Fast Track Exit under Companies Act 2013_Section 248

MCA vide notifications dated 26th December, 2016 notified Section 248 on Removal of Name of the Company from the Register of Companies and Companies (Removal of Name of the Company from the Register of Companies) Rules, 2016 collectively comprising provisions related to Fast Track Exit Scheme under Companies Act, 2013.

APPLICABLE PROVISIONS

As per Section 248 of the Companies Act, 2013:-

Sub-section (1)

Where the Registrar has reasonable cause to believe that—

(a)    a company has failed to commence its business within one year of its incorporation; or
(b)    a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of dormant company under section 455,

he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.

Sub-section (2)

Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of 75 % members in terms of paid-up share capital, file an application in Form STK-2 to the Registrar for removing the name of the company from register of companies on all or any of the grounds specified in sub-section (1) above and the Registrar shall, on receipt of such application, cause a public notice to be issued as per the provisions of Rule.

Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.

As per Section 455 of the Companies Act, 2013:-

Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in the manner prescribed under Rules for obtaining the status of a dormant company.

Explanation.—For the purposes of this section,—

(i)    “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

(ii)    “significant accounting transaction” means any transaction other than—
(a)    payment of fees by a company to the Registrar;
(b)    payments made by it to fulfill the requirements of this Act or any other law;
(c)    allotment of shares to fulfill the requirements of this Act; and
(d)    payments for maintenance of its office and records.

EXCLUSIONS

The provisions of Section 248 and Companies (Removal of Name of the Company from the Register of Companies) Rules, 2016 shall not apply for striking of names of following types of Companies :-

(i)    Listed Companies
(ii)    Companies that have been delisted due to non- compliance of listing regulations or listing agreement or any other statutory laws;
(iii)    Vanishing companies i.e. a company, registered under the Act or previous company law or any other law for the time being in force and listed Stock Exchange which has failed to file its returns with the Registrar of Companies and Stock Exchange for a consecutive period.
(iv)    Companies where inspection or investigation is ordered and being carried out or actions on such order are yet to be taken up or were completed but prosecutions arising out of such inspection or investigation are pending in the Court;
(v)    Companies where notices under section 234 of the Companies Act, 1956 (1 of 1956) or section 206 or section 207 of the Act have been issued by the Registrar or Inspector and reply thereto is pending or report under section 208 has not yet been submitted or follow up of instructions on report under section 208 is pending or where any prosecution arising out of such inquiry or scrutiny, if any is pending with the Court;
(vi)    Companies against which any prosecution for an offence is pending in any court;
(vii)    Companies whose application for compounding is pending before the competent authority for compounding the offences committed by the company or any of its officers in default;
(viii)    Companies which have accepted public deposits which are either outstanding or the company is in default in repayment of the same;
(ix)    Companies having charges which are pending for satisfaction; and
(x)    Companies registered under section 25 of the Companies Act, 1956 or section 8 of the Act.

KEY CHANGES FROM OLD FTE SCHEME

1.    Earlier Board Resolution was sufficient for approval for making application for removal of name, however now it is mandatory to pass Special Resolution or take consent of 75 % members in terms of paid-up share capital
2.    Earlier the eligibility for applying for FTE was a Companies not carrying any business operation since last one year however now it is changed to a company is not carrying on any business or operation for a period of two immediately preceding financial years.
3.    Additional requirement of certifying the special resolution by each of the directors of the company or consent of seventy five percent of the members of the company in terms of paid up share capital as on the date of application
PROCEDURAL REQUIREMENTS

1.    An application for removal of name of the company under sub-section (2) of section 248 shall be made in Form STK-2 along with the fee of Rs. 5000. The application in Form STK-2 shall be accompanied by-
(i)    indemnity bond duly notarized by every director in Form STK-3;
(ii)    a statement of accounts containing assets and liabilities of the company made up to a day, not more than 30 days before the date of application and certified by a Chartered Accountant;
(iii)     An affidavit in Form STK-4 by every director of the company;
(iv)    a copy of the special resolution duly certified by each of the directors of the company or consent of seventy five percent of the members of the company in terms of paid up share capital as on the date of application;
(v)    a statement regarding pending litigations, if any, involving the company.

2.    The application in Form STK-2 shall be signed by a director duly authorized by the Board in their behalf.

3.    Where the director concerned does not have a registered digital signature certificate, a physical copy of the form duly filled in shall be signed manually by the director duly authorized in that behalf and shall be attached with the Form STK-2 while uploading the form.

4.    The Form STK-2 shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time Practice or Cost Accountant in whole time practice, as the case may be.

 

 

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Swati Popli | Sr. Associate

CS Swati Popli, Associate eMinds Legal

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