The idea of Center for Processing Accelerated Corporate Exit (C-PACE) was first brought up in the Union Budget 2022-23, where it mentioned that C-PACE should re-engineer the business closure procedure and shorten the period required for the process of voluntary closure of business in India. It was created as a dedicated center for addressing matters related to the closure of companies.
What is C-PACE?
A notification was issued by the Ministry of Corporate Affairs (MCA) that introduced the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2023 (Amendment Rules, 2023).
The amendments made under these Rules aims to:
- Clarify about the authority responsible for issues related to removal of companies’ names from the register of companies (as stated under Section 248 of the Companies Act, 2013 – hereafter referred to as ‘Act’) and the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (hereafter referred to as ‘Rules’).
As per the notification, the application for removal of names from register of companies shall be managed by the Center for Processing Accelerated Corporate Exit (C-PACE) from May 2023.
When & Why was the C-PACE Introduced?
C-PACE has been introduced as a method of ‘accelerated corporate exit’ in India. While several advanced systems have been set up to enable quick registration of companies, C-PACE aims at quickening the process of voluntary closure for such companies.
It shall reduce the time required for voluntary closure from the current 2-year mark to less than 6 months.
- In March 2023, the MCA established C-PACE at the Indian Institute of Corporate Affairs, Gurgaon (Gurugram).
- It aimed to support and speed up the process for removal of companies’ names from the Register of Companies and make it easier for companies to wrap up and close their business. This is also referred to as ‘Fast Track Exit’.
- A notification was issued by the MCA in April 2023, which informed that the Rules shall come into effect from 1 May 2023.
C-PACE was basically introduced as a centralized system for two major reasons:
- Centralizing and speeding up the process of voluntary closure of businesses.
- Reducing the workload for the relevant registry authorities to help them save time for other tasks they are liable to manage.
| Such a system is quite advantageous for both the Government and private companies. |
Key Changes
- C-PACE’s Registrar shall have the authority to process and dispose of the applications submitted for the removal of names of companies using Form STK-2 under Section 248 of the Companies Act, 2013.
- The Registrar shall have territorial authority across India, which was previously managed by the Registrar of Companies (RoC) of the states where the companies’ headquarters were located.
- C-PACE shall be responsible to manage applications filed for removal of companies’ name, using Form STK-2 from 1 May 2023.
- Form STK-2 has been slightly changed.
- A certified true copy of the company’s shareholders’ consent for removal of companies from the RoC must be attached and submitted with the updated Form STK-2. This consent must be filed in Form MGT-14 to the relevant RoC, while the SRN of Form MGT-14 must be mentioned in Form STK-2.
- Form STK-2 now includes an option that allows you to choose the reasons behind filing the closure application under Section 248(1) and (2) of the Companies Act, 2013.
Conclusion
Introduction of C-PACE has not only simplified the process and reduced the time taken for removal of companies’ name from Register of Companies but also relieves the burden on the Government authorities responsible for managing such applications; allowing them to focus on other tasks that fall under their jurisdiction. Besides, considering the process time for voluntary closure of business has been reduced to 6 months from the previous 2-year mark, individuals may be more willing to start new businesses and not worry about having to spend years when they wish to close the company.
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