MCA waters down decision on filing of updated accounts

The Ministry of Corporate Affairs (MCA) has diluted its earlier decision and allowed companies not filing their updated balance sheets and profits and accounts to the Registrars of Companies (RoCs) to apply for liquidation through a speedy process. Also, directors of the firms can now intimate management changes, consolidations and divisions, changes in share capital without filing updating their accounts with the RoCs.

Earlier, the ministry had disallowed firms that do not submit their updated accounts from making most other statutory filings.

While the ministry circular three months ago barred such defaulters from making any routine submissions to the RoCs before they update, their annual balance sheets and profit and loss accounts, MCA has now revised its stand to allow RoCs to accept over two dozen types of submission, irrespective of the compliance level of registered firms. If the ministry’s rationale for the earlier decision was to ensure corporate governance and proper compliance by companies, the relaxation is being carried out “in the interest of the stakeholders”.

Talking about the earlier decision, an MCA official explained this was a move to bar fraudsters from misusing the easy exit route, as they will have to furnish the financial details before de- registering the firm.

The current changes, to take effect from September 25, will allow companies to apply for a speedy exit scheme to wind up operations even without updating financial vitals.

An MCA circular issued on Tuesday said the decision was taken after taking into consideration the requests made by professionals and corporate bodies. This is the third time this month the ministry has delayed or watered down its directives to suit stakeholder interests.

A few days ago, the ministry had exempted companies eying public fund raising during 2011-12 from filing their financial reports in the revised accounting format that recognises mark-to-market fluctuations.

Similarly, it went back from its earlier plans to introduce the facility of online incorporation of companies within 24 hours. On September 5, the ministry had stated it had re-examined this decision and decided not to implement this facility, the approval of three types of e-forms on the basis of certification and declarations given by the practising professional, for the moment.