If you want to wind up your company for any reason but don't know how to do it, then in this article, we will explain how to close a company in the right way!
A Fast Track Mode business may decide to close when it becomes more challenging for it to pay its debts owing to loss, stopping operations, entering receivership or liquidation, etc. Private limited corporations make up the majority of businesses with Indian registrations. When there is no longer any development in their business after a period of time, people desire to shut the company and cease operations so that they are relieved of the responsibility of maintaining its returns and other records. In this blog, we will discuss how to close a company through fast-track exit mode.
In India, there are two ways to dissolve a business:
- Fast Track Exit: In India, it is the most common and effective method of closing a business.
- Voluntary Winding-Up: In India, closing a business requires a long journey and follows a custom.
Learn More: Closure of Company Under Companies Act 2013
Fast Track Mode: Fast Track Exit Mode (FTE)
The Ministry of Corporate Affairs has implemented FTE mode to make it easier for non-operating companies to get their names removed from the Ministry of Corporate Affairs’ databases.
In comparison to the preceding schemes for the exit of non-operating companies,
This is a simple method for terminating non-operating companies at a lower cost with fewer formalities and in less time.
Steps for Closing Your Company Under FTE Mode
To close a company these steps should be followed,
- You must submit an application in form FTE first (Online).
- Then you must pay the Rs. 5,000 costs that are required.
- It’s crucial that your FTE be digitally signed by the company’s director, manager, or secretary (In case there are no active signatories existing in the MCA 21 system,
- it shall be signed manually by a director authorized by the Board of Directors of the company and shall be attached with the Form FTE at the time of filing.)
- Another requirement is that a CA, CS, or CWA must certify it.
- Along with your FTE form, you must also include the following:
- A copy of the Board resolution authorizing a director, manager, or secretary to file Form FTE must be submitted.
- The duly signed affidavit by each director endorsing FTE is another item.
- Each director must provide an indemnification bond, either individually or collectively (In the case of NRIs and foreign nationals, the Indemnity bond and the Affidavits shall be attested as per the laws of respective countries).
- Additionally, a Statement of Accounts in FTE form that is duly certified by a statutory auditor or a CA must be prepared on a date that is not earlier than one month prior to the date the application is filed.
One must submit the e-form FTE- Fast Track Exit Scheme after the company closing documentation phase is complete. From the date of filing, it will take at least one month for Form FTE to be approved.
Companies That Can Apply Under Fast Track Exit Mode
The following requirements must be fulfilled in order to apply for the Fast Track Exit mode for any company registered under the 2013 Companies Act:
- Defunct Company
- A company with no assets or liabilities.
- The company had not started any commercial operations or activities since its incorporation
- And was not carrying over any past operations or activities.
- Status of the business on the MCA website
- The Ministry of Corporate Affairs has classified the Company as either “active” or “dormant.”.
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Companies That Cannot Apply Under Fast Track Exit Mode
The following companies are ineligible to apply in FTE mode: Any listed companies;
- Companies that have been delisted for failing to comply with the Listing Agreement or any other statutory Laws.
- Companies that have been registered in accordance with Section 25 of the 2013 Companies Act;
- The term “vanishing companies” refers to listed companies that have not filed their returns with the Registrar of Companies and Stock Exchange for two years in a row,
Whose registered office does not exist at the address provided to the Registrar of Companies or Stock Exchange, and whose directors cannot be located in any way.
- Companies where an inspection or investigation has been ordered, is being conducted, is still pending,
or where completed prosecutions resulting from such an inspection or investigation are being heard in court;
- Companies where the Registrar of Companies has issued the order of investigation pursuant to Section 234 of the Companies Act, 2013,
And to those where the reply is pending or where the prosecution, if any, is pending in court;
- Companies that have accepted public deposits that are either outstanding or the Company is in default in repaying the same; Companies that are being prosecuted for a non-compoundable offenses in court;
- Companies with loans that are secured;
- Companies with management conflicts;
- Those companies for which the filing of paperwork has been stopped by a court, the Company Law Board (CLB), the Central Government, or any other authorized body;
- Businesses that owe money to the federal government, a state government, a local government, a bank, a financial institution,
an income tax collector, a sales tax collector, a central excise tax collector, a bank, or another type of financial institution.
Benefits
- The business does not have to control time- and money-consuming compliances like ROC filing and income tax filing. Accordingly, it saves time and money overall.
- As is common knowledge, penalties are imposed on directors and the company for failure to comply with annual formalities.
The company is therefore protected from any potential fines and prosecutions related to annual compliances as a result of this. Many times, employees just quit their jobs without giving notice,
- leaving their businesses with expensive maintenance expenditures. So, if you don’t anticipate using your private limited company anytime soon, it would be less expensive to dissolve it and re-incorporate it when you do.
- Under the fast-track exit, closing a corporation takes only about 100 days.
Conclusion
We hope that after reading this article you have understood how close a company in India through fast track method.
If you want to wind up your company, don’t let the formalities bother you anymore. With Vakilsearch, make it a hassle-free and easy process. Armed with decades of knowledge our legal experts can fulfill all your legal needs with ease.
