Clarifications - Clarifications & Extension of Scheme - Company Law Settlement Scheme, 2000

Clarifications Extension of Scheme 1 PIB Press Release, New Delhi, dated 16th May, 2000 The Union Minister of Law, Justice and Company Affairs, Shri Ram Jethmalani, made the following statement on the Company Law Settlement Scheme, 2000, for a limited operation of three months from June 1, 2000, in the Lok Sabha today : The Department of Company Affairs has 20 offices of Registrars of Companies in various States. Apart from discharging various statutory duties the office of the Registrar of Companies receives returns and documents from companies under various provisions of the Companies Act, 1956, as amended from time to time. It is mandatory for the companies to file annually their balance-sheets and profit and loss accounts and annual returns in addition to other returns. The companies which do not comply with the provisions of the Act are subject to prosecutions for such violations. From the information made available to the Department by the Registrars of Companies it is found that 5,16,100 companies were in existence and 2,60,530 annual returns and 2,70,961 balance-sheets were filed in the year 1999 alone. The compliance level for these two documents is around 50 per cent. More than five lakhs prosecutions will have to be launched by the Government. Already 38,603 cases are pending in various courts as on March 31, 1999. Experience has shown that disposal of prosecution cases takes considerable time. Courts generally levy a nominal penalty while disposing of cases. The results are not commensurate with the time and effort that go into obtaining orders of the hon ble courts. Experience shows that prosecutions do not really solve the problem of widespread non-compliance. In order to effectively ensure that during the millennium year we start with a clean slate, it is proposed to introduce a scheme called Company Law Settlement Scheme, 2000 . The Scheme would involve the applicant company or the officers to make a declara tion to the relevant Registrar of Companies that within the stipulated time the company will apply with necessary fees seeking immunity from prosecution and compounding of the period of delay involved in filing. The quantum of fees which will have to be paid by the company will depend upon the number of docu ments in respect of which the default has been placed and the period of delay involved in filing them. Fees will be directly proportional to the extent of immunity sought. The Scheme will be in operation for a limited period of three months from June 1, 2000, to August 31, 2000. The Scheme will permit defaulting companies to file all pending documents on the payment of lump-sum amount based on the period of delay as per following table : Sl. No. No.of documents Amount payable for delay for period less than three years Amount payable for delay for period more than three years 1 2 3 4 Up to 2 Up to 5 Up to 10 More than 10 (Rs.) 2,500 5,000 7,500 10,000 (Rs.) 3,000 6,000 9,000 15,000 The Scheme has been drafted after discussing the matter extensively with officers in the department as well as Field Offices and after discussions with the Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and other individuals and organisations. Pamphlets in simple language explaining the Scheme will be got printed and distributed through field offices and it is proposed to utilise the good offices of the three institutes, viz., ICAI, ICSI and ICWAI which have readily come forward and responded in a positive manner. I am confident with the implementation of the Scheme the companies all over the country can look forward to have complete peace of mind by paying one time lump-sum amount. Besides, the public will also have access to up-to-date information of the companies on various financial matters involving the company which will be of tremendous use of members of the public. I appeal through this house to all the companies to come forward to avail of this one time opportunity. I also appeal to the captains of the industry and all professional bodies to use their good offices to ensure that individual companies come for ward and take full advantage of this one time offer. I wish to state that after the expiry of the period that is August 31, 2000, the department will come down with a heavy hand on the erring companies and also that the fines will be increased to ten times the present amount. If the Scheme succeeds about Rs. 100 crores will accrue as income to the Department of Company Affairs. The said amount is proposed to be spent on computerising and modernising the work of the department and streamlining its operations. 