NEW DELHI: Government is planning to relax exit norms for not-for-profit companies to allow them to de-register without having to follow cumbersome regulations. The Ministry has been receiving representation from various stakeholders to develop a procedure for strike off name under section 560 of the Companies Act, 1956 of companies (non-profit companies) which have been granted licence under section 25 of the Companies Act, 1956, the MCA said in its proposal.

Section 25 companies are those which normally receive contribution in the form of donations, contributions among others for charitable activities.

According to the proposed guidelines, a company should have passed a resolution in general meeting to apply to Registrar of Companies to strike off name and which should have been approved by all members/shareholders of the company.

Further, for being eligible, the company should not have commenced any activity or operation since its incorporation or should have stopped activities for more than 3 years, or not received any donation, grants or contribution from anyone other than its members.

In case, a company has obtained any special status from any authority such as Income Tax, Commissioner of Charity or any organisation or Department of Central Government, State Government, Municipal Body or any recognised authority, then a “No Objection Certificate” has to be obtained from the concerned authority.

Besides the existing assets, if any new asset has to be transferred to a similar company before applying to RoC for striking off the name; the company should have filed its all upto date balance sheets and annual returns, and latest balance Sheet should not have any assets or liabilities.

The directors have to file an affidavit and indemnity as required under present exit guidelines and confirming above compliance’s, a certificate from practicing Chartered Accountants or Company Secretary or Cost Accountant certifying the above compliance’s by the company, the proposal said.

As per the company law, when such a company winds up, any asset or property is transferred to “any other such company having objects similar to the objects of this company”. Members or the High Court can determine the company to which the assets have to be transferred.

The government has invited comments on the proposed guidelines by July 15, 2011.

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