Clarification regarding Simplified Exit Scheme, 2005 - Companies Law - 05/2005

General Circular No: 05/2005 Government of India Ministry of Company Affairs 5th Floor, A Wing, Shastri Bhavan, Dr. R P Road, New Delhi-110 001 Dated the 10.05.2005 Subjects:- Clarification regarding Simplified Exit Scheme, 2005 I am directed to refer to the General Circular No. 2/2005 on striking off names of defunct companies and recollect the discussions held on a list of clarifications during the RDs/ROCs conference held on 27th April 2005. The final list of clarifications on the Scheme is enclosed. 2. As discussed during the meeting on 27-4-2005, ROCs are advised to process the applications received under section 560 of the Companies Act, 1956 prior to the commencement of SES 2005 also. 3. ROCs are further advised to add a new clause to the Affidavit (Annexure B ) with reference to Indemnity Bond to General Circular No. 2/2005 to the effect that the applicant company has no assets and liabilities as under: 6A. The company..........Private/Limited has no assets and no liabilities as on the date of the Affidavit. Clarifications on simplified Exit Scheme, 2005 Query Reply Whether balance sheet and annual return for earlier/initial periods would be required to be filed. Para 7 of general Circular No. 2 of 2005 is clear on this aspect. They are not required to be filed. Whether copy of documentary evidence for residence should be attested by Gazetted Officer only. Paras 2 and 3 of Annexure B and para 1( a )( iii ) ( iv ) of Annexure C to the general Circular No. 2 of 2005 addresses this. If documents are attested by Chartered Accountant and Company Secretary in whole time practice should also be acceptable. Whether notary should not be allowed to certify these documents. Paras 2 3 of Annexure B and para 1( a )( iii ) ( iv ) clearly indicate that either copies of residence proof should be attested by Gazetted Officer or alternatively an affidavit declaring place of residence may be sworn before a Magistrate. This is essential in the context of vanishing companies. Exit of a company through filing of incorrect particulars and wrong indemnities could result in similar phenomenon. What happens if an applicant is not holding passport or a PAN Card. The applicant can make a declaration to this effect in the affidavit. He can enclose other document showing his photograph to establish his identity to the satisfaction of ROC. This is obviously necessary in case those who have set up companies but do not possess even a PAN number or a Passport. Whether a company should increase its paid up capital to minimum prescribed under section 3 of the Act and amend its articles before applying under SES. This is not necessary. There is no bar on application being made and considered if the limits prescribed under section 3 are not complied with. What compliance would be required in case of a private company which has not amended its articles to indicate new clause about prohibition on invitation or acceptance of deposits from persons other than its Members, Directors or their relatives? There is no bar to such companies applying. Whether a company which has already been served with a notice of default under section 159/166/10/220 can apply under SES? Further whether a company against which a case is pending in economic offences Court on such offences can apply under SES, 2005 ? Attention is drawn to para 8 of general Circular 2 of 2005. No further clarification is necessary. Companies being prosecuted for non-compoundable offence may exist only if the concerned Court permits. In the case of documents filed timely under SES, 2005 are rejected by ROC due to incomplete information after 31-7-2005 whether there is any scope for rectification of documents already filed with ROC with their due Power of Attorney or resubmission of these documents with correct information at a later date. If the application is filed in time, rectification of documents may be done subsequently. The Scheme should provide for striking of section 25 companies after obtaining necessary NOC from Regional Director or connected authorities. The scheme specifcially excludes section 25 companies. Whether Scheme would be available to companies, which have already filed papers under section 560 for striking of names prior to announcement of SES, 2005. Such companies may, at their option, apply under SES, 2005 complying with the requirement of general Circular No. 2 of 2005, dated 28-1-2005 of this Ministry. Whether ROC can strike up the name of the companies, which have applied prior to the SES, 2005 coming into operation. No, ROC can consider their applications provided the applicant comply with the requirements of SES, 2005. Whether condition relating to no assets and no liabilities is mandatory? This condition is mandatory. Whether companies those have defaulted in raising their minimum paid up capital pursuant to section 3(3) and 3(4) are eligible or not under the Scheme. Yes, they are eligible. They should apply under the Scheme. The words No assets and liabilities means what this needs to be clarified. No asset and liabilities means when the company applies under SES there will be no asset in its possession and it will have no liabilities. According to the present section 3(5) companies which have defaulted under section 3(3) and 3(4) are deemed to be a defunct company and there should be struck off by ROC automatically under section 560. No doubt those companies, which have defaulted under section 3(3) and 3(4), are deemed defunct companies under section 3(5). However, ROC will not proceed to strike off unless they comply with their requirements of SES, 2005 mainly filing of affidavits and accounts and furnishing of indemnities etc.