Compliance Procedure: Fast Track Exit Mechanism under the Companies Act, 2013

The Fast Track Exit (FTE) mechanism under the Companies Act, 2013, offers an efficient way for defunct companies to strike off their names from the Register of Companies. It provides a simplified alternative to lengthy winding-up proceedings while ensuring protection of stakeholders’ interests. This article outlines the eligibility, procedure, and compliances required for companies opting for the FTE route.

1. Eligibility Criteria

The Registrar to whom the Application for removing the name of companies from the Registrar of Companies (RoC) has been made needs to satisfy itself of either or all the following conditions:-

1. The Company has failed to commence business within one year of its incorporation.
2. The Company is not carrying on any business or operation for a period of two immediately preceding financial years, and no application is made under such period for obtaining a status of the dormant company.
3. Subscribers to Memorandum have not paid the subscription amount within 180 days and no declaration filed to this effect has been filed.

Once the above eligibility criteria is satisfied –

1. The Registrar shall send a Notice[1] to the company and all the directors of the company mentioning the intention to remove the company from the RoC. And will further request them to send their representations along with copies of the documents if any.
2. After all the liabilities are extinguished, through a special resolution or consent of 75% of members in terms of paid-up capital, the Company will file an Application to the Registrar[2] in the prescribed manner from removing the name of the companies in a prescribed manner on all or any grounds specified in the above paragraph.
3. Further, the Registrar on receipt of such Application, will issue a public notice:-
   1. If the company is regulated under the special act, the approval of the regulatory body shall be obtained and enclosed with the application.
   1. The notice shall be published in the prescribed manner[3] and also in the Official Gazette for the information of the general public.
   1. The Registrar shall further satisfy himself that the company is absolved from all amounts due to the company and all liabilities and obligations are discharged within a reasonable time. Further, the Registrar, if necessary, shall obtain necessary undertakings’ from the managing director, director or other persons in charge of the management of the company.
   1. Notwithstanding this undertaking, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order to remove the company from the name of the RoC.
   1. At the expiration of the time mentioned in the notice, the Registrar may unless the contrary is shown by the company, shall strike off the name from the RoC and shall publish notice[4] in the Official Gazette, and on the publication on the Official Gazette the company shall stand dissolved.

• Pre-requisite conditions [5]

Application cannot be made if, in the preceding three months, the company has changed its registered office, disposed property outside normal business, carried on activities beyond those necessary for closure, applied for compromise/arrangement pending before Tribunal, or is being wound up under the Companies Act or IBC.

• Date of Cessation[6]

The company ceases operations from the date in the notice, provided liabilities are discharged. Its Certificate of Incorporation stands cancelled from such date.

• Fraudulent Application[7]

If the Application filed to the Registrar is with the object of evading the liabilities of the company to deceive the creditors or to defraud any persons, the persons in charge of the management of the company shall be

1. jointly and severally liable to any person(s) who had incurred loss or damage as a result of the company being notified as dissolved.
2. punishable for fraud as provided in Section 447.
3. The Registrar may also recommend the prosecution responsible for filing such an application under Section 248(2) of the Companies Act, 2013.

• Compliances under Section 248(2) [8]:-

1. An application for removal of the name of the company under sub-section (2) of section 248 shall be made in Form STK-2 along with the fee of five thousand rupees.
   1. Every application under sub-rule (1) shall accompany a no objection certificate (NOC) from the appropriate Regulatory Authority concerned in respect of the following companies, namely: –
2. companies which have conducted or conducting non-banking financial and investment activities as referred to in the Reserve Bank of India Act, 1934 (2 of 1934) or rules and regulations thereunder;
3. companies in the business of capital market intermediaries as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations thereunder;
4. companies engaged in collective investment schemes as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations thereunder;
5. asset management companies as referred to in the Securities and Exchange Board of India Act, 1992 or rules and regulations thereunder;
6. any other company that is regulated under any other law for the time being in force.
   1. The application to the Registrar shall be accompanied by –
7. indemnity bond duly notarised by every director in Form STK 3;
8.  a statement of accounts containing assets and liabilities of the company   made up to a day, not more than thirty days before the date of application and certified by a Chartered Accountant;
9. an affidavit in Form STK 4 by every director of the company;
10. 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 of the date of application;
11. a statement regarding pending litigations, if any, involving the company.

• Manner of filing of the Application

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

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 on that behalf and shall be attached with Form STK 2 while uploading the form.

• Form to be certified[9]

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.

• Manner of publication of notice[10]

• The Notice under sub-section (1) or sub-section (2) of section 248 shall be in accordance with the format in Form STK 5 or STK 6, as the case may be, and further be:-
• placed on the official website of the Ministry of Corporate Affairs on a separate link established on such website in this regard;
• published in the Official Gazette;
• published in the English language in a leading English newspaper and at least once in vernacular language in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated. Provided that in case of any application made under sub-section (2) of section 248 of the Act, the company shall also place the application on its website, if any, till the disposal of the application.

• The Registrar simultaneously intimates tax and regulatory authorities (Income Tax, Excise, GST, etc.) seeking objections within 30 days. If none are received, it is presumed no objection exists.

1. Manner to notarize, appostille or consularisation of indemnity bond and declaration in case of foreign nationals or non-resident Indians [11]

Where directors are foreign nationals/NRIs, indemnity bond and declaration must be notarised, apostilled, or consularised.

• Conclusion

The Fast Track Exit route serves as a pragmatic mechanism for companies that are no longer in operation to exit the corporate framework with ease. By balancing regulatory safeguards with procedural simplicity, it ensures both compliance and efficiency. Its proper use can reduce the burden on businesses and regulators alike, while upholding transparency in corporate governance.

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[1] As per the format mentioned in Form STK 1 of Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.

[2] As mentioned in Section 248 (2) of the Companies Act, 2013.

[3] Per the manner in Form Nos. STK-2; STK-3. STK-3, STK-3A, STK-4, and STK- 8

[4] As per the Form No. STK 7 of Companies ( Removal of Names of Companies from the Registrar of Companies) Rules, 2016.

[5] Section 249 of the Companies Act, 2013.

[6] Section 250 of CA, 2013

[7] Section 251 of the Companies Act, 2013

[8] This is a mandatory step as mentioned under Rule 4 of the Companies (Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.

[9] Rule 6 Companies (Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.

[10] Rule 7 Companies (Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.

[11] Rule 8 Companies (Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016.