New Delhi, November 5, 2017
National Financial Reporting Authority to be set up soon
The Centre has till date de-registered as many as 2.24 lakh companies for remaining inactive and not filing financial statements for two years or more.
Separately, around 3.09 lakh directors on the board of companies that failed to file financial statements and/ or annual returns for a continuous period of three financial years during 2013-14 to 2015-16 have been disqualified, the Corporate Affairs Ministry (MCA) said on Sunday.
Over 3,000 disqualified directors are directors in more than 20 firms each, which is beyond the limit prescribed under the law, an official release said.
The MCA also said that steps are under way to set up National Financial Reporting Authority (NFRA), an independent body to test check financial statements, prescribe accounting standards and take disciplinary action against errant professionals.
Software app on cards
A separate initiative is also under way to develop software application to put in place an ‘Early Warning System’ to strengthen the regulatory mechanism.
Post the de-registering of defaulting companies, restrictions have been imposed on operation of their bank accounts in accordance with the law.
Also, Preliminary Enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that over Rs.17,000 crore was deposited and withdrawn post-demonetisation. In one case, a company, which had a negative opening balance on November 8, 2016, deposited and withdrew Rs.2,484 crore post-demonetisation.
Further, in the light of the evidence with respect to abuse of the Corporate Structure through multi-layering, not more than two layers are now permitted beyond the wholly-owned subsidiary.
This is in addition to the existing restriction that prohibits a company to make investment through more than two layers of investment companies, the official release added.
In order to address the criminality angle, the Director, Additional Director or Assistant Director of SFIO have been recently authorised to arrest any person believed to be guilty of any fraud punishable under the Act. Under Section 447 of the Act, which defines fraud, stringent punishment including imprisonment up to 10 years is stipulated.
Further, reference has been made to the Finance Ministry to include it as a Scheduled Offence under the Prevention of Money Laundering Act.
Action is also being initiated against professionals guilty of fraud and all complaints against them are being reviewed. A High Level Committee has been constituted for suggesting revamp of the disciplinary systems of Chartered Accountants, Company Secretaries and Cost Accountants.
To check the problem of dummy directors, action is under way to seed DIN with PAN and Aadhaar at the stage of DIN application through biometric matching for new applications. The same may be extended to legacy data in due course, the release added.
[The Hindu Business Line]