May 15, 2023: Indian Ministry of Corporate Affairs Establishes Volunteer Exit Process

Indian Ministry of Corporate Affairs (MCA) establishes separate center C-PACE for accelerating voluntary exit process 

The Indian Ministry of Corporate Affairs (MCA), provided a on dated April 17, 2023, notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2023. These amended rules authorize the Registrar, the Center for Processing Accelerated Corporate Exit (C-PACE) to exercise functional jurisdiction of processing and disposal of striking off applications. This means that the companies who wish to voluntarily remove their names from the Register of Companies should make the strike off application in e-Form STK-2 to the C-PACE instead of the respective Registrar of Companies (ROC). The amended rules will be effective from May 1, 2023.

Earlier, it was announced in the 2023 Budget that a new body would be established to process and dispose of applications for the removal of company names from the Register of Companies to accelerate voluntary winding up process. Accordingly, MCA had issued a notification on March 17, 2023, to set up a separate body C-PACE for this purpose. It is expected that the time required for the voluntary winding up process will be reduced from two years to less than six months after implementation of this new measure. 

The April 17, 2023 notification makes the following amendments to the Companies (Removal of Name of Companies from the ROC) Rules, 2016:

• Rule 4 is amended to state that the strike off application shall be made to Registrar C-PACE in Form STK-2;
• New rule 3A is introduced which states that the C-PACE shall be considered as the ROC for the purpose of processing and disposal of striking off applications as well as for exercising power over all matters related thereto under section 248 of the Companies Act.
• Form No. STK 2 (Application by company to ROC for removing its name from registrar of companies), Form No. STK 6 (Public Notice) and Form No. STK 7 (Notice of striking off and dissolution) are revised, and the MCA will launch the revised Form No. STK-2 for the stakeholders from May 1, 2023, on its website to facilitate e-filing of the strike off application to C-PACE.

Implications

Companies who wish to voluntarily discontinue their Indian operations would benefit from this development as it is expected to substantially reduce the time required in processing these applications.