Strike Off vs Fast Track Exit: Which Is Better?

Strike off is the process of removing a company's name from the Register of Companies under Section 248 of the Companies Act, 2013, while Fast Track Exit (FTE) is a simplified electronic procedure under the same section, introduced by the Ministry of Corporate Affairs (MCA) for specific categories of companies. The core difference lies in eligibility and procedure: FTE is available only to companies that have no assets, no liabilities, and have not carried out any business activity for at least one year before the application. Strike off, on the other hand, can be initiated by the Registrar of Companies (ROC) suo moto or by the company itself, even if it has some assets or liabilities, provided certain conditions are met.

Under the Companies Act, 2013, Section 248(1) allows the ROC to strike off a company's name if it has failed to commence business within one year of incorporation or has not been carrying on business for two immediately preceding financial years. The company can also apply voluntarily under Section 248(2). The FTE scheme, launched via General Circular No. 07/2014, streamlines this process for dormant companies. The key practical difference is that FTE is faster (typically 30-60 days) and requires fewer documents, while a standard strike off can take 3-6 months and involves more scrutiny from the ROC.

Fast Track Exit is available only to companies that meet specific criteria: they must have no assets, no liabilities, and no business activity for at least one year prior to the application. Additionally, the company must not have any pending litigations, tax dues, or statutory filings. The MCA has clarified that the following categories of companies are eligible for FTE:

• Companies incorporated under the Companies Act, 2013 or any previous company law
• Companies that have not commenced business operations
• Companies that have ceased operations and have no assets or liabilities
• Companies that have filed all annual returns and financial statements up to the date of application

However, certain companies are explicitly excluded from FTE. These include companies that have been delisted from a stock exchange, companies that have changed their name or registered office in the last one year, companies that have any outstanding dues to the government, banks, or financial institutions, and companies that are under investigation or have pending legal proceedings. If your company has any outstanding liabilities, even if small, you cannot use the FTE route and must opt for the standard strike off procedure.

The standard strike off procedure under Section 248 of the Companies Act, 2013 involves filing Form STK-2 with the ROC, along with an indemnity bond and a statement of assets and liabilities. The process begins with the company passing a Board resolution authorizing the strike off application. Then, the company must file Form STK-2 electronically on the MCA portal, accompanied by the following documents:

1. A statement of assets and liabilities as on the date of application
2. An affidavit from each director confirming that the company has no liabilities
3. An indemnity bond from the directors indemnifying the ROC against any future claims
4. A copy of the Board resolution
5. A declaration that the company has not been carrying on business for at least two years

After filing, the ROC issues a public notice in the Official Gazette and on the MCA website, inviting objections within 30 days. If no objections are received, the ROC issues an order striking off the company's name. The entire process typically takes 3-6 months. It is important to note that even after strike off, directors remain personally liable for any debts or liabilities that existed before the strike off. The company's assets, if any, vest with the Central Government under Section 249 of the Companies Act.

The fast track exit procedure is entirely online and requires filing Form FTE (now integrated into the MCA portal) along with a simplified set of documents. The company must first ensure that all annual returns and financial statements are filed up to the date of application. Then, the following steps are followed:

1. Pass a Board resolution approving the FTE application
2. File Form FTE on the MCA portal, attaching:
   • A statement of accounts showing nil assets and nil liabilities
   • An affidavit from directors confirming no business activity for one year
   • An indemnity bond
   • A declaration of no pending litigations or dues
3. Pay the prescribed fee (currently Rs. 5,000 for companies with paid-up capital up to Rs. 1 lakh, and Rs. 10,000 for others)
4. The ROC reviews the application and, if satisfied, issues a notice in the Official Gazette
5. After 30 days, if no objections are received, the ROC issues the strike off order

The entire FTE process is designed to be completed within 30-60 days, making it significantly faster than the standard strike off. However, the ROC has the discretion to reject the application if any discrepancies are found. If rejected, the company must either rectify the issues and reapply or opt for the standard strike off procedure.

Fast track exit is better if your company has no assets, no liabilities, and has been dormant for at least one year, as it is faster, cheaper, and requires less documentation. For companies that have some assets, liabilities, or have been active recently, the standard strike off under Section 248 is the only viable option. Here is a practical comparison to help you decide:

Factor	Fast Track Exit	Standard Strike Off
Eligibility	No assets, no liabilities, no business for 1 year	Any company meeting Section 248 conditions
Timeframe	30-60 days	3-6 months
Cost	Lower fee (Rs. 5,000-10,000)	Higher fee plus professional costs
Documentation	Simplified	Comprehensive, including asset/liability statement
Scrutiny	Moderate	High, with public notice and objections

If your company has any outstanding tax dues, bank loans, or pending legal cases, you cannot use FTE. In such cases, you must first settle all liabilities and then apply for strike off. Additionally, if your company has filed annual returns and financial statements regularly, the ROC may be more inclined to approve a standard strike off. However, if your company has defaulted on filings, you must first file all pending returns before applying for either option.

Review your company's current financial status, compliance history, and any outstanding liabilities. If your company meets the FTE criteria, file the application online through the MCA portal. For companies with assets or liabilities, consult a company secretary or chartered accountant to prepare the strike off application under Section 248.

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This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.