

The Registrar of Companies immediately 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.[/vc_column_text][/vc_column][/vc_row]