Govt plans to roll out easier norms for winding up of companies

The government plans to roll out simpler norms on winding up of companies in India by August this year.

A Finance Ministry official told Business Today Television that the plan is to allow companies with complex closures to wind up within 180 days, and simple company cases where there is no settlement needed on assets, liabilities and loans to wind up within 100 days.

Earlier in the Budget this year, the government had announced the creation of a Centre for Processing Accelerated Corporate Exit (C-PACE) aimed at reducing the timeline of corporate exits from two years to six months.

“The Ministry of Corporate Affairs is currently working on launching MCA-21 version 3, followed by introduction of company law module which will be released in four phases, including the creation of C-PACE,” the official added.

The MCA-21 version 3 will be a key platform to submit the required documents and filings under company law.

"We are hopeful to launch MCA 21 version 3 by May end. This version is going to set our foundation in launching C-PACE”, the official said, adding that L&T Infotech is developing this version of the portal. “We are evaluating each step carefully to avoid any glitches like that of Income tax portal," he added.

There are two ways of winding up a company in India - voluntary or forced by a court, through the Insolvency and Bankruptcy Code. Winding up a company is necessary as it not only releases assets and investments, but also relieves the promoters from making annual filings with the Registrar of Companies (RoC).

The process of winding up includes getting approval of the board through a special resolution (in case of voluntary liquidation), filing a winding-up petition with the court, filing an order copy of liquidation by liquidator with the RoC and publishing the notice of dissolution in a newspaper.