2 Circular No. 8 of 2000, dated 24th August, 2000 The Government had announced a scheme, called the Company Law Settlement Scheme, 2000 (CLSS-2000), under which a company may file documents such as balance-sheet, annual return, etc., along with a lump sum fee as indicated in the scheme. However, it has been observed that some of the companies have approached the Registrar of Companies for striking off the names of the compa nies taking the shadow of circulars dated 17th February, 1987 and 19th February, 1991, issued by the department regarding striking off the names. The companies have, however, not filed the annual returns and balance-sheets. It is quite clear that as per section 560 of the Companies Act even in case of companies which come for striking off their names under this section the company should file all the balance-sheets and profit and loss accounts and not only one latest balance-sheet. This is more necessary to ascer tain whether the applicant seeking sanction under section 560 of the Act has met his obligation to depositors, banks and financial institutions from whom it borrowed the money and paid taxes and other Government and statutory dues. The Government has now reconsidered the circulars referred to above and has decided that the aforesaid circulars are not appropriate. Therefore, the circular numbers dated 9/7/83-CL. III, dated 17-2-87 and 1/3/91-CL-V, 5/4/91-CL. III, dated 19-2-91 are withdrawn till further orders. 3 PIB Press Release, New Delhi, dated 31st August, 2000 Company Law Settlement Scheme, 2000 extended by a month The Government (Department of Company Affairs) has extended the Company Law Settlement Scheme, 2000, in operation from June 1, 2000, for a period of three months, which is to end today, by a month till September 30, 2000. This follows demands from chambers of commerce, accountancy professionals and others in the corpo rate sector. However, a 10 per cent extra over and above the one-time settlement amount will have to be paid during the ex tended period by the defaulting companies. The Government has mopped up more than Rs. 60 crores till this evening and the amount is expected to go up further. The Govern ment expects the corporate sector to avail themselves of the one-time golden opportunity afforded to them in order to buy peace and as a matter of evolving trust, partnership and goodwill between the Government and the corporate sector in the interest of emerging excellence in corporate governance. 4 Notification No. S.O. 793(E), dated 1st September, 2000 Extension of period Whereas the Central Government had made a Scheme, namely, the Company Law Settlement Scheme, 2000 (hereinafter referred to as the said Scheme), published, vide Notification No. S.O. 529(E), dated 31st May, 2000, for granting immunity from prosecution and compounding the period of delay involving in filing certain documents under various provisions of the Companies Act, 1956 (1 of 1956), and 2. Whereas the period of the Scheme was from 1st June, 2000 to 31st August, 2000, and 3. Whereas the Central Government has received numerous represen tations from chambers of commerce, professional institutes and corporate sector for extension of time of the said Scheme to enable companies to avail of its benefit. The Central Government has examined the representations and has decided to extend the Scheme till 30th September, 2000. 4. Now, therefore, in exercise of the powers conferred by clause (b) of section 637B read with section 637 of the said Act, the Central Government hereby extends the Company Law Settlement Scheme, 2000, up to 5 p.m. of 30th September, 2000, with the stipulation that the companies will now have to pay 10 per cent over and above the existing lump sum amounts. 5. The revised lump sum amounts now payable by the companies filing documents under the said Scheme after 31st August, 2000, would be as under : Sl. No. No. of documents Amount payable for delay for period less than three years Amount payable for delay for period more than three years (a) (b) (c) (d) Up to 2 Up to 5 Up to 10 More than 10 (Rs.) 2,750 5,500 8,250 11,000 (Rs.) 3,300 6,600 9,900 16,500 6. The other terms and conditions of the Company Law Settlement Scheme issued on 31st May, 2000, remain unchanged. 5 PIB Press Release, New Delhi, dated 13th September, 2000 In view of the ongoing Company Law Settlement Scheme, 2000, some of the companies which have availed of the scheme by paying one time fee and filing necessary documents such as balance-sheet and annual return as indicated in the Scheme, have approached the Registrars f Companies (ROCs) for deletion of their names from registers of companies taking the advantage of circulars issued by the Department of Company Affairs (DCA) on February 17, 1987 and February 19, 1991, regarding striking off the names. In this connection the DCA hereby clarifies that the companies that have approached ROCs, however, have not filed all the annual returns and balance-sheets. It is quite clear that under section 560 of the Companies Act, 1956, even in case of companies which come for striking off their names under that section, such companies are expected to file all the balance-sheets and profit and loss account for all the defaulting years and not only one latest balance-sheet. The DCA further clarifies that it is more necessary to ascertain whether applicant seeking sanction under section 560 of the Companies Act has met all the obligations to depositors, banks and financial institutions from whom it borrowed the money and paid taxes and other Government and statutory dues. The Government has now decided that the said two departmental circulars are not appropriate and, therefore, these two circulars have been withdrawn and superseded till further orders. Meanwhile, defaulting companies, which have filed all the neces sary documents under the Company Law Settlement Scheme, 2000, and are desirous of getting the name of their company struck off from the register of companies, can now approach the respective Regis trar of Companies under section 560 of the Companies Act, 1956. The department is finalising detailed guidelines to process all these cases on a fast track. The respective Regional Directors will oversee and co-ordinate the expeditious disposal of all the cases falling under section 560 of the Companies Act, 1956. 