The scheme came with in-built safeguards to ensure that unscrupulous promoters/directors /managers did not escape their liabilities.
Process has been completed for striking off names of 24,884 small, non-functioning or defunct companies from the field offices of the Ministry for Corporate Affairs (MCA). The Registrar of Companies (RoCs) had received applications from 26,590 such companies for the Simplified Exit Scheme 2005 (SES 2005).
Faced with the problem of handling over three lakh defunct companies, the Ministry had launched the Scheme providing an easy exit route.. Under SES 2005, a simplified procedure was adopted by companies as well as RoCs in striking off their names.
The scheme came with in-built safeguards to ensure that unscrupulous promoters/directors /managers did not escape their liabilities and was operational from February 1 to July 31, 2005.
“A review of the status of the Scheme implementation as on March 31, 2008 showed that processing has been completed and orders have been issued for 24,884 companies out of a total 26, 590 applications received. Applications of 588 companies were under process,” a senior Corporate Affairs Ministry official told Business Line. Of the total number of applications received, 1,118 were rejected.
The Southern Region topped the list with 9,178 applications, of which 723 were rejected or returned and processing completed for 7,868. From the Western Region applications were received from 9,040 companies, Northern Region 5,429, and Eastern Region 2,943. The SES was applicable to all companies making an application under Section 560 of the Companies Act, and not just to companies that have not raised their capital to Rs 1 lakh and Rs 5 lakh, respectively.
Promoters of companies that went defunct were able to close down their entities in a hassle-free manner, if they were able to show that the company did not carry out any business at any time or that they had carried out some business activity, but discontinued the same thereafter.
No Cumbersome process
The scheme also did away with the cumbersome process of filing applications for closing down entities before a magistrate. All a company required was to make a declaration in an affidavit that their respective entities were not in operation and that it had no asset and liabilities.
Based on this information, the respective RoCs would issue an order for removal of company’s name from its register.