A senior ministry official said the exercise would help in having a "sanitised list" of companies and professionals.
Last year, the ministry carried out the Know Your Customer (KYC) initiative for directors to ascertain their identities as part of larger efforts to clamp down on entities that are suspected to be conduits for illicit fund flows.
Corporate Affairs Secretary Injeti Srinivas said that KYC requirement for directors was a major step.
Against 3.3 million individuals who had Director Identification Numbers (DINs), little over 1.6 million have complied with the KYC requirement. DIN is a unique number allotted to individuals who are eligible to have directorship on the boards of registered companies.
Srinivas said the ministry would be doing the KYC process for companies, which would be a major step wherein the MCA21 system would not register the companies in case they are non-compliant with certain parameters.
"If you are defaulting in payment of deposits, system will not let you register. If you are having non-compliant directors who have not done KYC, the system will not let you enter."
"So the company will be forced to either remove the director or make the director compliant and then get into the system," Srinivas told PTI.
However, he said such companies would be allowed to transact with the ministry but would be shown as "non-compliant" in the system.
"This is again another architecture where the third drive will run after the companies drive. Professionals will be screened and then registered into the system," the Secretary said.
Against the backdrop of instances of corporate frauds and various alleged lapses in corporate governance practices, he said prima-facie there is not anything lacking in the Companies Act itself but on many occasions, compliance appears to be more in form than in substance.
"If compliance is more like tick box and all, then you are not really having a strong foundation of corporate governance... Many of the big sort of incidents that we have come across in the last year or two, these things are becoming very apparent," he noted.
The IL&FS crisis and fraud at Punjab National Bank came to light in 2018. In both cases, the ministry has taken various regulatory actions.