The ministry of corporate affairs has upped its ante to weed out defunct companies. Firms that are no longer in operation but are still on the rolls of the registrar of companies (RoC) are identified as defunct. The plan is to come out with an amnesty scheme under which firms that have failed to file their annual returns and balance sheets with the RoC for the last two years will be allowed to do so and carry on with their business.
While companies that are in business will get a final chance to comply with the rules, the non-operational ones can opt for de-registration under the amnesty plan.
An annual return provides basic information about a company such as its board of directors, activities and income, while a balance sheet is a detailed account of a company’s financial position.
Under the companies act, it is mandatory for companies to provide these information to the RoC.
“The scheme basically aims at weeding out the ‘defunct’ companies,” a senior ministry official said.
Among the eight lakh companies, about 6,50,000 are operational and the remaining 1,50,000 are defunct.
Around half of the eight lakh firms registered in India at the end of 2008-09 did not submit their annual accounts.
Union corporate affairs minister Salman Khurshid had earlier told the Lok Sabha that 370,196 firms did not file their balance sheets and 371,110 companies did not submit their annual returns for 2008-09 and before.
Filing of annual returns and balance sheets for a financial year is due after the succeeding financial year.
According to the official, a new company can provide the necessary document after 18 months of being incorporated under the companies act.
“Any wilful default attracts a lump sum fine of Rs 5,000 and a penalty of Rs 500 per day for the number of days delayed from the due date of filing the returns,” the official said.
However, the amnesty scheme will not be available to all firms. “It will be only for those that have not filed their returns and balance sheets for the last two years. It will be a kind of giving them the last chance to comply with the requirement or face stiff legal procedures,” he added.
The scheme, likely to be introduced in June-July, will provide for a one-time settlement for companies that have not filed the required information.
The filing of returns for 2009-10 is not yet due.
Every year RoCs initiate legal proceedings against defaulting companies.
In the last three years, courts had handed out penalties worth Rs 2.5 crore.
“In this context, for your as well as your readers’ benefit, I reproduce below the response received on your previous release dt. 5 May on “Government may increase BIFR benches” :
“TDS Says:
“May 5th, 2010 at 12:49 pm
While in India the term “quasi judicial” has totally been rendered a misnomer and superfluous, there no doubt was a need for additional Benches of the BIFR which, pardon me for saying, all along suffered from the absence in considerable number of persons with hands-on and proper experience and expertise in, as well as exposure to, handling/analysis of accounts/balance sheets, etc., and administering taxation/financial laws. This body has long become a very sure haven, as most specialised bodies inter alia like the SFIO, for the generalists of all generalists, the IAS, and, also partly for the officers trained mainly in handling government accounts based in general in the “single entry system”.
Expertise and competence apart, the selection of Chairman and Members, as well as the officers sent on deputation/staff working in the Board has never been transparent and, as usual with all such bodies with the so called quasi judicial bodies, corruption is the only thing which is transparent-and., of course, rampant. Having the case of a company “somehow or other” brought under the jurisdiction of the BIFR has itself a very big business, the reason being the statutory protection stipulated against the recovery of any state and central taxes due from any (defaulter)company whose case comes to the Board.
Moreover, it is also public knowledge, to the utter chagrin of small/individual share holders of many such companies, cheated for years, that once a company’s matter is within the jurisdiction, the management starts illegally denuding the undertakings/factories of its assets.
One only hopes that the FM and the BIFR are aware of all this.
“[Read more: https://www.taxguru.in/corporate-law/government-may-increase-bifr-benches.html#ixzz0nUsgCkti%5D“
How far you justify the Schemes like SES and the new proposed Amnesty scheme? Is’nt a reward for the defaulting companies and an unjustified move of MCA for abetment of non-compliance in filing of Rnnual Returns and Balance Sheet.
In the recent past we have also seen that the companies who had not filed thier accounts and returns, their names were sturk off from the register of ROC.
Such move, to my view, will encourge non-compliance of provisions of overall Companies Act particularly NON Filing of annual statements. Non filing or delayed filing of annual returns and balance sheet are deliberately by some companies just to conceal facts and figures from the public domain.
Under the Income Tax Act, the companies used to file return within the due dates but same fails to file the annual return and balance sheet due to any major delay fee, lack of motivation of mca for penalising such defaulters
Amnesty must not precede action against defunct companies floared with the criminal intent of cheating the public and the banks. The MoC must first, therefore, publish the state-wise list of the “defunct” companies calling for input from the members of the public to ascertain as to whether any one has any information about these companies, their (erstwhile) directors/executives, etc., to prove the transparency in the decision of the govt. Amnesty just for allowing the defaulters to have another lease of life would tantamount to playing fraud on the people.