Fast Track Exit (FTE) Mode: Procedure for striking off the name of the company

Last Updated at: Jul 20, 2020
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Fast Track Exit (FTE) Mode: Procedure for striking off the name of the company
Fast Track Exit (FTE) Mode: Procedure for striking off the name of the company

The Ministry of Corporate Affairs of India introduced the Fast Track Exit Mode or the FTE mode on 3rd July 2011, to help non-functioning companies to remove their company names from the register on time. Any business owner running a non-profitable business, owning a defunct business, or planning to start a new company can use the FTE Mode to get their company’s name struck off from the register, according to Section 560 of the Companies Act, 1956.

What is the FTA scheme?

The FTE scheme was launched to boost up the process of the disposal and removal of the companies from the registered list. The fast track scheme gives ROC the right to remove a company’s name from the register as its initiative. Companies can also voluntarily submit an application to remove their names from the register without court intervention. This way, the FTE provides a platform for companies that are no longer running to remove their names from the register.

Eligibility Criteria:

Unfortunately, all the companies are not directly eligible for the application of FTE. The companies must fulfil certain eligibility criteria to use the FTE mode.

  • To apply for the Fast Track Exit scheme, the company must neither have any asset nor any liability.
  • The company shouldn’t have initiated any business activities since its incorporation or shouldn’t have been involved in any sort of business activity in the past year.

Remove Your Company Name

Companies to which FTE doesn’t apply:

The FTE scheme does not apply to a few companies even if they seem to satisfy the eligibility criteria. Those companies are listed below:

  • The companies that had been listed.
  • Those falling under Section 25 of Companies Act.
  • The companies that are vanishing.
  • The ones which were subjected to investigation or inspection in the past.
  • The companies having pending prosecutions against them in the court.
  • The ones that have a secured loan.
  • The companies that had accepted public deposits that are either outstanding or default in repayment of the same.
  • The ones that are under immense debt or the ones facing management issues.
  • The companies for which the filing of important documents have been put to stay by the court or other higher authorities.
  • The companies that have dues of taxes, loans to banks, or other financial institutions.

Documents Required:

If a company wants to get its name struck off from the registered list, the applicant needs to fill in the application form online with the registrar, and pay INR 5000 as an application fee. 

Once the application is submitted successfully, the applicant is required to submit various documents which include:

An Affidavit:

 It is the proclamation taken by all the directors of the company stating either that the company hasn’t undertaken any business since its commencement or that the business was terminated on a particular date (which needs to be specified on the documents).

Indemnity Bond:

The indemnity bond has to be signed and produced by every director of the company either individually or collectively in the name of the company. The indemnity bond usually states that if any losses, debts, assets, or liabilities incur even after removing the name of the company, they will be paid by the directors individually or collectively in the name of their company.

Statement of Account:

It has to be prepared by a professional Chartered Accountant or by the secretary of the company and has to be attached to the FTE application form. The account statement so prepared must not be older than 30 days, preceding the date of application.

Copy of Board Resolution:

The board resolution containing a written statement on the decision of the board members needs to be submitted along with the application form. It also serves as a legal document or record.

Prerequisites:

To be eligible for the FTE scheme, a company must fulfil the following:

Litigation:

A company that has pending litigations can apply under the FTE scheme, provided it specifies the details in the e-form. Details regarding the litigations must also be mentioned in the affidavit.

NOC:

All the directors of the company concerned must confirm no dues are pending against the company. The MCA must also receive a confirmation letter that the Income Tax department has no objection to strike-off the name of the company.

Objections:

The ROC allocates time for the companies to submit a response to the objections raised by the RBI, Income Tax department, etc. If the concerned department is satisfied with the company’s response, then the ROC will proceed with the deregistration process.

Application Procedure:

The procedure to apply for FTA and fill in the application form for the same is given below:

1st step: If the company fulfils the eligibility criteria, it can then register itself under the ROC and obtain an FTE form.

2nd step: After the completion of the registration process, the company has to pay INR 5000 as the registration fee.

3rd step: The ROC then examines the company, and checks whether it satisfies the criteria. Then within 30 days of application, the company is dissolved. Then, the name of the company is also struck off from the list.

4th step: After the application is filled, the stakeholders are given a tenure of 30 days to raise any objections.

5th step: After all the objection and intimation process is completed, the Registrar of Companies finally approves and strikes off the name of the company and a notice is sent regarding the same to the official gazette under section 560(5) of the Companies Act, 1956.

Stamp Duty:

The final step involves paying off the stamp duty on the Affidavit and Indemnity Bond. The applicant must This is done with respect to the State Stamp Act.

As per the Delhi Stamp Act, there has to be a non-judicial stamp paper of INR 10 on the affidavit. Also a stamp paper of INR 200 on the Indemnity bond.

Post-strike Off Liabilities:

After the removal of the company’s name, all the directors must pay and settle all the claims against the company. They must also pay and settle all the liabilities in the name of the directors or the company.

A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.