Often, we register a company for a business idea we wanted to implement and for some reasons it does not work, we do not even start the work. Also, there are times when we register a company for a future project and hence those companies are not operational in present.
There are various compliances which one needs to meet after registering a company and it takes a cost to meet them. Who would want to bear more cost for the company which is not working in the first place?
So, what do we do, we just keep the company like that, either we get the compliances done or many times we just ignore it.
Earlier, closing a company was a tedious process, which required a lot of formalities, things have changed now and there are now quicker modes to close the company.
Here we bring you two options for such companies that you have formed but not functional anymore.
Option 1: Fast Trick Exit (FTE) mode: Let’s you close your company
This mode as suggested by name lets you close your company quickly, any company which is defunct can apply for this mode.
Let’s understand what’s a defunct company
A Defunct company is a company which has:
1. Nil asset and nil liability, and
2. Not commenced any business or activity since its incorporation
or
Not been carrying any business operation since last one year.
Now we know if our company is a defunct or not, let’s move on to see the procedure for applying for the FTE mode
1. To close a company under FTE, one should apply through Form FTE, available in MCA website. This form should be digitally signed by authorised director.
The application fee will be Rs.5000/-
2. On receiving the application, the Registrar would display the name of the company on its website for a period of 30 days, to give notice to anyone who may have objection to the striking off the name of the company.
3. After 30 days, the Registrar will issue a certificate for closure of the company stating that its name is struck off from the register of companies maintained with the ROC.
The documents stated below are to be attached with the form FTE
i) We need a Board of Directors approval for closure of the company
Through a board resolution, BOD must approve applying for the FTE.
Note: All bank accounts, Registrations with the govt. authorities should be closed/ cancelled before applying for closure of the company.
ii) Once board resolution is passed, all the directors of the company should produce an affidavit on a stamp paper or Rs 100/- duly notarised & individually stating the following in it:
- The directors swear that they are the directors of the company applying for closure.
- That the company has closed all the bank accounts in its name.
- That the company has nil assets & liability.
- That the company has not been carrying on any business for the past one year at least.
- The reasons for not carrying on any business.
- That the company has no statutory dues as on the date of declaration and that there are no litigations pending before any court of law against or involving the company.
iii) Next, all the directors of the company should execute an Indemnity Bond witnessed by 2 persons on a stamp paper of Rs 200/- and undertake to do the following:
- To indemnify any person for any losses that may arise pursuant to striking off the name of the company.
- To pay and settle all lawful claims arising in future after the striking off the name of the company
- To settle all lawful claims and liabilities which have not come to our notice up to this stage.
Option 2: Granting the “Dormant status”
This option is suitable when you have registered a company for a future project and hence the company is not operational currently. Also, where an in-operational company cannot be closed as it might be holding assets such as land, building etc., choosing the “dormant status” is a good option.
Let’s understand what’s a Dormant company?
A dormant company is a company which is inactive i.e. a company which has the following characteristics:
- It has not been carrying on any business or operation
- It has not made any significant accounting transaction during the last two financial years.
- It has not filed financial statements and annual returns during the last two financial years.
- A defaulting Company which has not filed annual returns and financial statements for two years or more.
Procedure for obtaining status of dormant company:
- An application must be made in form MSC-1 to get the “Dormant” status.
- A special resolution should be passed to authorize the directors to make application for Dormant status. Thus, we need to file E-form MGT-14 with ROC for filing special resolution.
- The Registrar shall, after considering the application filed in Form MSC-1, issue a certificate in Form MSC-2 allowing the status of a Dormant Company.
Advantages of applying for ‘Dormant Status’
There is lesser compliance burden for a dormant company which reduces the costs of maintaining such a company.
‘Dormant Companies’ are exempted from the following compliances:
- To include cash flow statements in their financial statements.
- Reduced compliance for holding board meeting in each quarter. These companies are required to hold only two board meetings during the year.
