Easy Exit Scheme 2011 Rajendra Rao 1 EES 2011 Issued through General Circular No. 6/2010 dated December 3, 2010 Intent: Companies registered but inoperative since incorporation Companies becoming inoperative after initial commencement of business Not filing documents Considered defunct and wish to have the names struck off Re-launch based on huge demand by corporates who could not avail of EES 2010 2 1
Statistics Total number of Companies (as per MCA Annual Report of 2009-10) = 8,21,212 Total number of Companies who have not filed Forms 23AC / ACA and Form 20B for 2008-09 = ~ 3,70,000 Total number of Companies who have not filed Forms 23AC / ACA and Form 20B for 2005-06 = ~ 1,92,000 3 Validity of Scheme Commences on January 1, 2011 Ends on January 31, 2011 4 2
Applicability EES 2011 can only be availed by a Defunct Company, defined to be a Company registered under Companies Act, 1956 Not carrying on any business activity or operation on or after April 1, 2008 Includes a company which has not raised its paid-up capital to the minimum prescribed [under sec. 3(3) or 3(4)] 5 Applicability Defunct Company can avail EES 2011 only if: It has an Active status on the MCA portal It submits an NOC issued by Administrative Ministry or Department or State Government, where the defunct company is a Government Company 6 3
Who Cannot Avail? Listed Companies De-listed Companies Section 25 Companies Vanishing Companies Companies where inspection or investigation ordered and is (i) yet to be taken up or (ii) is being carried out or (iii) having been completed prosecution is pending 7 Who Cannot Avail? Companies where order under sec. 234 has been issued and (i) reply is pending or (ii) prosecution is pending Companies against which prosecution for noncompoundable offence is pending in Court Companies which have accepted public deposit (i) which are outstanding or (ii) company is in default in repayment of deposits Company having secured loan(s) 8 4
Who Cannot Avail? Company having management dispute Company where filing of documents have been stayed by Court or CLB or Central Government Companies having dues towards income-tax, sales-tax or central excise or to Banks and FIs or any other Central or State Government Departments or authorities or any local authorities 9 Procedure (Company) Form EES 2011 to be filed To be filed electronically Filing fee of ` 3,000 If Form EES 2011 is not being digitally signed (i) a physical form should be signed manually by a director authorized by BoD and (ii) a scanned image of such physical form is to be attached to the e-form EES 2011 If there are active signatories existing on the MCA21 system, the Form EES 2011 must be digitally signed 10 5
Procedure (Company) Form EES 2010 to be certified by CA/CS/CWA in whole-time practice All pending litigation to be disclosed Each existing director to provide an Affidavit, sworn to before FCJMagistrate, ExecMagistrate, Oath Commissioner or Notary swearing that: Company has not carried on any business since incorporation, or Conducted business which has been discontinued and Has not carried on any business on or after April 1, 2008 11 Procedure (Company) All directors to file (either singly or collectively) an Indemnity Bond to the effect that Losses, claims and liabilities arising after the Company s name has been struck off will be met individually or collectively Statement of Account prepared as on a date not earlier than one month preceding the filing date to be filed Statement of Account to be certified by the Company s statutory auditor or any practicing CA 12 6
Procedure (Company) Where a defunct 100% Government company does not have a BoD, then a person of the rank of Deputy Secretary (or above) of the concerned Administrative Ministry may be authorized to enter his name and details in Form EES 2011, Annexure(s) A, B and C and sign the Form. 13 Procedure (ROC) ROC to examine Application ROC to issue notice under sec 560(3), by e-mail, within 30 days asking the applicant to show cause why the Company s name should not be struck off ROC to put up the name of applicant and date of making application under EES 2011, on the MCA portal, on a daily basis, giving stakeholders 30 days to raise objections, if any 14 7
Procedure (ROC) ROC to send intimation to RBI, SEBI in respect of NBFCs and CIMCs who have applied to avail of EES 2011; this intimation is sent at the end of every week ROC to intimate ITax Department the names of Companies intending to avail of EES 2011; objections, if any, are to be filed with the ROC within 30 days If no objections have been received within the time frame stated in the Scheme and upon being otherwise satisfied, ROC shall strike off the name and send notice under sec. 560(5) 15 Consequence Company to stand dissolved from the date of publication of notice in Official Gazette 16 8
Applications filed till 7.1.2011 All India 144 17 Comparison EES 2010 EES 2011 Filing fee NIL Filing fee ` 3,000 De-listed companies were entitled to make an application 100% Govt. Co. with no BoD unable to make an application De-listed companies NOT entitled to make an application 100% Govt. Co. with no BoD Deputy Secretary or above, authorized to do so, may make, sign and file the application and annexures 18 9
Issues Definition of Defunct Company includes companies who have not raised their capital to the prescribed minimum. For such a Company to avail of EES 2011, should it, also, satisfy the criteria of not having carried on any operation after April 1, 2008? What happens to companies where inspection has been carried out / completed and no prosecution has been / is proposed to be filed? Can a company against which prosecution is pending for a compoundable offence avail the Scheme? 19 Issues Can a Company which has repaid its Secured Loan, in full, but has failed to file a Satisfaction of Charge avail of EES 2011? How do you define management dispute? EES 2011 may not be availed by Companies with dues towards Income Tax, Sales Tax, Excise, etc. Why then is a notice being sent only to the Income Tax Dept.? To whom is such notice sent? 20 10
Issues EES 2011 requires all existing directors to file Affidavit and Indemnity Bond. What happens if few directors are deceased, missing, etc.? Is DIN mandatory? Should the Assets and Liabilities be NIL? 21 Apostille The Hague Convention of 5 th October 1961 abolishes the Requirement of Legalisation for Foreign Public Documents (Hague Apostille Convention) and facilitates the circulation of public documents executed in one State party to the Convention, to be produced in another State party to the Convention just by making it Apostille. 22 11
Apostille Apostille means a Certificate or a Apostille Certificate issued by a Competent Authority designated by the State on whose territory the public document has been executed. The list of Competent Authorities is notified by each Contracting State who is a party to the convention. This certificate certifies the authenticity of the signature, the capacity in which the person signing the document has acted and, wherever required, the identity of the seal or stamp which the document bears. 23 Apostille MCA accepts these Apostilles in respect of affidavits submitted by foreign directors 24 12
Thank you for your patience 25 13