In corporate and legal language, it is called fast track exit (FTE). A defunct or dormant company can be closed permanently when the company is not doing any business for a long time. The Ministry of Corporate Affairs (MCA) in India has systematized the matter as per the Companies Act, 2013. Whenever the board of directors wants to go for fast track company closure, they have to follow the rule. It is always feasible to take corporate legal advice in this matter to wind up the company in concern completely. If FTE is not happening systematically now, the company promoters or board of directors may have to face several legal consequences in the future.
What is the first track exit scheme?
The MCA has created the system to boost up the process of removal of a company name from ROC that is no more functional in India. It gives the capacity to ROC to remove the name of a company frothier list on certain grounds or makes it possible to some companies to remove their names from ROC when they are either dysfunctional or dormant for a certain period.
- A company can apply for FTE if they have no liability in the market in any form.
- A company can apply for FTE if it is proved that they have no business activities that can create assets or liability during the past year.
There may be other kinds of obligations that a company needs to follow while winding up through FTE. A fast track company closure normally takes 30 days maximum if the documents are rightly processed and ROC finds the company has no issue in the market. Consulting company law experts in this matter makes the process smooth sailing for the board of directors.
Not all companies are fit to fast track exit
The FTE scheme of MCA doesn’t apply in certain cases even if they have not done any business in the last year or they have no asset or liability. In any of the following situations, the company cannot apply for FTE.
- The company is a SEBI-listed company.
- The company is falling under section 25 of the companies act 2013.
- The company is prosecuted in any court of law anywhere in India or abroad.
- The companies have pending prosecution in any court of law anywhere in India or abroad.
- The company has dues in the form of unpaid loans or taxes.
- The Company has obtained a secured load from any bank in India.
There may be more complicated legal reasons not listed above. For FTE, the company needs clearance from ROC. To obtain the clearance, it is feasible to consult an expert in this domain like UComply that could help in systematic fast track company closure with zero backlogs or obligations.