It has been observed by the Ministry of Corporate Affairs 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 struck off from the Register of Companies.
In order to give an opportunity to the defunct companies, for getting their names struck 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.
This newsflash is intended to highlight certain significant aspects of the “Easy Exit Scheme, 2010 introduced by the Ministry of Corporate Affairs vides General Circular No: 2/2010 dated 26.05.2010.
- The Scheme does not inter-alia cover the listed companies, section 25 companies, vanishing companies, companies under inspection / investigation, companies against which prosecution for a non-compoundable offence is pending in court, companies having outstanding public deposits or secured loan or dues towards banks and financial institutions or any other Government Departments etc. or having management dispute or company in respect of which filing of documents have been stayed by court or CLB or Central Government or any other competent authority.
- Any defunct company desirous of getting its name struck off from the Register under Section 560 of the Companies Act, 1956 shall make an application without fee in the Form EES, 2010 electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in along with affidavit, Indemnity Bond and a Statement of Account duly certified by the statu¬tory auditor or a Chartered Accountant in whole time practice.
- The scheme will be in operation from 30 May 2010 to 31 August 2010.
- Availing the benefit of the Scheme will prevent companies from prosecution and other legal action
- “defunct company means 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, 1956;
- “vanishing company” means a company, registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable.
- Any “defunct company” which has active status on Ministry of Corporate Affairs portal may apply under EES, 2010 in accordance with the provisions of this Scheme for getting its name strike off from the Register of Companies;
- Any defunct company which is a Government Company shall submit No Objection Certificate’ issued by the concerned Administrative Ministry or Department or State Government along with the application under this Scheme;
- The purpose of the Scheme is to allow eligible companies to avail of this opportunity to exit from the Register of Companies after fulfilling the requirements laid down herewith and the decision of the Registrar of Companies in respect of striking off the name of company shall be final.
Scheme not applicable to certain companies
The Scheme does not cover the following companies namely:
- listed companies;
- companies registered under section 25 of the Companies Act, 1956;
- vanishing companies;
- 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 where order under section 234 of the Companies Act, 1956 has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court;
- companies against which prosecution for a non-compoundable offence is pending in court;
- companies accepted public deposits which are either outstanding or the company is in default in 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 (CLB) 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 for making an application
- Any defunct company desirous of getting its name strike off from the Register under Section 560 of the Companies Act, 1956 shall make an application in the Form EES, 2010;
- The Form EES, 2010, should be filed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in and there shall be no fee payable for filing of the same;
- In case, the application in Form EES, 2010, is not being digitally signed by any of the director or Manager or Secretary, a physical copy of the Form duly filled in, shall be signed manually by a director authorised by the Board of Directors of the company and shall be attached with the application Form at the time of its filing electronically;
- In all cases, the Form EES, 2010, shall be certified by a Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice;
- The company shall disclose pending litigations if any, involving the company while applying under this Scheme;
- The Form shall be accompanied by an affidavit, which should be sworn by each of the existing director(s) of the company before a First Class Judicial Magistrate or Executive Magistrate or Oath Commissioner or Notary, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations and has not carried on any business after the 1st April, 2008, as the case may be;
- The Form EES, 2010 shall further be accompanied by an Indemnity Bond, duly notarized, to be given by every director individually or collectively, to the effect that any losses, claim and liabilities on the company, will be met in full by every director individually or collectively, even after the name of the company is struck off from the register of Companies;
- The Company shall also file a Statement of Account, prepared as on date not prior to more than one month preceding the date of filing of application in Form EES, 2010, duly certified by a statutory auditor or Chartered Accountant in whole time practice, as the case may be.
Simplified procedure for Registrar of Companies for removal of name of defunct companies
- The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by e-mail on its e-mail address intimated in the Form, giving thirty days time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved;
- The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under Easy Exit Scheme, 2010, on daily basis, on the MCA portal www.mca.gov.in, giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar;
- In case of company(s) like Non?Banking Financial Company(s), Collective Investment Management Company(s) which are regulated by other Regulator(s) namely RBI, SEBI, the Registrar of Companies, at the end of every week, after the Scheme commences, shall send intimation of such companies availing EES, 2010, during that period to the concerned Regulator(s) and also an intimation in respect of all companies availing EES, 2010, during that period to the office of the Income Tax Department giving thirty days time for their objection, if any;
- The Registrar of Companies immediately after passing of time given in sub-paras (a) to (c) of this Para and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under sub-section (5) of section 560 of the Companies Act, 1956 for publication in the Official Gazette and the applicant company under this Scheme shall stand dissolved from the date of publication of the notice in the Official Gazette.