Various initiatives taken up by MCA in last 3 years

Around 2.24 lakh companies have been struck-off till date for remaining inactive for a period of two (2) years or more;. Around 3.09 lakh Directors disqualified who were on the Board of Companies that have failed to file Financial Statements and/or Annual Returns for a continuous period of three (3) financial years during 2013-14 to 2015-16.
Over 3,000 disqualified Directors are Directors in more than 20 companies each, which is beyond the limit prescribed under the Law; To address the criminality angle, the Director, Additional Director or Assistant Director of SFIO have been recently authorized to arrest any person believed to be guilty of any fraud punishable under the Act; Steps are underway for setting-up National Financial Reporting Authority (NFRA), an independent body, to test check Financial Statements, prescribe Accounting Standards and take disciplinary action against errant professionals;. A separate initiative is underway to develop a State-of-the-Art software application to put in place an 'Early Warning System' (EWS)  to strengthen the Regulatory Mechanism.

Few recent initiatives by MCA INITIATIVES 
1.     SPECIAL TASK FORCE
“Special Task Force” has been constituted to oversee the drive against such defaulting companies under the Joint Chairmanship of Revenue Secretary and Secretary, Corporate Affairs with the help of various enforcement agencies.

2.               DIRECTOR CAN BE ARRESTED FOR ANY FRAUD U/S 477
In order to curb money laundering and address the criminality angle, MCA has empowered Director, Additional Director or Assistant Director of SFIO to arrest any person believed to be guilty of any fraud under the Act. MCA highlights that Section 447 of the Act, which defines fraud, states stringent punishment including up to 10 years imprisonment. In addition, Ministry of Finance has decided to include it as a Scheduled Offence under the Prevention of Money Laundering Act. In order to strengthen the Regulatory Mechanism, MCA has decided to develop State-of-the-Art software application to put in place an ‘Early Warning System’ (EWS) which would be housed in SFIO.
3.               CONSTITUTION OF HIGH LEVEL COMMITTEE TO CONSTRAINT PROFESSIONALS FRAUD & SETTING UP OF NATIONAL FINANCIAL REPORTING AUTHORITY (NFRA)
MCA has constituted High Level Committee (HLC) to revamp of the disciplinary systems of Chartered Accountants, Company Secretaries and Cost Accountants and constraint Professionals fraud. In addition to the HLC, an independent body, National Financial Reporting Authority (NFRA) has been also set up to test check Financial Statements, prescribe Accounting Standards and take disciplinary action against errant professionals.
4.               PROHIBITS INVESTMENT IN NO MORE THAN 2 LAYERS OF INVESTMENT IN WHOLLY OWNED SUBSIDIARY
In order to restraint abuse of the Corporate Structure through multi-layering, not more than two (2) layers are permitted beyond the wholly owned subsidiary. This is in addition to the existing restriction which prohibits a company to make investment through more than two layers of investment companies.
5.               ACTION INITIATED AGAINST DEFAULTING DIRECTORS AND COMPANIES

Based on the massive drive undertaken by the Ministry of Corporate Affairs (MCA), Government of India, around 2.24 lakh companies have been struck-off till date for remaining inactive for a period of two (2) years or more.

Separately, action has also been taken to disqualify Directors on the Board of Companies that have failed to file Financial Statements and/or Annual Returns for a continuous period of three (3) financial years during 2013-14 to 2015-16. Around 3.09 lakh Directors have been affected by this action. Preliminary enquiry has shown that over 3,000 disqualified Directors are Directors in more than 20 companies each, which is beyond the limit prescribed under the Law.

6.               FREEZING OF BANK ACCOUNT OF SHELL COMPANIES

Following the action of striking-off defaulting companies, restrictions have been imposed on operation of their bank accounts in accordance with the law. Further, Preliminary Enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs. 17,000 crore was deposited and withdrawn post demonetization. In one case, a company which had a negative Opening Balance on 8th November, 2016, deposited and withdrew Rs.2,484 crore post-demonetization.

To access the Press Release issued by MCA, click here

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