Decline in Registration of Companies

Decline in Registration of Companies

The number of companies registered during the first five months of this financial year (2014-15) was 21,260, as against 43,601 companies registered during the corresponding period of the previous year. Month-wise registration of companies is indicated in the Table below:

Number of Companies Registered during first five months of 2013-14 and 2014-15, month-wise:


There is no evidence or feedback suggesting that the decline is in any way attributable to “tedious compliance” entailed by the new Act. However, it is a fact that the provisions of Companies Act, 2013 have safeguards against floating “shell companies”. Further, the decline is also attributable to introduction of new e-forms and the time taken by professionals to become familiar with such forms.

About 60% of the provisions of the Companies Act, 2013 entered into force from 01.04.2014. The Companies Act, 2013 and Rules made thereunder contain essential features of good corporate governance which are to be adopted by companies incorporated under the Companies Act, 2013. Almost all policy elements recommended by the Committee on Corporate Governance (Adi Godrej Committee) stands incorporated in the Companies Act, 2013.

An Expert Committee has been constituted by this Ministry recently to (a) review the e-forms notified under the Companies Act, 2013 (b) to suggest changes aimed at simplifications of such forms and (c) removal of difficulties faced by stakeholders.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha today.


Legal Backing for CSR Compliance

Section 135 of the Companies Act, 2013 mandates every company above the given threshold levels to comply with Corporate Social Responsibility (CSR) provisions of the Act, and to disclose contents of its CSR policy in its Board’s Report. The penalty provision for non-compliance in this regard is prescribed under Section 134 (8) of the Act.

Provisions for CSR compliance by companies, as prescribed under Section 135 of the Act, have the force of law.

This is the first year of CSR implementation by companies under the Act. The likely amount of CSR expenditure for the year 2014-15 would be known only after the Annual Financial Statements are filed by companies due after September, 2015. It may be prudent to not speculate on the quantum of CSR expenditure at this stage.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha today.


Duping of Investors by Dubious Firms

A total of 238 companies which had raised funds through Public issues were initially identified as “Vanishing Companies” as they had stopped filing documents/balance sheets with the regulators and were untraceable. Out of these, 128 companies were removed from this category and placed under a “watch list”, as these companies had started filing their documents/balance sheets, etc. In addition, 32 companies are presently under liquidation. Thus, as on date, there are 78 companies which remain in the list of “Vanishing Companies”. The total amount of Public Issues made by these 78 companies was Rs. 310.21 crore (approx.).

FIRs have been lodged against 78 such companies and their Directors and to trace their whereabouts as well as to file cases against them under the provision of the Indian Penal Code (IPC).

Prosecutions have also been filed against these companies and their Promoters/Directors under sections 162 and 220 of the Companies Act, 1956 for non-filing of Statutory Returns and under sections 62/63, 68 and 628 of the Companies Act, 1956 for mis-statement in Prospectus/fraudulently inducing persons to invest money/false statements made in the offer documents, etc.

Section 447 of the Companies Act, 2013 provides for punishment for fraud. In addition, other relevant provisions contain penal provisions for default. Section 450 also provides for punishment where no specific penalty or punishment is provided in the Act.

A number of steps have been taken by the Government to save investors from frauds including frauds by vanishing companies. Attention is, in particular, invited to the following:

• It has been made mandatory for every existing or prospective directors to obtain a “Director Identification Number” (DIN). This process requires detailed verification of particulars of a person along with a photograph, identity proof, residence proof etc. so that traceability of the directors is ensured. Requirement of DIN, therefore, makes it difficult for individuals promoting dubious companies to defraud investors by hiding or misrepresenting their identity.

• In case of incorporation of a new company or change of address of an existing company, the Ministry has made it mandatory for professionals to verify details of the company and to personally visit their premises and certify that the premises are at the disposal of the company. In such cases, proof of registered address has also been made mandatory to be furnished at the time of incorporation or change of registered office address.

• Instructions have also been issued to the Registrar of Companies to scrutinize the Balance Sheet and other records of the company who raise money through public issue and monitor the utilization of such funds.

• The Ministry has also undertaken preemptive measures aimed at sensitizing people through investors awareness programmes. These programmes are organized regularly in association with the three professional institutes-Institute of Chartered Accountants of India (ICAI), Institute of Cost Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) in various cities. Since 2012-2013, MCA has also started organizing such programmes in rural areas through CSC e-Governance Services India Ltd, an entity under Department of Electronics and Information Technology. 2897 such programmes were conducted during 2013-2014.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Rajya Sabha today.

Decline in Registration of Companies Decline in Registration of Companies Reviewed by Ajit Kumar on 10:55 PM Rating: 5

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