We register a company for business ideas we desire to implement and for some reasons it does not works or we do not 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 many compliances which one needs to meet after registering a company and it takes a cost to meet them. No one wants 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 complex 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 2 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 or shut down 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:
Nil asset and nil liability,
Not commenced any business or activity since its incorporation or Not been carrying any business operation since last one year.
Option 2: Granting The “Dormant Status”
The option is suitable when we 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
t 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.
Yes, any company that has been identified as dormant by the Ministry of Corporate Affairs can apply under FTE. Such companies need not file Form No. GNL-1 for normalizing.
Any company, that has not filed its statutory documents i.e. Balance Sheet and Annual Return for any of the financial year, has been identified as defaulting company. Directors of such companies are debarred from filing any document till they make the default good. Such defaulting companies can apply under FTE.
The guidelines does not inter-alia covers the listed companies, companies which have been de-listed due to non-compliance of listing agreement or any other statutory Laws, section 8 companies, vanishing companies, companies under inspection/investigation, companies against which prosecution for a non-compoundable offence is pending in court, companies having outstanding public deposits or secured loan or dues towards banks and financial institutions or any other Government Departments etc. or having management dispute or company in respect of which filing of documents have been stayed by court or CLB or Central Government or any other competent authority
If the pending prosecutions are only for the non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Act, such application may be accepted when the applicants have already filed the compounding application. However, steps for final strike of the name of the company will be taken only after disposal of compounding application by the competent authority.
Foreign nationals and NRIs may get their Indemnity Bond and Affidavit notarized as per their respective country’s law.
List of applications filed under FTE will be available on the government portal. In case any stakeholder has any objections to the Striking off the name of any company, he/she may raise such objection by email/letter with the concerned ROC Office within 30 days from the date of filing Form FTE by the company.