ALERT DIRECTORS – MCA Is Watching!!
In 2017, Ministry of Corporate Affairs (MCA) took a drastic step and de-registered almost 2.3 lakh companies. This also resulted in the de-activation of DINs (Director Identification Number) of almost 3.10 lakh directors. This has created panic and uncertainty in the financial and industrial sector.
Reasons for ‘Strike Off’
- Most of these companies were on the radar of MCA as they had not filed their returns for three years in a row.
- Some of them were shell companies.
- A lot of companies underwent heavy transaction and deposit during demonetization, without transparency.
- A large number of these companies were Dormant companies which were not active.
- The Directors did not perform their duties sincerely therefore these companies lacked ‘due diligence’.
- Some 3000 Directors were holding post in as many as 20 companies which is against the prescribed limit under specific law.
Impact of ‘Strike Off’ on Companies:
The Registrar of Companies act upon the erring companies’ u/s 248(1) of Companies Act 2013. These are some implications of this Section on the affected companies.
- Impact #1 These companies cannot function from the date of issue of notice regarding their disqualification.
- Impact #2 Their Bank Accounts are frozen and no transaction can take place.
- Impact #3 Liabilities and dues will not be pardoned.
- Impact #4 Their Directors registration is deactivated.
- Impact #5 These Directors will be barred from other companies Board of Directors too.
- Impact #6 Penalty and fine is imposed according to the Rules prescribed under the Act.
The actions taken by MCA in 2017 will continue in present fiscal year and the number of Defaulters might be much more than our expectations. Caution and Quick-action are the key to success.
Isha Malik (Company Secretary, MUDS Management Pvt Ltd)
Provisions for Revival of the Company:
Affected Companies biggest concern is to exonerate themselves and start functioning again. Under Section 252 of Companies Act 2013 there are certain provisions for the revival of the de-registered companies as well as re-activation of DINs.
1. Appeal to Tribunal:
Section 252(3)- An aggrieved company or its member or creditor or workman can appeal to the Tribunal by the way of filing an application within twenty years of the name being struck off.
The Tribunal has the power to restore the Company and its Directors if it’s satisfied by the explanation and evidence.
Rule 87(A) NCLT (National Company Law Tribunal) (Amendment) 2017- An application can be filed by the affected company or its members or workmen with the NCLT within three years of publication of notice. Due documents have to be submitted, affidavit verified and stipulated fee submitted.
The Tribunal will then hear the case as per the specified Act. At the end, if the Tribunal is satisfied by the documents and evidence, it will revive the company.
2. Condonation of Delay Scheme (CODS), 2018:
As the number of struck off companies and DIN de-activation in 2017 was of humongous proportions, the aggrieved people as well as the Industry appealed to the Government for a swift and fast redressal system. In response to this, MCA has come up with CODS, 2018 through a general Circular No. 16/2017.
Eligibility and Procedure:
- Only those Defaulting Companies, which have been de-registered because of non-filing of Income tax returns, can take advantage of this scheme.
- Defaulters under Section 248(5) of the Companies Act, 2013 cannot appeal/apply in this scheme.
- There are five prescribed forms that has to be duly filled and submitted.
- Then the DINs will be re-activated temporarily so as the Directors can file the returns and relevant documents.
- The defaulting Company would then fill the E-Forms and pay the prescribed fee.
- After this, the struck off company would file e-CODS on the portal of MCA and deposit 30,000 as the fee.
- The Directors are also supposed to file their documents and e-CODS, in absence of which their DINs would be de-activated on expiry of the scheme.
In the present scenario the CODS scheme is the one which can help in restoring and reactivating companies and DINs in the fastest manner. The MCA through various circulars has laid down the provisions clearly.
Since the implementation of the scheme, approximately 14,000 companies and Directors have benefited from it. As the process is on, many more companies will get reprieve and resume functioning.
Hence, the best way out for defaulters is to take swift action and get going.
“Due-diligence, transparency and professional ethics are the basic principles which will keep Companies health and growth intact.”
– Shweta Gupta (Founder and CEO, MUDS)
For any query or help please feel free to contact us:
call at 9599653306 or [email protected]