Clss And Ees 2010


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A synopsis and brief analysis of the Company law Settlement Scheme and Easy exit Scheme 2010

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Clss And Ees 2010

  1. 1. A presentation on
  2. 2. <ul><li>The Ministry of Corporate Affairs has gone online through the website </li></ul><ul><li>There are a large number of companies which are dormant or defunct but they are clogging the system </li></ul><ul><li>These schemes are for such dormant or defunct companies </li></ul><ul><li>Why and for whom ? </li></ul>
  3. 3. <ul><li>These companies can go for either of the following two options, that is, regularize and come to the mainstream or get out of the system </li></ul><ul><li>These schemes are valid from 30 th May 2010 to 31 st August 2010 </li></ul><ul><li>Why and for whom ? </li></ul>
  4. 4. <ul><li>Company : means a company registered under the Companies Act 1956 including a foreign company as per the meaning of the term under section 591 of the said act. </li></ul><ul><li>Important terms </li></ul>
  5. 5. <ul><li>Defaulting company: company which has made a default in filing documents on due date as required under the said act </li></ul><ul><li>Designated Authority: The jurisdictional ROC </li></ul><ul><li>Important terms </li></ul>
  6. 6. <ul><li>As per Section 3 & 4 of the Companies Act 1956 as modified by Companies Amendment Act 2000, a private company must have a minimum paid up share capital of Rs 1,00,000/- and a public company must have a </li></ul><ul><li>Paid up capital </li></ul>
  7. 7. <ul><li>minimum paid up capital of Rs 5,00,000/- </li></ul><ul><li>What would be the status of those companies whose paid up capital is less than the minimum specified in the said act ? </li></ul><ul><li>First increase the paid up capital, then apply. </li></ul><ul><li>Paid up capital </li></ul>
  8. 8. <ul><li>Additional filing fee can be up to 9 times of the normal fee </li></ul><ul><li>Under the CLSS 2010 a defaulting company has two advantages, namely, </li></ul><ul><li>( A ) Concession in additional filing fee of 75%, that is, only 25% of total additional filing fee has to be paid. </li></ul><ul><li>Additional fee </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  9. 9. <ul><li>Example: say a company is in default of filing the annual accounts and annual return for six years. If the normal filing fee is Rs 500/-, the additional filing fee for both the documents together with the compliance certificate would be about Rs 78,000/- . </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  10. 10. <ul><li>Under the CLSS 2010 it will get a concession of Rs 58,500/-, it will have to pay an additional fee of Rs 19,500/- </li></ul><ul><li>How to claim this concession ? </li></ul><ul><li>This concession in additional filing fee is automatically granted by the MCA system for all belated filings. </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  11. 11. <ul><li>( B ) The Immunity Certificate </li></ul><ul><li>Non filing of documents within the schedule time attracts two penalties, namely, </li></ul><ul><li>( 1 ) Pecuniary penalty of additional fee and </li></ul><ul><li>( 2 ) Liability for prosecution by the ROC for non filing / belated filing of documents </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  12. 12. <ul><li>This scheme addresses both the liabilities of a defaulter company. </li></ul><ul><li>A defaulting company , after filing the documents, can apply to the designated officer for an Immunity Certificate. Application can be made after </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  13. 13. <ul><li>the closure of the scheme AND after such documents have been taken on file or on record or approved by the ROC but within 6 months from the date of closure, that is within 28 th Feb, 2011. The designated officer, upon being satisfied shall grant immunity </li></ul><ul><li>What is the CLSS 2010 offering ? </li></ul>
  14. 14. <ul><li>( 1 ) The paid up capital must be at least at the threshold limit. </li></ul><ul><li>( 2 ) The company must withdraw any appeal, if filed against any notice or complain before a competent court, in respect of violation under the relevant section, </li></ul><ul><li>What are the conditions for availing CLSS 2010 ? </li></ul>
  15. 15. <ul><li>before applying for immunity certificate . The proof of such withdrawal must be furnished with the designated authority. </li></ul><ul><li>After the grant of immunity the concerned Registrar shall withdraw the prosecution pending, if any, before a competent court. </li></ul><ul><li>What are the conditions for availing CLSS 2010 ? </li></ul>
  16. 16. <ul><li>4. At the conclusion of the Scheme, the Registrar shall take necessary action under the Companies Act, 1956 against the companies who have not availed this Scheme and are in default in filing of documents in a timely manner !!!!!!!!! </li></ul><ul><li>Defaulting companies Beware !!!!! </li></ul>
  17. 17. <ul><li>( 1 ) Incorporation documents. </li></ul><ul><li>( 2 ) Establishment of place of business in India. </li></ul><ul><li>( 3 ) If specific order for condonation of delay or prior approval is needed from CLB / Central Government / Court / other competent authority </li></ul><ul><li>( 4 ) Action taken u/s 560 ( 5 ) </li></ul><ul><li>Non Eligibility criteria . </li></ul>
