MCA cuts business closure time to 93 days with C-PACE

The Ministry of Corporate Affairs reported a significant reduction in the average time required to voluntarily close a business, dropping from 195 days in FY23 to 93 days in the last fiscal year, and further down to less than 80 days in the current fiscal quarter. This improvement is attributed to the implementation of the C-PACE system, which was established in May last year. This change has made the voluntary exit process smoother and more efficient, thereby encouraging entrepreneurs to pursue more productive ventures.

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The Ministry of Corporate Affairs reported that the average time to voluntarily close a business was 93 days last fiscal year, down from 195 days in FY23, and 499 days in FY22, according to an internal communication from the Ministry of Corporate Affairs (MCA), highlighting the ease of exit in recent years. This improvement comes after the C-PACE system was put into place, which streamlined procedures, and this quarter’s average closure time was less than 80 days.

According to a senior official, the implementation of a centralised electronic exit system known as C-PACE last year, with a focus on faster processes and timely disposal, as well as strict monitoring of applications, has accelerated the voluntary closure of companies. It is not necessary to interact physically with stakeholders.

In reality, the average time to close a corporation during the current fiscal quarter was fewer than 80 days, according to the ministry’s message, which ET checked.

Prior to the pandemic, voluntary winding-up took more than two years, according to the official. “After ease of entry, the MCA has also taken steps to make the voluntary exit of companies easier and smoother,” the agency reported.

Easier closing of unsuccessful enterprises stimulates entrepreneurs to engage in more productive ventures, hence increasing economic activity and jobs. According to the notification, the previous approach required the Registrar of Corporations (RoCs) in their individual jurisdictions to close corporations on their own initiative.

This was primarily because the RoCs were burdened with numerous other responsibilities, and many of them adhered to “divergent and non-uniform practices.”

Nirmala Sitharaman, finance and corporate affairs minister, proposed a plan in the FY23 budget to establish a centralised facility for faster processing of departure requests. The MCA established the Centre for Processing Accelerated Corporate Exit (C-PACE) in May of last year.