What is FTE (Fast Track Exit) Scheme - A Detailed Analysis

What is Fast Track Exit (FTE)

Ministry has issued Guidelines for "Fast Track Exit (FTE) Mode" to give opportunity to the defunct companies to get their names struck off from the register under Section 560 of the Companies Act, 1956 in time bound manner. The Guidelines will be implemented with effect from 3rd July, 2011.

Main Criteria for making an Application under FTE

There are two main criteria:-

The company applying under FTE should not have any asset and liability.

The company should not have commenced any business activity or operation since incorporation or at least one year must has been passed since last business activity or operation

Companies which can apply FTE:

Any company, which has been identified as dormant by the Ministry of Corporate Affairs, can apply under FTE. Such companies need not to file Form No. GNL-1 for normalizing.

Any company, which has not filed its statutory documents i.e. Balance Sheet and Annual Return for any of the financial year 2006-07, 2007-08, 2008-09 and 2009-10, has been identified as defaulting company. Directors of such companies are debarred from filing any document till they make the default good. Such defaulting companies can apply under FTE.

Companies on which FTE is not applicable

The guidelines does not inter-alia cover:

• The listed companies,

• Companies that have been de-listed due to non-compliance of listing agreement or any other statutory Laws,

• Section 8 companies, *vanishing companies, companies under inspection/investigation

• Companies against which prosecution for a non-compoundable offence is pending in court,

• Companies having outstanding public deposits or secured loan or dues towards banks and financial institutions or any other Government Departments etc. or having management dispute or

• Company in respect of which filing of documents have been stayed by court or CLB or Central

• Government or any other competent authority.

*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.

PROCEDURAL REQUIREMENTS

Procedure for making application for striking off the name under FTE are as follows:

The Company desirous to get its name struck off from the Register shall file an application in the prescribed Form FTE online with the Registrar.

The form shall be accompanied with an affidavit, an indemnity bond, statement of account duly certified by a Chartered Accountant in practice or auditor of the company and copy of board resolution showing authorization for filing the form. 

Fee for filing Form FTE

Applicant is required to file an application in the prescribed Form FTE along with prescribed fee of Rs. 5,000/-

Who can sign Form FTE?

In case there are active signatories of the company existing in the MCA21 system, then the Form shall have to be mandatorily digitally signed by the authorised signatory of the company.

In case no active signatories are existing in the MCA 21 system, then a physical copy of the Form duly filled in, shall have to be signed manually by a director authorised by the Board of Directors of the company and shall be attached with the Form.

Such form will be uploaded by the practicing professional (i.e. CA/CS/CWA), who has certified the form.

In such case, the application shall be accompanied by certificate from a CA/CS/CWA in whole time practice along with their membership number, certifying that the applicants are present directors of the company. In such cases, the applicants shall not be asked to file Form DIR-12 and DIN Form.

In all cases, certification by a practicing professional (i.e. CA/CS/CWA) is mandatory

If Pending Prosecution against the Company

If the pending prosecutions are only for non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Act, 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.

How the foreign nationals will get their Indemnity Bond and Affidavit notarized?

Foreign nationals and NRIs may get their Indemnity Bond and Affidavit notarized as per their respective country’s law.

In case any stakeholder has any objections to the Striking off the name of any company from the Register, what shall be done in such case

List of applications filed under FTE will be available on the portal. In case any stakeholder has any objections to the Striking off the name of any company, he/she may raise such objection by email/letter with the concerned ROC Office within 30 days from the date of filing Form FTE by the company. 

Attachments with FTE Form

• A duly certified statements of Account by the chartered Accountant in whole time Practice or Statutory Auditor of the Company (as per annexure C of the scheme) 
• Copy of Board Resolution showing Authorization given for filing this application
•  Affidavit (to be given individually by Director(s)
• Indemnity Bond
• In case of application not digitally signed by the company representative , copy of application duly signed by Director, Managing Director or Secretary. 
• Copy of No Objection certificate from the concerned administrative ministry/Department/ State Government (in case of Government Company) 
• Copy of relevant order for delisting from concerned Stock Exchange.