EASY EXIT SCHEME -2010

BACKGROUND:

The Ministry of Corporate Affairs has observed that certain companies have been registered under the Companies Act, 1956, but due to various reasons some of them are inoperative since incorporation or commenced business but became inoperative later on and are not filing their due documents timely with the Registrar of Companies. These companies may be defunct and are desirous of getting their names strike off from the Register of Companies.

In order to give an opportunity to the defunct companies, for getting their names strike off from the Register of Companies, the Ministry has decided to introduce a Scheme namely, “Easy Exit Scheme, 2010” under Section 560 of the Companies Act, 1956.

ADVANTAGES OVER WINDING UP:

As per the existing policy, companies require to give various details and get No-Objection certificates from different authorities and regulators for winding up their business. The present process is lengthy and consumes a lot of time before the name of a dormant business gets deleted from the rolls of the ROC. EES-2010 has various advantages over Winding up:

  • LESS TIME CONSUMING.
  • LESS EXPENSIVE.
  • LESS PAPERWORK.

Period of operation:

The Scheme will be in operation from 30th May, 2010 to 31st August, 2010.

Applicability:

The scheme is applicable to a “Defunct company” to mean a company registered under the Companies Act, 1956 which is not carrying over any business activity or operation on or after the 1st April, 2008 and includes a company which has not raised its paid up capital as provided in sub sections (3) and (4) of section 3 of the Companies Act, 1956having “active” status on MCA Portal.

Non-applicability:

The Scheme is not applicable to the following Companies;

  • Listed companies;
  • Companies registered under section 25 of the Companies Act, 1956;
  • Companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;
  • Companies accepted public deposits which are either outstanding or the company is in default of repayment of the same;
  • Company having secured loan ;
  • Company having management dispute;
  • Company in respect of which filing of documents have been stayed by court or Company Law Board or Central Government or any other competent authority;
  • Company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.

Procedure:

NOTE :

If the defaulting company has filed an appeal before the Competent Court for violationsof
provisions under the Act in respect of which application is made under the scheme, the
Applicant shall withdraw the appeal first.

WHY IS EES2010 DIFFERENT FROM EARLIER SCHEMES?

The Ministry has from time to time, come out with Schemes under section 560 of the Companies Act so as to provide an easy exit route to defunct companies. There are significant differences between the present scheme and earlier schemes launched by MCA.

HEADING / SES 2003 / SES 2005 / EES2010
1. Fees. / Fee Rs.2000. / Fee Rs.3000. / No fees.
2. Asset- Liability status. / Audited accounts to show no assets and liabilities. / Though not stated in the body of the Scheme, the application stated that the company has no assets and liabilities. / An only eligibility criterion is “being inoperative” or “not carrying on any business” for at least two years.
As is clear from statement of accounts, even companies with Assets and Liabilities may apply under the Scheme.
3. Signing of Application. / Application to be signed by minimum of Two directors. / Application to be signed by minimum of Two Directors. / Application to be digitally signed by one Director or in case of manual signing, by one director.

Conclusion:

It will be an incentive for companies that want an easy exit. If they file it between the period, they will not have to go through strenuous procedure, fill forms and will not have to give explanations,” minister for corporate affairs Salman Khurshid said.

According to available data, over 10% of the seven lakh registered companies in India are defunct. This means that a gateway is opened for around 70,000 defunct firms to formally close down their business, by availing the benefits of EASY-EXIT SCHEME 2010.

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