6 Press Note No. 10 (2000 series), dated 25-9-2000 Fast Track Scheme under section 560 of the Companies Act It has come to the notice of the Department that while a large number of companies have been registered but due to various reasons some of them have failed to take off. The promoters of such companies have been requesting the Government to strike off the name of the company by adopting an easy to follow method in a time-bound manner. 2. A number of representations from professional bodies/individu als have also been received during the operation of CLSS, 2000. 3. Recognising the urgent need, the Department has decided to launch fast track section 560 scheme with effect from 28th September, 2000. Three different coloured forms have been pre scribed : (a) White coloured form for applicants of CLSS 2000 up to 31st August, 2000 (Fast track I); (b) Pink coloured form for applicants of CLSS 2000 from 1st September to 30th September, 2000 (Fast track II); (c) Blue coloured form for all other applicants who have filed the documents with the Registrars in the past in respect of defunct companies and have sought their names to be struck off. 4. The blue form is for those applicants who file their applica tions after 30th September, 2000, and who wish to avail of the benefit of section 560 Scheme. They will however, be required to pay lump sum fee as per the table given below : No.of documents Amount payable for delay for period less than three years (Rs.) Amount payable for delay for period more than three years (Rs.) (1) (2) (3) Up to 2 Up to 5 Up to 10 More than 10 3,500 6,500 10,000 13,000 4,000 8,000 12,000 20,000 5. The cost of each form has been prescribed as Rs. 100. The pre-numbered forms will be supplied in the respective office of the ROC s and RD s throughout the country. 6. The companies availing of this scheme will be enormously benefited as it would be a simple exit route for them particu larly those companies which have no business and they have availed of Company Law Settlement Scheme, 2000. This will also help the other companies who want to exit the corporate form of business on the payment of specified lump sum amount. They will be saved from the protracted process of voluntarily winding up of companies. 7. The scheme will be in operation from 28th September, till 26th November, 2000 (60 days). 7 Press Note No. 11 (2000 series), dated 25-11-2000 Company Law Settlement Scheme, 2000 - A grand success The Company Law Settlement Scheme, 2000 (CLSS 2000), is an initiative of the Department of Company Affairs to usher in a new era of trust and partnership between the Government and the private sector. The CLSS 2000 was started on 1st June, 2000. The scheme provided a one-time opportunity to companies which de faulted in filing the balance sheet and profit and loss account and such other documents with the Registrar of Companies. The Scheme was to initially expire on 31st August, 2000. However, the Scheme was successful beyond expectations and till 31st August, 2000, the Scheme was availed of by 1,02,096 companies who contributed Rs. 109 crores to the exchequer as against a target of Rs. 100 crores. The success of the CLSS 2000 has been possible due to a brilliant conception and imaginative packaging of the Scheme by the leaders in the Department of Company Affairs and dedication and hard work put in by field officers which has enabled the target of the Scheme being surpassed. The Scheme has been extended by the Government till 30th Septem ber, 2000, due to persistent demand from companies. The collec tions under the Scheme as on 23rd September, 2000, are Rs. 111.59 crores. I would, however, appeal to companies to come forward in large numbers in the remaining week of the Scheme and avail of the CLSS, 2000 facility. They should justify the Government s belief that the companies would now move towards an era of growth and good corporate governance. 8 Press Note No. 13 (2000 series), dated 16-11-2000 Fast Track Scheme under section 560, waiving of the requirement for obtaining certificate from various authorities A Scheme namely, the Fast Track Scheme under section 560 of the Companies Act has been launched by this department recently for allowing companies which, due to various reasons have failed to take off, to get their name struck off from the Register of Companies maintained by Registrar of Companies under that sec tion. Details in this regard were issued through Press Note No. 10 of 2000, dated 25th September, 2000 and General Circular No. 10 of 2000, dated 20th September, 2000. 2. Two common problems have been highlighted by the profession als/professional bodies in following the procedure prescribed in this Scheme. 