  18. 18. <ul><li>( A ) What would be the general criteria for grant of immunity ? </li></ul><ul><li>( B ) What happens if immunity is not applied for ? </li></ul><ul><li>( C ) What may be the general grounds for rejection of applications for immunity ? </li></ul><ul><li>( D )If any defect is found in the or in relation to the application </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  19. 19. <ul><li>for immunity, will the company be allowed to resubmit the application after making good the defects ? </li></ul><ul><li>( E ) Immunity will be granted to the company. What will happen to the directors regarding their default u/s 274 ( 1 ) ( g ) . </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  20. 20. <ul><li>( F ) How will the company know, as to, whether the documents have been taken on file/record ? </li></ul><ul><li>( G ) If the prosecution has already been started, even then a company may file documents and apply for immunity. Can this be a substitute for S 621 A ? </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  21. 21. <ul><li>( H ) If any director is facing criminal case for economic offences, what would be the effect on Immunity application by the COMPANY? </li></ul><ul><li>( I ) If any director is a proclaimed offender under any act, what would be the effect on the application. ++ </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  22. 22. <ul><li>Company: means a company registered under the Companies Act 1956. </li></ul><ul><li>Defunct Company: a company not carrying any business activity or operation ON OR AFTER 01/04/2008 including one whose paid up cap is below the threshold limit. </li></ul><ul><li>Important terms </li></ul>
  23. 23. <ul><li>A defunct company as per the afore said definition in the circular dated 27/05/2010, which has active status on the MCA portal. </li></ul><ul><li>A Government company will require an NOC from the concerned administrative ministry or the department. </li></ul><ul><li>Eligible companies </li></ul>
  24. 24. <ul><li>Listed companies </li></ul><ul><li>Section 25 companies </li></ul><ul><li>Vanishing companies </li></ul><ul><li>Companies where inspection or investigation is ordered and being carried out / yet to be carried out / completed and prosecution pending in court </li></ul><ul><li>Companies where order u/s 234 </li></ul><ul><li>Ineligible companies </li></ul>
  25. 25. <ul><li>has been issued by the ROC and reply / prosecution in a court is pending </li></ul><ul><li>Companies where prosecution for a non compoundable offence is pending in a court </li></ul><ul><li>Companies where either public deposit is outstanding or there is payment default </li></ul><ul><li>Ineligible companies </li></ul>
  26. 26. <ul><li>Companies having secured loans </li></ul><ul><li>Companies having dispute in management. </li></ul><ul><li>Companies where filing of documents have been stayed by CLB/Court/Central Government/ other authority </li></ul><ul><li>Ineligible companies </li></ul>
  27. 27. <ul><li>Companies having outstanding dues to Income Tax / Sales Tax / Central Excise / Banks / FI / Central Govt./ State Govt. / local authorities </li></ul><ul><li>Ineligible companies </li></ul>
  28. 28. <ul><li>Company will have to file the E Form EES, electronically. The form is available on the MCA site. There is no fee. </li></ul><ul><li>It is not mandatory to sign the form EES digitally. A hard copy can be signed manually and attached to the E form and can be filed electronically. </li></ul><ul><li>How to apply ? </li></ul>
  29. 29. <ul><li>The Form EES 2010 must be pre-certified by a Company Secretary in Practice or by other professionals like CA or ICWA in practice. This certification must be digital. </li></ul><ul><li>Company must disclose pending litigations, if any. </li></ul><ul><li>How to apply ? </li></ul>
  30. 30. <ul><li>An affidavit by each director sworn before First Class Judicial Magistrate/ Executive Magistrate/Oath Commissioner /Notary, to the effect that the company is inoperative from a particular date, and that it has not carried on any business after 01/04/2008, must be </li></ul><ul><li>How to apply ? </li></ul>
  31. 31. <ul><li>attached to the Form EES2010. </li></ul><ul><li>An indemnity bond by each director individually or collectively, duly notarized, must be given to the effect that any loss, claim or liability will be met in full by each director, individually or collectively, even after the name is struck off. </li></ul><ul><li>How to apply ? </li></ul>
  32. 32. <ul><li>A statement of Account, duly signed by the statutory auditor or a CA in Practice must be attached to then form EES 2010. This statement must be on a date not prior to one month ( 30 days ) from the date of filing the Form EES 2010 </li></ul><ul><li>How to apply ? </li></ul>
  33. 33. <ul><li>Yes . </li></ul><ul><li>Annexure A for affidavits </li></ul><ul><li>Annexure B for Indemnity and </li></ul><ul><li>Annexure C for Statement of Account </li></ul><ul><li>Affidavits and Indemnity Bonds should be on the non judicial stamp paper of appropriate value as per the Stamp Act </li></ul><ul><li>Any specified format for attachments ? </li></ul>
