Skip to main content

Shell companies: Govt may provide relief for disqualified directors

By
Shell companies: Govt may provide relief for disqualified directors
Starting January, shell companies can apply for a pardon for three months, and, for this period, the disqualification of directors will be lifted to allow them to file these documents
The ministry of corporate affairs, or MCA, will soon notify a scheme to provide relief to over 300,000 directors disqualified for associating with companies that failed to file their financial results, said two people with knowledge of the matter.
Non-compliant companies can apply for a pardon (or condonation of delay) for three months starting January; for this period, the disqualification of their directors will be lifted temporarily to allow them to file these documents. The window for filing all pending documents will be open till 30 June, said a copy of a draft circular reviewed by Mint.
In September, the government had taken two sets of action against companies that were not compliant with provisions of the Companies Act. The first was against firms that appeared to be non-functional or shell structures. On 5 September, 209,000 companies were struck off the Registrar of Companies (RoC) database and banks were directed to restrict operation of bank accounts of such companies by their directors and authorized representatives.
The second was against companies that did not file their returns/financial documents for the past three years. As per the MCA directive, 309,614 directors were barred from serving on the board of any company for the next five years. Any digital signatures by these directors on annual reports, financial results and other company documents were not to be accepted by RoC.
“The companies that do not appear to be working cannot subscribe to the scheme. They will first need to revive the company and show that they are in a working condition and get an approval from the National Company Law Tribunal (NCLT) to meet other compliances,” said one of the two people cited earlier.
“The defaulting companies which had not filed their returns for some reason or the other but otherwise look to be functional would be allowed to submit their pending documents. After submitting pending documents these companies and their directors will be able to get relief from the strictures,” this person added.
Companies and directors who do not avail of the scheme will remain disqualified and MCA will take further action against them under provisions of Companies Act, 1956/2013, the draft circular said.
“I look at this as a pragmatic move by the government to differentiate between companies that are black sheep and companies that are in the grey. With this the government will be able to focus its energies on companies that are truly non-compliant (rather than a) larger set of companies and directors who appear to be in the grey zone,” said Samir Paranjape, partner at consultancy firm Grant Thornton India LLP.
The ministry’s move comes after representations from many directors and cases filed in courts. At least 500 publicly traded firms shared directors with suspected shell companies.
The Minty, New Delhi, 20th December 2017

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more