- These companies do not require to rotate the auditors
Compliances to be met by a dormant company:
- It shall file a “Return of Dormant Company” each year, indicating financial position which should be audited by a chartered accountant in practice in
- Form MSC-3 along with such annual fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within a period of thirty days from the end of each financial year.
Also, note that maximum tenure for which a company can remain dormant is 5 consecutive financial years.
If a company remains dormant for more than 5 years, the Registrar commences the process of striking off the name of the company from the Records, i.e. the company will be removed.
(The author is a CA in practice at Delhi and also the owner of http://moneyboat.in/ and can be contacted at: E-mail: abhinandansethia90@gmail.com, Mobile: +91-9811741451)
Author Bio
started a company in 2016. I did not earn any income or my product never hit the market. Wit no revenue or no income on it, i never filed IT returns for the same. Now do I need to pay any fine for closing the company or Can i simply fill the form mentioned above and close it with 5000 INR. Please suggest
Is it necessary to surrender PAN after company closure. If yes then what is the process.
I started a company in 2016. I did not earn any income or my product never hit the market. Wit no revenue or no income on it, i never filed IT returns for the same.
Now do I need to pay any fine for closing the company or Can i simply fill the form mentioned above and close it with 5000 INR.
Please suggest
Can I convert private limited company to partnership firm
I have a private limited company for last 5yr having 2 director.
There is no transaction in that company.
And we havn’t fill any NIL returns from starting.
And now i want to close that company.
Then kindly rep what is the procedure??
We have formed a company in Aug 2019, no business done since then, only share capital money kept in FD. No we want to close the company. Can we go through FTE scheme of MCA. To make asset/liab nil, can we director take out the share capital money and close the bank account. For filing FTE we need close the bank account I believe, How this is possible, without taking out money how bank account can be closed. Please guide with proper process flow and advice how we can take out the share capital money at the earliest.
Hello sir,
I just read ur article regarding closing of a pvt Ltd company
My name is Antik atta
I live in Kolkata
Sir we had formed a pvt Ltd company (cultindiana pvt Ltd)
There r 3 directors
Incorporation date-16/06/2018
But from then we have not carried any operations
Neither we have any bank accounts in the name of our company nor we have made ny transactions
Now we want to close our company
Can you please suggest how to proceed
I will be very thankful if u rply sir
I had registered company in 2017.by converting proprietorship concern having immovable property ( Industrial Plot) could not do further progress in project and did not filled company financial return. but director KYC done and applied for dormant company. and got the status.
can company sale Immovable property in dormant status?
Hi,
I incorporated my OPC pvt ltd in july 2019.But due to unfortunate circumstances we need to close down the company.No business has been done till now. A current account is open and also we have got the commencement of business certificate.I know i have to wait till July 2020 to apply for the strike off, but can i close down the account and take out the money?
I have opened a company 4-5 months back and not filed any get returns as there was no sales and now I want to close it. How to close it.
Sir i have registered a pvt. Ltd. Company in march 2019 but since then we haven’t done any business under this company and also we have not filled any itr or complience with govt. Now we need to close it please help.
Company Incorporated – March 2019
Commencement of Business Filed – Sept 2019
Current account opened with 1 Lakh.
No Business/Transaction Done.
Can we close the company Fast Track Mode?
Hi ,
I have registered the pvt ltd company in dec 2017 , till then I have not done any mandatory filings including DIR DSC KYC and other returns.
I have few transaction in year 2018, but from almost a year I have not done any operations under this company . What is the best option for me If I like to go with the company , otherwise If I want to close it down. as a defunct or dormat .
I would like to continue if filings+penality are not too big . Any help would be appreciated
btw Thanks for the nice article
Hi,
We would like to close our Pvt ltd company which was opened in 2014 and we have filed a nil tax return for year 2016-2017 and 2017-2018 and are suppose to file nil for yr 2018 – 2019 as our accountant mentioned before we put closure request we need 3 yrs nill return. Can you please advise if we are doing right and what would be the process involved for company closure.
