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Corporate Exodus: Over 7,700 Companies Opt for Voluntary Closure Amidst Accelerated Exit Initiative

Date: December 11, 2023

In a significant development, more than 7,700 companies in the country have voluntarily shut their doors since the inception of the Centre for Processing Accelerated Corporate Exit (C-PACE) in May this year, according to government sources. The Minister of State for Corporate Affairs, Rao Inderjit Singh, revealed that the time required for voluntary exits has remarkably reduced to approximately 110 days since the operationalization of C-PACE on May 1, 2023.

C-PACE was established to streamline and expedite the processing of applications for voluntary exit under Section 248(2) of the Companies Act, 2013. Singh highlighted that the centralization of processing under C-PACE ensures efficiency and a uniform outcome for voluntary closure applications.

"Since the establishment of C-PACE, 7,721 companies have been struck off till December 5, 2023, under Section 248(2) of the Act. The time taken for voluntary exit has reduced to around 110 days during the current year," stated Minister Rao Inderjit Singh in a written reply to the Lok Sabha.

In a separate written response, Singh addressed Corporate Social Responsibility (CSR) disclosures, indicating that companies submit CSR-related information through the MCA 21 portal. He clarified that actions are taken against non-compliant companies following due examination of records and adherence to the Companies Act.

The Companies Act mandates a minimum of two percent of annual average net profit to be allocated towards CSR activities for certain profitable companies. Singh disclosed, "So far, sanction for prosecution has been accorded in 366 cases. Of these, 175 applications for compounding have been made, and 131 cases have been compounded."

Crucially, non-compliance with CSR provisions has been reclassified as a civil wrong since January 22, 2021, signaling a shift in the regulatory landscape. As businesses voluntarily exit and CSR accountability strengthens, the corporate sector undergoes transformations with potential long-term implications. Stay tuned for further updates on this evolving corporate scenario.

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