Fast Track Exit (FTE) or the 'Strike-off route' has been one of the easiest exit modes for companies, that have not conducted any business operations for past 2 (two) years and who satisfy certain other eligible criteria. For this, hitherto an online voluntary application for FTE ought to be made by the company to the jurisdictional Registrar of Companies (ROC). Section 248 of the Companies Act, 2013 (Companies Act), and Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (Rules) deal with provisions relating to FTE. FTE process is different from both a voluntary winding up process, which is court driven process as well as a compulsory removal of a defaulting company from the register on account of action taken by the Government.

The Ministry of Corporate Affairs (MCA) has, vide its notification dated 17 April 2023, amended the existing Rule 4 of the Rules (Amendments). The Amendments have been introduced with a view to make the exit process for companies, which do not fall under the purview of the Insolvency and Bankruptcy Code, 2016 (IBC), smoother.

What's new?

The Amendments will come into force with effect from 1 May 2023. The following new changes have been introduced:

  • New Authority: The approval authority for all applications of FTE would now be a special authority, being the 'Center for Processing Accelerated Corporate Exit' (CPACE). CPACE is set up in Manesar at the 'Indian Institute of Corporate Affairs', an institution attached to the MCA. CPACE will exercise functional jurisdiction for processing and disposing of applications being made for the removal of names of companies under Section 248 of the Companies Act (through Form STK-2). CPACE will have territorial jurisdiction all over India, which was earlier handled by the ROC of the respective states where the companies' registered offices were situated.
  • New forms/format: The formats of three existing FTE forms (being STK-2 (application by company to ROC for removing its name from ROC), STK-6 (public notice) and STK-7 (notice of striking off and dissolution)) have been substituted. Form STK-2 includes disclosures relating to pending litigations of the concerned company and such other disclosures to ensure that there are no other pending proceedings or liabilities of the company. Forms STK-6 and STK-7 have been amended to vest powers to CPACE.
  • Omission of attaching of shareholder approval: The companies will no longer be required to submit a special resolution or consent of seventy-five percent of its members for making an application for strike-off.

What to expect?

The amendments have been introduced with a view to speed up the processing of FTE or 'strike-off' applications.

This is one of the recent various attempts made by MCA to centralize the form filings and processing by introducing more than 50 (fifty) forms on the new 'Version 3' portal. This move of shifting of the authority for approving FTE forms from ROC to a centralised agency, shall facelift the approval process in entirety.

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