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Close a defaulting company

yashsr (CA) (2285 Points)

18 April 2012

A Pvt Ltd Company was formed in Sept 2007. However, none of its compliances has been done. If you see its Company Master Data, you can see:

Defaulting status
	Defaulting in filing of Annual return and Balance sheet for the financial year 2008-2009
	Defaulting in filing of Annual return and Balance sheet for the financial year 2009-2010

No audit has been done, no AGM has been held. No B/S or P/L has been prepared. Obviously, no Income Tax Return has been filed.

Now, I want to close this Company. What is the easiest way to do so without penalty or with least amount of penalty? Easy Exit Scheme? Or some fast track exit Scheme? Is there any one of those going on currently?

Thanks and any help would be appreciated!

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19 Replies

(Guest)

Does it carry on any business ? Or it is just non-compliant ?

yashsr (CA) (2285 Points)
Replied 18 April 2012

Originally posted by : Veeral Gandhi
	Does it carry on any business ? Or it is just non-compliant ?

It was formed for some purpose. Maybe it did some business in 2007-08 but none there after. So basically it doesn't carry on any business and hasn't done any compliances..

(Guest)

Dear Yash,

Easy Exit Scheme is not operative currently . I advise you to go for Fast Track Exit Mode. I have attached a circular of MCA dated June 7, 2011. Just see whether your company is applicable for it.

Regards,

Veeral Gandhi

Attached File : 698334 966853 fte circular 36 2011 07jun2011.pdf downloaded: 206 times

1 Like

yashsr (CA) (2285 Points)
Replied 19 April 2012

Hi Veeral,

As I understand, the said company will have to file 2 forms:

1) Form FTE (Fees of which is 5000)

2) Form 61(for compounding of offences since it has defaulted in Annual Returns etc..) (Is Form 61 free to file)

The said Company is:

a) Not carrying not carrying over any business activity or operation for last one year before making application under FTE.

b) Doesn't have any secured loans, disputes, investigations, dues towards income tax etc..

Now, however, it has defaulted in filing of Annual return and Balance sheet for the financial year 2008-2009 and all years after this year. It has also not filed Income Tax Return for any year, held AGM at any date etc. etc.

Can I close this Company and will I have any problems? How much time will it take? What will the fees, if any apart from the Rs.5000 fee for Form FTE)

(Guest)

Clause 1 (k) of Guidelines for Fast Track Exit mode for defunct companies under section 560 of the Companies Act, 1956 says that " If the pending prosecutions are only for non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Companies Act, 1956, such application may be accepted provided 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."

Thus, first of all Form 61 will have to be filed, then only your FTE Application will be accepted. The time of final strike off of the company's name will ultimately depend upon time taken by the MCA to compound the offence.

Since, Form 61 is relating to compounding of offences, naturally, it would not be free of any charge. Since I have never filed Form 61, I do not have the idea of it's charges. Talking about our group company which was defunct, it's Form FTE was filed on 4th January, 2012, still the status on MCA is showing "Work in progress". Thus, the ministry takes it's own sweet time.

Ultimately, your company will be striked-off. I advise you to just start off the process and then keep your fingers crossed. Let's hope that any problem does not arise.

1 Like

yashsr (CA) (2285 Points)
Replied 19 April 2012

Originally posted by : Veeral Gandhi
	Clause 1 (k) of Guidelines for Fast Track Exit mode for defunct companies under section 560 of the Companies Act, 1956 says that " If the pending prosecutions are only for non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Companies Act, 1956, such application may be accepted provided 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."

Thanks! What does the phrase 'If the pending prosecutions are only for...." mean? If I goto 'View Company Master Data', I see that the Company has defaulted in terms of non-filing of Annual Returns and B/S but there is no prosecution going on as such. So does Form 61 still have to be filed? And if yes, do we have to file Form 61 before Form FTE? If yes, do we have to wait for Form 61 to be approved and the compounding process to get over before we proceed with filing of Form FTE??

And I understand that compounding might not be free, the Directors may have to pay a fine(which obviously would be less than actually what penalty they might have had to pay) but I was talking about the filing fees for Form 61. I tried 'Calculate Fees' section in MCA21 and it showed nothing which probably means its free..

yashsr (CA) (2285 Points)
Replied 19 April 2012

Also, I doubt whether accounts for this Company for any of the years has been prepared(forget about audit...) Will these also have to be prepared in the process?

(Guest)

Good News !

Just now I checked 'Instructions' that come attached with e-Form 61. In the Instructions, it was written boldly on top that :

"Please note any company desirous of getting its name struck off from Registrar of Companies under section 560 shall file Form FTE only. Filing of Form 61 for such purpose shall not be allowed."

Thus, you are relieved from filing this form...

1 Like

(Guest)

Originally posted by : yashsr
	Also, I doubt whether accounts for this Company for any of the years has been prepared(forget about audit...) Will these also have to be prepared in the process?

I am not sure because I have never encountered this problem. I advise you to take expert advise for this query.

If the CCI expert does not reply, ask to MCA.

yashsr (CA) (2285 Points)
Replied 19 April 2012

Hey that is great news!! So in short, I should just file Form FTE and wait and see what happens... 'Jo hoyega dekha jayega' kind of.. Maybe we won't have to do anything and the name will be struck off after a few months, maybe we'll have to pay some fine whatever....

yashsr (CA) (2285 Points)
Replied 19 April 2012

I'm actually still not convinced of the Compounding Application. Although point 1(k) states that:

If the pending prosecutions are only for non-filing of Annual
Returns under section 159 and Balance Sheet under section 220
of the Companies Act, 1956, such application may be accepted
provided 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.

But as you said in the instructions of the Form FTE, they've said:

Please note any company desirous of getting its name struck off from Registrar of
Companies under section 560 shall file Form FTE only. Filing of Form 61 for such
purpose shall not be allowed.

So whats the deal? Is it 100% sure that we do not have file form 61??

Thanks Veeral for all your help!

(Guest)

Yes, it is 100% sure that Form 61 has not to be filed.

I am attaching the 'Instructions' of filing Form 61. Kindly check it for your satisfaction.

2 Like

yashsr (CA) (2285 Points)
Replied 19 April 2012

Yes I did check the Form FTE help file... thanks!!

yashsr (CA) (2285 Points)
Replied 20 April 2012

Hi again,

Just another thing. I just heard from 2 of my friends who have indulged in closing a defaulting company themselves that Audit for Last year i.e. year ended 31.03.2012 will have to be done. AGM will have to be held and B/s & P/L will have to be filed with the Registrar. Is this true? If yes, what about Income Tax Return?