Winding Up Of A Company

A private limited company is an artificial judicial person and requires various compliances like appointment of Auditor, regular filing of income tax return, annual return filing and more. Failing to maintain compliance for a Company could result in fines and/or debarment of the Directors from incorporating another Company. Therefore, if a private limited company has become inactive and there are no transactions in the company, then it is best to wind up the Company. To enable inactive private limited companies to quickly close or wind up, the Ministry of Corporate Affairs has introduced Fast Track Exit Mode - an easier way to close inactive companies at a cheaper cost with lesser formalities. A defunct company which has not carried out any business activity or operations for last one year or since incorporation and having NIL assets & liability can apply for stricking-off of name under the Fast Track Exit Mode.

Process For Closing A Company

Step 1

Winding Up

You can wind up a company under fast track exit mode in about 3 months.

 

Frequently Ask Questions (FAQs)

 

What is Winding up of Company under Fast Track Exit?

Fast Track Exit is a scheme introduced by the Ministry of Corporate Affairs (MCA) for inactive companies to wind up and get their names struck off from the MCA record with lesser formalities.

Which companies can apply for winding up under Fast Track Exit?

A defunct company, meaning that has not been carrying any business activity or operation since incorporation or for last one year and having NIL assets and liabilities can apply for winding up under the Fast Track Exit scheme.

Can a Company under litigation apply under Fast Track Exit?

The eligibility will depend on the nature of litigation. For instance, if there is a Management dispute or prosecution pending in court for compoundable offence, then the company cannot be closed using the Fast Track Exit mode.


Can a Company having loans be closed under Fast Track Exit?

A company having secured loans cannot be closed under Fast Track Exit mode. To be eligible for the Fast Track Exit scheme, the Company must have NIL assets and liabilities.


Can a Company having statutory dues be closed under Fast Track Exit Scheme?

No. A Company having income tax / sales tax / central excise / other Govt dues cannot make application under fast track exit mode.


Which companies cannot be closed under Fast Track Exit Scheme?

Listed Companies, Section 8 Companies, De-listed Companies and Vanishing Companies cannot be closed under Fast Track Exit Scheme.


What will happen to the Bank Account of the Company being closed?

Prior to application under the Fast Track Exit Scheme, the bank accounts of the Company must be closed and all assets and liabilities must be NIL.


How long does it take to close a company under Fast Track Exit Scheme?

After filing of the application with the Ministry of Corporate Affairs, it takes about 90 days for striking off of the Company from MCA records.


When is the Company officially considered to be closed?

ROC will publish list of companies struck off in the Official Gazette. The Company under fast track exit mode will be considered closed from the date of publication of the notice in Official Gazette.

Advantages Of Closing Company Under Fast Track Exit Scheme

 

Avoid Compliance:

A company is a legal entity and a juristic person established created under the Companies Act. Therefore, a company required regular maintenance of Compliance throughout its lifecycle. Fast track exit used can be used close a company that is not active and avoid compliance responsibilities.

Avoid Fines:

A company that doesn't file its compliance on time incurs fines and penalty including debarment of the Directors from starting another Company. Hence, it is better to officially wind up a company that is inactive and avoid potential fines or liabilities in the future.

Easy to Close:

The fast track exit scheme was specifically introduced by the Government to make it easy for inactive companies that have NIL assets and liabilities to close down or wind up. Hence, the formalities for winding up of a company under fast track exit scheme is easy to complete.

Fast to Close:

A company can also be closed under the fast track exit scheme quickly in about 90 days, whereas traditional methods take longer and are more cumbersome. Hence, closing a company under fast track exit scheme is faster and easier.

Low Cost:

When compared to maintaining compliance for a dormant company, it might actually be cheaper to wind up a company and incorporate again when the time is right.

No Activity:

Companies that have no activity or transaction since incorporation can be quickly and easily closed under the fast track exit scheme. This allows the promoters to be hassle free with respect to compliance and open another company in the future when required.

No Approvals:

If a Company meets eligibility criteria for winding up under fast track exit scheme and has no statutory liabilities, then it can be easily effected. No other approvals or no-objection certificates are necessary from any statutory bodies is required for winding up.

Applicable Widely:

Almost all private limited companies that have no activity for more than a year or since incorporation and have NIL assets and liabilities can apply for winding up under the Fast Track Exit scheme. Hence, the scheme is applicable for a majority of inactive companies.