How Do You Close A Business In India Using Fast Track Exit Mode?
A complete guide on – How Do You Close A Business In India Using Fast Track Exit?
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Introduction
- The Ministry of Corporate Affairs (MCA) announced a program to remove a company’s name from the Register of Companies through a Fast Track Exit (FTE). When it becomes more difficult for a company to pay its debts owing to loss, ceasing operations, moving into receivership or liquidation, etc., then a company can decide to close. The thorough information in this article will help you know more about closing a business through Fast track mode.
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What is a Fast Track Exit (FTE)?
- The Ministry has released “Fast Track Exit (FTE) Mode” Guidelines to give shuttered companies the chance to have their names removed from the register under Section 560 of the Companies Act, 1956. In comparison to previous Schemes for Exit of Non-operating Companies, it is a simple method for closing non-operating companies at a lower cost with fewer formalities and in less time.
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What are the Advantages of Fast Track Exit (FTE) Mode?
- The business is not needed to manage time- and money-consuming compliances like ROC filing and income tax filing. Overall, it is less time-consuming and more cost effective.
- Delay to complete annual formalities results in penalties for both directors and the firm. As a result, it protects the company from any financial penalties or legal action related to annual compliance.
- People frequently quit their jobs without completing projects, and leave the organization with significant maintenance costs in the future. Therefore, it would be less expensive to dissolve such a firm and re-incorporate when required if you do not have any immediate plans to utilize your private limited company.
- A company can be closed in around 100 days under the fast track exit.
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What is the procedure to close a business in India via Fast Track Mode?
- Any firm that is registered under the Companies Act, 2013 and meets the requirements below may apply for the Fast Track Exit mode:-
- Dormant company
- A business with no assets or liabilities
- A business that had not started any operations or economic activities since its formation
- It has not carried over any business activity or operation for the previous year before applying for FTE.
- Status of the business on the MCA portal
- The Ministry of Corporate Affairs has classified the company as either “active” or “dormant”.
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What is the procedure to close a business in India via Fast Track Mode?
- You must submit an application in form FTE first.
- Then you must pay the required charge of Rs. 5,000.
- It’s important that the director, manager, or secretary of the organization digitally signs your FTE (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).
- A CA/CS/CWA must certify it, among other requirements.
- A copy of the Board resolution authorizing the director, manager, or secretary to file Form FTE must be included with your FTE form.
- Another requirement is the legally executed affidavit confirming FTE signed by each director.
- Each Director shall, individually or collectively, provide an indemnification bond (In case of NRIs and foreign nationals, the Indemnity bond and the Affidavits shall be attested as per the laws of respective countries).
- As part of the application process, you must also submit Statements of Accounts in FTE form that must be properly certified by a statutory auditor or a CA and must be prepared not earlier than one month before the date the application is filed.
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Conclusion
- A Fast Track Mode company may decide to close if it finds it extremely difficult to pay its debts as a result of losing money, ceasing operations, going into receivership or liquidation, etc. Any business that the Ministry of Corporate Affairs has classified as being dormant may submit an application under Fast Track Exit (FTE). Such businesses are free from submitting Form GNL-1 for standardization. The provisions of Section 248 of the Act are less difficult and provide for a quicker exit for companies than winding up.
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