THE government on Friday introduced a scheme that will facilitate easy exit for unlisted companies willing to wind up their defunct business. A defunct company is one whose business is lying in a dormant state. The new scheme will give such companies an opportunity to get their names struck off from the Register of Companies(RoC). The scheme, however, does not apply to listed entities, organisations formed not for profit, vanishing companies or firms facing investigation or prosecution.
According to the new scheme, to be open between May 30 and August 31 this year, any defunct company willing to get its name struck off from the RoC can make an electronic application without fee to the ministry’s portal. The application will have to be submitted along with a statement of accounts among others, it said.
“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.
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.
According to available data, over 10% of the seven lakh registered companies in India are defunct. This means that the scheme opens up a gateway for around 70,000 defunct firms to formally close down their business.