  34. 34. <ul><li>Board Resolution authorizing the directors to file the application EES </li></ul><ul><li>NOC in case of Govt.companies </li></ul><ul><li>PAN / Passport of directors duly attested by a Gazetted officer/ CS or CA or ICWA in practice / company secretary of the company </li></ul><ul><li>What are the other documents needed ? </li></ul>
  35. 35. <ul><li>Proof of present address and proof of permanent address, duly attested by a Gazetted officer/ CS or CA or ICWA in practice / company secretary of the company </li></ul><ul><li>What are the other documents needed ? </li></ul>
  36. 36. <ul><li>The Registrar of companies shall examine and if found in order shall EMAIL ( as per the Form EES 2010 ) the company a notice u/s 560( 3 ) intimating that unless cause is shown to the contrary, within 30 days, the name of the company will be struck off the register and </li></ul><ul><li>What would be the process after filing the application? </li></ul>
  37. 37. <ul><li>the company will be dissolved. </li></ul><ul><li>The ROC shall put the name of applicants and date of application on the MCA site on daily basis, seeking objection from STAKEHOLDERS, if any, to be made within 30 days. </li></ul><ul><li>That means after filing EES 2010, the ROC will wait till reply </li></ul><ul><li>What would be the process after filing the application? </li></ul>
  38. 38. <ul><li>by the company or till 30 days, thereafter, it will be put on website for another 30 days seeking objection from stakeholders. </li></ul><ul><li>If you have stake in a company , better keep watching the MCA site. </li></ul><ul><li>Where there are other sectoral </li></ul><ul><li>What would be the process after filing the application? </li></ul>
  39. 39. <ul><li>Regulators, like SEBI, RBI, IRDA etc are involved, the ROC will send them weekly intimation, giving them 30 days time for objection. </li></ul><ul><li>The ROC will send weekly intimation to the Income Tax department of all companies, giving 30 days time for </li></ul><ul><li>What would be the process after filing the application? </li></ul>
  40. 40. <ul><li>objection, if any </li></ul><ul><li>After being satisfied the ROC shall strike off the name and send notice under Section 560 ( 5 ) for publication in the official Gazette. The Company will stand dissolved with effect from the date of publication in the official gazette. </li></ul><ul><li>What would be the process after filing the application? </li></ul>
  41. 41. <ul><li>It seems that foreign companies as defined u/s 591 are not eligible under the EES 2010. </li></ul><ul><li>What about a company which is inoperative after 01/04/2008 say from 01/04/2009 ? </li></ul><ul><li>What about a company incorporated after 01/04/2008 </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  42. 42. <ul><li>and has become inoperative thereafter or recently. </li></ul><ul><li>What is the meaning of the term inoperative. Does it mean non operation of business or non operation in general ? </li></ul><ul><li>It seems that irrespective of whether the filing is pending or is up to date, a company may </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  43. 43. <ul><li>be eligible, if it is defunct, even without filing the pending documents. </li></ul><ul><li>It seems that a company whose paid up cap is below the threshold would be eligible to apply without increasing the capital. </li></ul><ul><li>If a company is defunct for </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  44. 44. <ul><li>quite some time, it is quite likely that it will have defaults in other matters as well, say, VAT returns/ Service tax / trade license/ electricity charges/ P Tax returns etc and that will make the company ineligible under the EES 2010. </li></ul><ul><li>Can a company having assets or </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  45. 45. <ul><li>liabilities but inoperative, apply. </li></ul><ul><li>If yes, then what would happen to the assets ? </li></ul><ul><li>Where or in whose custody or to which account will the assets go ? </li></ul><ul><li>What would be the treatment of such assets in Income Tax ? </li></ul><ul><li>If liabilities are waived, would it </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  46. 46. <ul><li>amount to income under the Income tax laws. How will then the company remain eligible ? </li></ul><ul><li>Companies having management dispute are not eligible. What does management dispute mean and what would establish it? A formal complain to the ROC/ </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  47. 47. <ul><li>Petition to the CLB ? Does it mean that any director can obstruct , even if he is not a shareholder ? Probably yes. The decision to go for EES 2010 is in the hands of directors, affidavit of each director is mandatory, whether or not the director is a shareholder of the company. +++ </li></ul><ul><li>Some questions, doubts and lack of clarity . </li></ul>
  48. 48. <ul><li>Thank you very much </li></ul><ul><li>Thank you </li></ul>