Another Step by Ministry to Track Shell Companies

CS Ritika Malhotra

Another step has been taken by ministry for tracking shell companies and vanishing companies by introduction of E-Form ACTIVE (INC-22A).

As the expansion of ACTIVE itself defines Active Company Tagging Identities and Verification, Ministry, through this e-form, has asked companies to geo-tag its registered office location and share the data related to compliance of registered office. Once the data comes in regarding such addresses, then Govt. can scoop down on these addresses, and reveal the non-active companies which are operating just for the purpose of money laundering.

E-Form ACTIVE has been notified under new Rule 25A; vide the Companies (Incorporation) Amendment Rules, 2019 dated February 21, 2019.

This rule is applicable on every company (including dormant company) incorporated on or before December 31, 2017. Such companies are required to file particulars of its registered office in the form which is required to be filed on or before April 25, 2019.

Through this form, the details of directors, statutory auditors, cost auditors (if applicable), Key Managerial Personnel (KMP) including Company Secretary (if applicable), Annual Filing made will be verified. These details will be pre-filled on entering CIN of Company, hence, if any applicable provision of Companies Act, 2013 is not complied with will be listed down and will enable ministry to identify non-compliant companies. Also it will enable common public to be aware of KYC (Know Your Company) status of the companies and their directors.

The Ministry has exempted following companies from such filing:

1. Companies which has not filed annual financial statements or annual return or both, unless in a recorded management dispute.
2. Struck off Companies or companies under the process of striking off
3. Companies under Liquidation or amalgamation or dissolved, as recorded with the registrar

Information/Documents required for filing e-Form ACTIVE are:

1. Photograph of Registered Office showing external building and inside office also showing therein at least one director/ KMP who has digitally signed such form.
2. E-mail Id of the company: It will be pre-filled after entering CIN of company, however, in case there is any change in the email ID, the new valid email ID can be entered as an OTP will be sent to this email ID which is required to be entered and verified before filing this form.
3. Details related to latitude and longitude of Company: It shall be based on geo details of registered office of the Company.
4. In case Company has more than 15 directors, the details of the date and relevant SRN of MGT-14 is required to be mentioned in the form.

Form ACTIVE is required to be digitally signed by one director in case of OPC and in other cases, one director and one KMP or two directors using his/ her DSC and the same shall be certified by a practicing professional (CA/ CS/ CMA).

This exercise of Ministry will provide status of “ACTIVE-non-compliant” to such companies which fail to file E-Form ACTIVE and the same can be rectified and updated to “ACTIVE Compliant” by filing Form ACTIVE with delayed fee of Rs. 10,000/- on or after April 26, 2019.

Further, ACTIVE non-compliant Company can also attract a physical verification of the registered office of the company if the registrar has reasonable cause to believe that the company is not carrying on any business or operations and if any default is found, the registrar may initiate action for the removal of the name of the company from the register of companies. Also, Ministry will not accept the request of such companies in respect of filing of following information:

a. Form SH-7 (Change in Authorized Capital);

b. Form PAS-3 (Change in Paid-up Capital);

c. Form DIR-12 (Changes in Director except cessation);

Points to be noted:

1. The email ID entered in the form shall belong to Company as it would be duly verified by OTP which is required to be entered in the form

2. The company must ensure the appointment of minimum number of directors as prescribed in the Act.

3. ACTIVE shall not be filed if any of the following circumstances occur:

a. The associated director does not have an approved DIN, i.e. his/her DIN is marked as “Disqualified u/s 164(2)” or “De-activated due to non-filing of DIR-3 KYC”.

b. The period of appointment pre-filed for statutory auditor and/or cost auditor pre-filled before March 31, 2019. (An updated particular of auditor is required to be filed before filing ACTIVE).

c. In case annual filing (Form AOC-4/AOC-4 XBRL and MGT-7) for financial year 2017-2018 has not been made (ensure to file these forms before filing ACTIVE).

4. A template of photograph which is required to be attached in the form has been provided by Ministry showing interior and exterior building photograph.

5. An individual must not digitally signed the form in two capacities say directorand KMP.

6. Practicing Professional needs to ensure the information, say email ID entered, documents attached are legible before certification of such form.

Further, a clarification is pending from ministry for cases where companies has reported the appointment of statutory auditor via Form GNL-2 when e-form ADT-1 was not deployed by Ministry as those details are not being reflected in the e-form ACTIVE till date.

Hope this article will give you a basic understanding on KYC of Companies introduced by ministry of corporate affairs.