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Understanding the Norms for India’s Exit Scheme for Defunct Companies
1. Understanding the Norms for India’s Exit Scheme for Defunct Companies
India’s popular Easy Exit Scheme (EES) that allows defunct companies to get their names removed from the
Register of Companies has been extended. The scheme is a major relief for a number of companies that have
registered with the Indian Government (Registrar of Companies, Ministry of Corporate Affairs) but either went
out of business or became non-operational and stopped filing statutory returns and documents, with the
Registrar of Companies.
The EES 2011 is an extension of the hugely popular EES 2010 launched under Section 560 of the Companies Act,
1956 during May-Aug, 2010. Companies not availing or eligible for the EES are required to file the relevant
statutory returns and documents (e.g. balance sheets, etc.) for all the years of their existence even if they were
not doing any business. The penal fees amounts to ten times the original fees for every late / non filing and such
companies also face criminal prosecution for being in violation of the Companies Act.
Who Is Eligible For EES 2011?
Companies which are inoperative since incorporation or commenced business after incorporation but later on
became inoperative are eligible for the said Easy Exit Scheme 2011. Such companies are termed “Defunct
Companies”.
What Are Defunct Companies?
As per definition provided under the Easy Exit Scheme 2011, Defunct Companies are Companies, which have an
active status at the Ministry of Corporate Affairs (MCA) and which are not carrying on any business or not in
operation on or after 1st April, 2008; or which did not raise their minimum paid up Capital i.e. Rs. 1,00,000/-
(for Private Limited Companies) or Rs. 5,00,000/- (for Public Limited Companies).
Who Is Not Eligible For EES 2011?
The below cannot avail of the Easy Exit Scheme:
• Listed companies
• Companies that have been de-listed
• Companies registered under section 25 of the Companies Act,1956 (Non-profit companies)
• 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 against which prosecution for a non-compoundable offence is pending in court
• Companies that have accepted public deposits which are either outstanding or the company is in default
in repayment of the same
• Companies that have secured a loan
• Companies having management dispute, etc.
What The Eligible Companies Need to Do?
The eligible companies need to prepare an Affidavit & Indemnity Bond (to be signed by the Directors of the
Company) as per the prescribed format. It is also essential to prepare a Statement of Accounts as per the
prescribed format, as on date not prior to more than 1 month preceding the date of filing of application under
EES, 2011. An approval needs to be obtained from the authorities governing the industry/ sector of the Company
in which it operates, if necessary and it also necessary to file the E- Form EES, 2011 on the MCA Portal (along
with the aforementioned documents) and pay the filing fees online. The form needs to be certified by practicing
Chartered Accountant/Company Secretary/Cost Accountant”.
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