2.1 First one relates to getting the two affidavits prescribed by the Department signed on a stamp paper by a judicial magistrate. It has been represented before the Department that going before the magistrate is not easy for various reasons. The Department has, therefore, considered this matter in detail and a decision has been taken that the affidavit could be signed by magistrate or by notary public with seal. 2.2 Secondly, there were, inter alia, the following conditions (mentioned in clauses (e) and (f) of General Circular No. 10 of 2000, dated 20th September, 2000) to be fulfilled by a company which wishes to avail of this Scheme for striking off its name : l A certificate from the auditor that the company is not doing any business and does not owe any amount to tax authorities/banks and financial institutions has been submitted. l A clearance certificate of tax dues (from income-tax, sales-tax, excise, etc.) has been attached. Various suggestions/representations have been received by the Department informing the non-applicability of Income-tax Act, Sales Tax Act and Central Excise to those companies which have not done any business since their incorporation or for a fairly long period and problems involved in getting these certificates by such companies. It has, therefore, been decided that in the case of companies which have not done any business since their incorporation as well as for a fairly longer period can give an affidavit along with an indemnity bond in the prescribed form on a stamped paper. 3. Further on the basis of the various representations received from companies, profes-sionals, institutes, chamber of commerce, etc., the scheme has been extended by one month. 9 Circular No. 14 of 2000, dated 16th November, 2000 Fast track scheme under section 560 of the Companies Act, waiving of the requirement for obtaining certificate from various authorities. Sir, Attention is drawn to this Department s General Circular No. 10 of 2000, dated 20th September, 2000, regarding Fast Track Scheme under section 560 of the Companies Act. 2.1 First one relates to getting the two affidavits prescribed by the department signed on a stamp paper by a judicial magistrate. It has been represented before the department that going before the magistrate is not easy for various reasons. The department has, therefore, considered this matter in detail and a decision has been taken that the affidavit could be signed by magistrate or by notary public with seal. 2.2 Secondly, there were, inter alia, the following conditions (mentioned in clauses (e) and (f) of General Circular No. 10 of 2000, dated 20th September, 2000), to be fulfilled by a company which wishes to avail of this scheme for striking off its name : l A certificate from the auditor that the company is not doing any business and does not owe any amount to tax authori ties/banks and financial institutions has been submitted. l A clearance certificate of tax dues (from income-tax, sales-tax, excise, etc.), has been attached. Various suggestions/representations have been received by the Department informing the non-applicability of Income-tax Act, Sales Tax Act and Central Excise to those companies which have not done any business since their incorporation or for a fairly long period and problems involved in getting these certificates by such companies. It has, therefore, been decided that in the case of companies which have not done any business since their incorporation as well as for a fairly longer period can give an affidavit along with an indemnity bond in the prescribed form on a stamped paper. 3. Further on the basis of various representations received from companies, professionals, institutes, chamber of commerce, etc. the scheme has been extended by one month. AFFIDAVIT We, the following directors of................Limited, (hereinaf ter called the company ), incorporated on............../......../...............under the Companies Act, 1956 and having its registered office at......................: 1. Shri.............S/o. Shri.............., residing at........ 2. Shri.............S/o. Shri..............., residing at....... do solemnly affirm as under : 1. We are the only directors of...................Limited. 2. The company was incorporated on.................with an object to carry on................... 3. The company has been inoperative right from the date of its incorporation/the past...........years due to diverse reasons. 4. The company has assets worth Rs. ...........in the form of cash balance/or no assets* (*strike out the one not applicable) and has liabilities to the extent of Rs. .....but the creditors have waived the payment of their dues, and the waiver letters have been enclosed/no liabilities.* (*strike out the one not applicable). 5. As on date the company is not having any dues towards income-tax/sales-tax/central excise or any other Central or State Government Departments/authorities or any local authorities. 6. The company has/had no workers* (*strike out the one not applicable) as on date and no amount is due any worker who was in the employment of the company. 7. In view of the foregoing, we the directors of the company have decided to make an application to the Registrar of companies, ..... to strike off the name of the company from the register of companies maintained by the said Registrar of Compa nies, under section 560 of the Companies Act, 1956. 