Government plans on easier winding up for start-ups: MCA Official

The government is planning to ease the winding up rules for start-ups by facilitating exits in 100 days, sources in the Ministry of Corporate Affairs told TNIE.

Published: 17th March 2022 08:08 AM  |   Last Updated: 17th March 2022 08:08 AM   |  A+A-

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Express News Service

NEW DELHI:  The government is planning to ease the winding-up rules for start-ups by facilitating exits in 100 days, sources in the Ministry of Corporate Affairs told TNIE. “At present, corporate exits take anywhere between one-two years, our aim is to make it 6 months for all corporates and 100 days for start-ups,” an official from the MCA said on the condition of anonymity.

He said that many young people are taking the entrepreneurial route, and if they fail in their efforts, the laws of exit should be simpler so that they do not punish young entrepreneurs. The government in this year’s budget had announced the creation of the Centre for Processing Accelerated Corporate Exit (C-PACE) to speed up the voluntary winding-up of these companies from the currently required 2 years to less than 6 months.

There are two ways of winding up a company in India - voluntary or forced by a court. 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 Company.

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 RoC and publishing the notice of dissolution in a newspaper.

Under the Insolvency and Bankruptcy Code, there is a provision for voluntary liquidation. As per information released by the insolvency regulator, 34% of the ongoing voluntary liquidation processes have taken more than two years and 52% have taken more than one year.


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