Companies Easy Exit Scheme

This is with reference to the editorial titled "Re-launching of CEES" which appeared in your esteemed newspaper on Monday, 15 March 2004.
We would like to point out with you that re-introduction of the Companies Easy Exit Scheme (CEES) has been done by the Securities and Exchange Commission of Pakistan (SEC) on the demand of the corporate sector.
During the interactions of the officials of the SEC with the representatives of corporate sector, including the various Chambers of Commerce and Industry, this common demand was voiced and accordingly the scheme was re-introduced.
The CEES has been introduced to facilitate defunct companies which have no assets or liabilities and have a nominal paid-up capital.
A number of these companies have been dormant for the last many years. While it has been correctly pointed out in your editorial that the Companies Ordinance, 1984, provides for a procedure of exit for bankrupt and defunct companies, please note that this procedure is applicable to companies that have known assets, liabilities and sizeable paid-up capital.
The procedure regarding liquidation of companies and striking off their names by the Registrar would, therefore, be cumbersome and complex for companies, which have no assets/liabilities.
It may also be noted that, as a result of reforms introduced by the SEC over the past few years, it is less costly to form a new company than to pay the penalties, filing fees and face the prosecutions for defaults committed by dormant companies and their directors.
The SEC introduced, some time back, a "Companies Regularisation Scheme" under which special concession in fee for late filing of documents and waiver of penalty were granted. If dormant companies wished to, they could have regularised their affairs under that scheme.
You have also suggested, in your editorial, that a separate register of companies be maintained for dormant companies.
This is neither lawful nor desirable because the Company Law is equally applicable to all kinds of companies and it does not allow persistent defaults on part of companies or their directors.
In case the proposal suggested in the editorial is accepted, the liability of the directors would increase on account of the late filing fee of various returns and the penalty prescribed for defaults, whereas the company, being dormant, would generate no income.
A financial rehabilitation and bankruptcy law is in the process of being formulated. However, till such time that the law is promulgated, schemes like CEES would help to phase out the defunct companies to ensure a healthy and vibrant corporate sector.
You would appreciate that this letter is an attempt to correct the misunderstanding about the CEES, which far from being a persistent measure of the SEC is a voluntary scheme for defunct companies to exit from the corporate sector.