8. In the case of any loss(es) to any person or any valid claim from any person, if any, arising out of the striking off of the name of the company from the register of companies, by the Regis trar of Companies............, we the directors of the company jointly and severally, undertake to indemnify any person for any such losses and the indemnity bond to this effect is enclosed. We solemnly affirm that this declaration is true to the best of our knowledge and belief and that it conceals nothing and that no part of it is false. Place: Signature: 1. Shri Date: 2. Shri Indemnity bond To The Registrar of Companies, 1. We Shri ....., S/o. Shri ..... residing at ..... and Shri ....., S/o. Shri ....., residing at ....., do hereby jointly and severally declare that: (a) We are the only directors of ..... Limited, a company incorporated on ..... under the Companies Act, 1956, whose regis tered office is situated at ..... (b) That we have made an affidavit dated ..... the ..... duly sworn before notary public affirming that the company ..... Limited, has assets worth Rs. ..... in the form of ..... The company has no liabilities. (c) Further the company is not doing/carrying on any busi ness right from the date of its incorporation and the company is also not intending to do any business or commercial activity as laid down in the main objects of its memorandum of association in future. (d) Thus the company is defunct and is requesting the Registrar of Companies, ..... to strike off the name of the company from the register of companies in terms of section 560 of the Companies Act, 1956. 2. In view of the above, we do hereby undertake in writing: (a) to pay and settle all lawful claims arising out of the striking off of the name of the company. (b) to indemnify any person for any such losses that may arise pursuant to striking off the name of the company. (c) to settle all lawful claims and liabilities which have not come to our notice at this stage, even after the name of the company has been struck off in terms of section 560 of the Compa nies Act, 1956. Place : Signature : 1. Date : 2. Witnesses: 1. Signature (Name, father s name, addresses and occupation) 2. Signature (Name, father s name, addresses and occupation). 10 PIB Press Release, New Delhi, dated 20-11-2000 Scheme of fast track exit route for defunct companies extended The Government (Department of Company Affairs) has extended the fast track exit route for defunct companies under section 560 of the Companies Act, 1956, for a further period of one month from November 26, 2000 to December 25, 2000. The scheme was announced earlier on September 25, 2000, by the Minister of Law, Justice and Company Affairs and Shipping, Shri Arun Jaitley, for a period of two months ending November 26, 2000. The scheme allows defunct companies, which have failed to take off for various reasons, to get their names struck off from the register of companies maintained by Registrar of Companies under section 560 of the Companies Act, 1956. The Government has also waived the requirement for obtaining certificate from various authorities. Now the affidavit could be signed by magistrate or by notary public with seal. Originally, the scheme required getting two affidavits, prescribed by the Department of Company Affairs (DCA), signed on a stamped paper by a judicial magistrate, which faced innumerable hurdles. The other waiver of conditionalities relates to exemption from producing certificates from Income-tax Act, Sales Tax Act and Central Excise to those companies which have not done any busi ness since their incorporation or for a fairly long period and problems involved in getting these certificates by such companies can give an affidavit along with an indemnity bond in the pre scribed form on a stamped paper. Originally, the scheme stipulated submission of a certificate from the auditor that the company is not doing any business and does not owe any amount to tax authorities, banks and financial institutions. Besides, a clearance certificate of tax dues from income-tax, sales tax, excise, etc., was needed. The extension of the fast track exit route for de-registration of defunct companies and waiver of original conditionalities follows various representations from companies, professionals, chambers of commerce and the three premier institutes of chartered, cost and works accountants and companies secretaries of India. So far, more than seven thousand defunct companies have availed themselves of the scheme. With the extension of time and waiver of conditionalities grant ed, the Government hopes that the remaining defunct companies will come forward to avail themselves of the de-registration route. The fast track exit route under section 560 of the Companies Act, 1956, is an off-short of the four-month long Company Law Settle ment Scheme (CLSS) 2000, which ended with a grand success on September 30, 2000, wherein 50 per cent of 2.54 lakh defunct and defaulting companies availed of the CLSS 2000. For the remaining defunct companies, the fast track exit route was resorted to initially for a period of two months since extended by one month. 11 General Circular No. 3/2001, dated 2-1-2001 Scheme further extended Fast Track Scheme under section 560 of the Companies Act - Exten sion till 31-1-2001 On the basis of various representations received from Companies, Professionals, Institutes, Chamber of Commerce, etc., the Scheme has been extended till 31-1-2001. Other terms and conditions of the Scheme remain unchanged.