The setting up of a centralised electronic exit system called C-PACE last year-with its focus on faster processes and timely disposal-and strict monitoring of applications have expedited the voluntary closure of companies, said a senior official. It doesn’t require physical interaction with stakeholders.
In fact, in the ongoing quarter of this fiscal, the average time to close a company took less than 80 days, the ministry said in the communication, reviewed by ET.
Voluntary winding-up used to take more than two years before the pandemic, said the official.
“After ease of entry, the MCA has also taken steps to make the voluntary exit of companies easier and smoother,” it said.
Easier closure of failed businesses encourages entrepreneurs to invest their resources in more productive ventures, thus adding to the economic activity and employment. Under the earlier system, the communication said, voluntary closure of companies by the Registrar of Companies (RoCs) in their respective jurisdictions had been time-consuming. This was mainly because the RoCs were saddled with many other responsibilities and many of them followed “divergent and non-uniform practices”.In the budget for FY23, finance and corporate affairs minister Nirmala Sitharaman announced the proposal to set up a centralised facility for faster processing of exit requests. Subsequently, the MCA set up the Centre for Processing Accelerated Corporate Exit (C-PACE) in May last year.”With C-PACE, a centralised registry is specifically dealing with the closure of companies rather than the traditional setup of jurisdictional RoCs where there was no segregation mechanism to deal in priority,” said Noorul Hassan, partner at law firm Lakshmikumaran & Sridharan. The absence of physical interactions further led to speedy closures, he added.
As per the MCA data, of the 28,536 closure cases as of June 13, 2021, almost 10% were pending for more than 1,000 days and 54% for more than one year. Now, about 2,500 cases remain to be cleared, the lowest pendency so far.
