The Ministry of Company Affairs (“MCA”) has introduced two Schemes with effect from 30 May 2010 for providing benefit to companies from prosecution and other legal action.
Company Law Settlement Scheme, 2010 (“CLSS”) which provides an opportunity to companies who have not been on top of their compliances and not filed returns, filings etc. to make their default good by just paying 25% of the additional fee (i.e. a rebate of 75% on the additional fee) and avail immunity from prosecution from non-compliance.
Easy Exit Scheme, 2010 (“EES”) provides an opportunity for inoperative / defunct companies to get their names struck off from the Register of Companies through a simplified process compared to the tedious winding up procedure.
CLSS
Eligibility: CLSS is available till 31 August 2010, for Indian companies and foreign companies (liaison / branch / project offices). But the companies should have first increased their minimum paid up capital (Rs. 1 lakh for private limited and Rs. 5 lakh for public limited ).
Non-applicability: CLSS is not applicable where ‘prior approval’ of any authority (like Company Law Board, Central Govt.) is required or if there is any on-going prosecution. Delayed filings during the period of the Scheme is not eligible for the fee rebate.
Procedure: The defaulting company has to pay the prescribed statutory fee along with additional fee to the extent of 25% of the actual additional fee prescribed. Once those filed forms / returns are taken on record (approved by ROC), then the company must in a specific form provided under the CLSS, apply (within 6 months) for immunity from any prosecution.
Company Law Settlement Scheme 2010
EES
Eligibility: Any active company on the MCA portal, which is not carrying on any business activity or operation on or after 1 April 2008.
Non-applicability: EES is not applicable in cases of listed companies, not-for-profit companies, if any prosecution is pending. Also in cases where companies have accepted public deposit or has a secured loan which is outstanding, has a management dispute or any taxes are pending for payment.
560 Easy Exit Scheme 2010
Procedure: Let me make it sound simple:
Step 1:
- Apply through a new form EES which has been prescribed. No fees on this one.
- Along with an Affidavit from each Director that there are no outstanding litigation, the company has been in-operative and that there are no tax dues. It is nice that a format has been prescribed for this too.
- And an Indemnity Bond
- And a Statement of Accounts.
Step 2:
On receiving the above documents and examining them, ROC shall display the names of such companies on MCA portal and provide 30 days time to receive any objection from any stakeholders of the company. Intimate the company (via email) and also to certain regulators ( in cases of NBFCs etc.) and tax authorities for their objection. Post the 30 day period and if there are no objections, then the ROC shall strike the name of such defunct companies from the Register of Companies and publish the same in the Official Gazette. With effect from the date of such publication, the company stands dissolved.
This scheme is available till 31 August 2010.
I wish there is an ‘easy Incorporation of a company scheme’ too. At times it takes 6 weeks and more with replies from ROC ranging from system is slow, no net connection, the officer is on leave to comments such as address of the subscriber does not tally (it means you should have written “Flat No. B1102” and you wrote “No.B1102”).
Please leave your questions in the comments section.
Sharda Balaji
Founder, NovoJuris Services India Pvt. Ltd (legal consulting company focused on start-ups).
Disclaimer: This article is for informational purposes only and is intended but not promised or guaranteed to be correct, complete and up-to-date. This is not a legal advice or opinion.
Ah! So, these are one time schemes? Makes sense for CLSS. But EES should have been an ongoing scheme, shouldn’t it? It is a well known issue that closing down companies is very difficult in India. So, once you are incorporated, unless you want to go illegal, you end up having to pay for compliances life long!
Hi Jaya, Section 560 of the Companies Act, does provide for defunct companies to apply for striking its name off the Register of Companies…one major exception from EES is that there are no established SLAs
Thanks,
Sharda
thanx Sharda for the good info.
I donno whether this is the right forum to ask this question.
I am holding a company whose operations are nil…but fortunately or unfortunately the code-set (programs) have been recently sold on a non-exclusive basis to some company for 10-lacs (2010-march).
Will that code become an asset for the company? How will that affect me in availing EES?
My company secretary was telling me that i have to run the show (maintaining website, return filling etc.,) for 3-more year and show no-income before i close etc.,etc., Can’t i use EES and close since i don’t have any interest in running that operation.
Kasi,
A defunct company under EES is defined to mean a Company which is in-operative on or after 1 April 2008. If you have not had any activity (other than selling the code-set) from April 2008, then it might be possible to file under EES.
Thanks,
Sharda
I think i had transactions till July 2008… bummer
.
I believe i have to follow the traditional route as per company secretary…
thanx a lot for the information.
Kasi
Thanks Sharda, for the info. I am holding a company in Bangalore whose operations are NIL after incorporation in 2005. Could you please let me know how much will I have to pay (aproximately) to get the services of a Company Secretary for the EES.
Thanks,
Paul
please explain other beneficial schemes launched in the past by CLB.
Dear All,
I hold a company which is registered in the year 2008 but inactive as on date as it didn’t had any sales in particular. Could any suggest whether i can opt for EES.
thanks in Advance – Smileassasin
Dear All,
Is the easy exit scheme also applicable to a foreign company having its branch office in India and registered with the ROC (as a foreign company not incorporated in India). It has not done any business since the stipulated date.
Thanks…
I have a company, which is inoperative since 2003. I have filed all the Returns to ROC till 2008-09, except Annual Returns for 2008-09. I have even filed charge satisfaction with a proof thereof. I do have the copy of the charge satisfaction in all the cases except one. I have been chasing my company secretary to file the closure of the company since last 9months, but the company closure is still not filed, due to reasons unjustified.
The EES is a breather. But the BIG question is: Whether the EES filing is a manual process or a system driven( in which case, there are chances that system may not accept a EES application, if some charges are still Open).
Appreciate an approach. Thanks a Ton!!
I have a pvt. ltd. company which is not in operation since 8 years and I was filing the annual return etc. regularly. However I could not file it since last two years since the e-filings requires digital signatures of two directors. I have made attempt to use ths EES scheme, but in the last moment I have found that one charge created by the bank was not shown satisfied and hence I could not complete the procedure. Now I have got the charge satisfaction procedure complete. Is there any chance this scheme is being extended beyound 31st Aug 2010, so that I can complete the process.