Lok Sabha Question No. 683 (UNSTARRED), answered on 2023-07-24
Subject: Voluntary Exit of Corporate Companies
Ministry: CORPORATE AFFAIRS
Asked by: Chandra Sekhar Bellana, Sanjay(Kaka) Ramchandra Patil

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO. 683

ANSWERED ON MONDAY THE 24 TH  JULY, 2023

SRAVANA 2, 1945 (SAKA)

## VOLUNTARY EXIT OF CORPORATE COMPANIES

## QUESTION

683. SHRI CHANDRA SEKHAR BELLANA: SHRI SANJAY KAKA PATIL:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) the number of corporate companies that have voluntarily exited during the last five years;
- (b) the average time and process that is currently taken for a corporate company to voluntarily wind up and exit;
- (c) whether there is any mechanism in place that is comparable to the international standards;
- (d)
- if so, the details thereof; and
- (e) the number of cases of voluntary corporate exit that are currently pending in the country?

## ANSWER

MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION; MINISTER OF STATE (INDEPENDENT CHARGE) OF THE  MINISTRY  OF  PLANNING;  AND  MINISTER  OF  STATE  IN  THE  MINISTRY  OF CORPORATE AFFAIRS

## [RAO INDERJIT SINGH]

- (a) (b) & (e):   Voluntary exit of companies is covered under Section 248(2) of the Companies Act, 2013 and Section 59 of the Insolvency and Bankruptcy Code (IBC), 2016.  Under Section 248(2) of the Companies Act, 2013, a company that seeks to have its name removed from the Register of Companies is to apply to the Registrar of Companies (RoC).  On receipt of the application, the RoC seeks public objections by way of newspaper advertisements and publication in the Official Gazette.  After receipt of objections, if any, RoC scrutinizes the whole case and approves the application of the company, if found in order.  The same is then published in the Official Gazette and from the date of publication, the company's name is struck off.

In  compliance with Section 59 of the IBC, 2016, companies which intend to liquidate themselves voluntarily and which have not committed any default may initiate voluntary liquidation proceedings.  After passing special resolution of Members and after consent of the creditors holding 2/3 rd  of the value of debt, if any, a Liquidator is appointed.  The Liquidator, after following due process for realization of the assets and distribution of the proceeds to the creditors and shareholders, submits the final report to the Adjudicating Authority, in this case the NCLT.

From 1.04.2018 to 31.03.2023, 96,261 companies have exited voluntarily under section 248(2) of the Companies Act, 2013. Under section 59 of the IBC, 2016 final reports of 1013 companies have been submitted by Liquidators, of which final dissolution orders have been passed by the NCLT in 510 cases during the said period.

In the last 5 years, the time taken for voluntary exit under Section 248(2) of Companies  Act,  2013  has  varied  between  an  average  of  approximately  6-8 months to even 12-18 months in some cases.  Under the IBC, the average time taken  for  dissolution  of  the  company  after  submission  of  final  report  by  the liquidator  has  been  in  the  range  of  7-9  months.    The  average  time  taken  by liquidator to submit the final report for adjudication to the NCLT has been about 14 months.

Keeping the above in view, the Central Government has set up the Center for Processing  Accelerated  Corporate  Exit  (CPACE)  to  centralize  and  expedite voluntarily exit of the companies under Section 248(2) of the Companies Act, 2013  at  one  central  place  at  Manesar.    Since  its  operationalization  on 01.05.2023,  the  time  taken  for  voluntary  exit  has  been  found  to  be  about  4 months.

520 cases are currently pending for voluntary liquidation under section 59 of the  Code  till  March  2023.  Further  11,037  cases  are  pending  for  voluntary corporate exit under section 248(2) of the Companies Act, 2013 till date.

- (c)  &  (d):  The  Report  of  the  Bankruptcy  Law Reforms Committee which was the precursor to the enactment of the Insolvency and Bankruptcy Code, 2016 (Code) in 2016 had considered the well-established principles of collective insolvency resolution regime provided in UNCITRAL Legislative Guide on Insolvency while recommending the framework of the Code.

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