Summary of Guidelines for Fast Track Exit mode for defunct companies under section 560 of the Companies Act, 1956

Background:- There are a number of companies, which are registered under the Companies Act, 1956 (the Act), but due to various reasons they are inoperative since incorporation or commenced business but became inoperative or defunct later on. Such companies may be desirous of getting their names strike off from the Register of Companies maintained by Registrar of Companies (ROC) without going through elaborate liquidation procedure. As per section 560 of the Act, ROC may strike off the name of companies on satisfying the conditions therein. As per present practice, a company desirous of getting its name struck off, has to apply to ROC in e-form 61. All pending statutory returns are required to be filed along with e-form 61.In order to give an opportunity for fast track exit by a defunct company for getting its name struck off from the ROC, the Ministry Corporate Affairs (MCA), Government of India (GOI) has on 7 June 2011 decided vide General Circular No.36/2011 to modify the existing route through e-form – 61 and has prescribed the “Fast Track Exit mode Guidelines” (the FTE Guidelines) for defunct companies under section 560 of the Act.

Effective date of FTE Guidelines- FTE Guidelines will be effective from 3 July 2011

Salient Features of FTE Guidelines- FTE Guidelines are applicable to a defunct company. For the purposes of the FTE Guidelines, any company will be called as “defunct company”, which has nil asset and liability and

1. has not commenced any business activity or operation since incorporation; or
2. is not carrying over any business activity or operation for last 1 year before making application under FTE.

Any defunct company which has active status or identified as dormant by the MCA may apply for getting its name struck off from the ROC.

The application received by the ROC pursuant to the FTE Guidelines will be processed by ROC and some of the key steps of the process are as under:

a) The ROC shall examine the application and if found in order, shall give a notice to the company under section 560(3) of the Act giving time of 30 days stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;

b) The name of applicant and date of making the application under the FTE Guidelines shall be displayed on the MCA portal www.mca.gov.in giving time of 30 days for raising objection, if any, by the stakeholders to the concerned ROC;

c) In case of company like Non-Banking Financial Company, Collective Investment Management Company which are regulated by other Regulator namely RBI, SEBI, respectively, the ROC, at the end of every week, shall send intimation of such companies availing of the FTE Guidelines during that period to the concerned Regulator and also an intimation in respect of all companies availing of the FTE Guidelines that period to the office of the Income Tax Department giving time of 30 days for their objection, if any.

The FTE Guidelines are not applicable to the following companies:-