Thanks,
Sir we reg. pvt ltd company in march 2019 .but we did nt open current acnt and not done any bussiness transactions.how can i close this company
Hi Abhinandan,
Can you please provide your email so that I can contact you regarding closing of my pvt. ltd. company.
Thanks,
Vikas
my company Primesol Dekor India Private Limited disolved in f/y 2018-19 and share value of directors become zero. please clarity whether the loss of said shares will be treated as long term capital loss or not in the individual books of directors.
my company Primesol Dekor India Private Limited :- dissolved in f/y 2018-19. directors share value become zero. please clarify :- may I get the benefit of long term capital loss on directors share in individual books of account of director or not. i.e. whether it is capital asset or not
with the intention of doing business, I have done construction in Company’s land but suddenly want to close the company.Also with the sell of assets of the company, I want to Pay the Liabilities. Pls inform?
I want to close company through FTE i have not done any transaction so far can i download the FTE form and file it and upload back to MCA? is it this simple?
I want to get my pvt ltd company name striked off from ROC.
Pls suggest
Send me Company name and your contact details.
We are interested to takeover the companies.
Hi, need to close down a pvt ltd. no operations since two years now and no liabilities or assets. Kindly advise or provide contact
I want to closure the Company as on Date and Last Compliance was done till 31.03.2017.
Can we close the Company without ROC Compliances for F.Y.31.03.2018?
Code
Dear Mr Abhinandan
I registered a pvt ltd company “Laksh Staffing and Recruitment Services Pvt Ltd” on 16 Dec 2016, The company didnt do any business since then. No asset no liabilities. Can I close the company .If yes how? How much is total fee and charges. Please guide
I incorporated company in December 2015and since inception it is inoperative and not file any compliance
Can avoid penelty or minimum penalty and close company
Hi- I filed a company in April 2016, then I started business after an year but it didn’t work and had to shut down. I had a GST and we closed all sales tax formalities but never filed ROC. I would like to close the company but the fine is turning out to be too big to pay. Can you help?
Hello Sir,
My Company is inoperative from last 2 years ( incorporated in 2016) we have not done ROC filing from its incorporation. can we close without doing annual return filing for the period 2016 – 17 ?
Penalty is now per day basis its cost too much. Please Suggest
Sir..I have opened a Pvt Ltd company last year and i do not have any GST, Bank accounts neither operated or done any kind of business …Please suggest me a way to close the company.
my private limited company has property in company name through its directors? how can i pull out my property from companys ambut as taxation will be pretty high if i sell my property since its under company.
Addersson healthcare private limited
Company registered 28 Dec 2015.
I want to close our company.company main koi work nhi kiya Gaya hai.na hi company ka koi account hai.company ko kaise close karain?my mobile no 9807403737
Reply
SIR, Is it true that the company should not have done business for last 2 years instead of 1 year as said above for its closure? we havent done the business in last 1 year, no asset , no liability…
Hello Sir,
we are closing a Defunct comoany under FTE .
But we have Sundry debtors to the tune of 10Lakhs , debtor ready to pay , how to dipose of these funds ?
Are they taxable ?
and further , do we need to repay capital bought in by directors ??
thanks sir it’s very useful information for stakeholders.
Hello,
I am a disqualified director of a pvt. ltd. company. I was not aware of this Condonation Scheme.
This company is not doing any business for the last about 2 years and has no asset/liability.
What option I am left now to close my company,
Balvinder Sharma
W.e.f. 26.12.2016 Strike-off needs shareholders approval by special resolution and Form STK-2 has to be filed with Registrar under Fast Track Exit Mode
We have to file form STK 1
I think FTE is no more available …We need to file form STK 1….PL Confirm…
Is it not Fast track mode not available Now but to file form STK… Confirm
what other options