40% firms failing to file returns under MCA lens, may get deregistered

The ministry has found that even after these companies were de-registered, their directors were not vacating offices - as they are supposed to Companies Act

Forty per cent of the 1.4 million companies registered with the Registrar of Companies (RoC) do not file statutory returns, sources in the Ministry of Corporate Affairs (MCA) have said. This means 560,000 companies are on the radar of the ministry, which might decide to deregister them.
 

In the 2017-18 financial year, the RoC de-registered 226,000 companies for not filing statutory returns, such as financial statements. The MCA had considered non-filing of statutory returns from 2013-14 to 2015-16. 
 

The ministry has found that even after these companies were de-registered, their directors were not vacating offices — as they are supposed to according to Section 167 (1) of the Companies Act. 
 

In February 2017, the Prime Minister’s Office had set up a task force under the joint chairmanship of the revenue secretary and the secretary of the MCA to keep tabs on shell companies. It was supposed to check illegal companies with a multi-agency approach. The task force had recommended de-registering of these companies. 
 

FIGHT AGAINST THE SHELL FIRMS

About 560,000 companies — 40% of the 1.4 million registered with the RoC — do not file statutory returns

DEREGISTERED
 

260,000 firms in FY18 

UNDER THE LENS
 

16, 537 firms identified as shell companies
 

16,739 firms have directors in shell companies
 

80,670 suspected shell companies

NOTICES
 

Being sent to 225,000 firms

The department of financial services, the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED), the Serious Fraud Investigation Office (SFIO), the Reserve Bank of India (RBI), the Central Board of Direct Taxes (CBDT), and the Securities and Exchange Board of India (SEBI) were some of the task force’s core members.
 

A database of shell companies was compiled by the SFIO on the basis of de-registration. 
 

This has three lists — the confirmed list, the derived list and the suspect list. The confirmed list has 16,537 shell companies, listed on the basis of the information received from the various law enforcement agencies. 
 

The derived list has 16,739 companies identified on the basis of 100 per cent common directorships with the confirmed shell companies. Then, there is another list of 80,670 suspected shell companies, drawn up by the SFIO using certain indicators.
 

A total of 225,910 companies have been further identified for being officially struck-off in a second drive by the task force in 2018-19. The number may rise in the future, the ministry sources said.