Sending out a strong message to corporates, the government has said non-compliance will be “very costly” and strong deterrents will be there to curb the dangerous adventure of using companies for wrongful purposes.
Continuing the clampdown on illicit fund flows, the Ministry of Corporate Affairs has already struck off more than 2.24 lakh companies that have not been doing business for long and has disqualified over three lakh directors associated with such entities.
Against this backdrop, Corporate Affairs Secretary Injeti Srinivas said things are being simplified for legitimate businesses while checks are being strengthened against illegal business activities.
Highlights
“It should be very easy to be compliant and very costly to be non-compliant. We want this… There should be a strong deterrent against illegal business. People using the company for wrong purposes, that should be a very dangerous adventure,” he told PTI in an interview.
About the ongoing action with respect to suspected shell companies, he said investigations are being carried out with urgency.
“When you go for prosecution, it should serve as a deterrent. Imprisonment option should essentially be confined to violations involving criminality and fraud,” Srinivas said.
On the scenario of certain genuine entities also facing the heat in the clampdown, Srinivas said every effort is made to ensure that “innocent companies are not inconvenienced”, adding that investigations are carried out only after preliminary scrutiny.
“In any such large exercise, it is not unusual that there could be some collateral damage. It cannot be so perfect but effectively, it is very focused and every effort is made that innocent companies are not inconvenienced,” he noted.
To provide a three-month window for defaulting companies to submit their filings, the ministry would be coming out with the Condonation of Delay Scheme. It is to be in place from January 1 to March 31, 2018.
While making it clear that a law should not be too onerous, he said there is a continuous effort to simplify the law “but non-negotiable in terms of essential compliance”.
Last week, the Parliament cleared a bill to further amend the Companies Act.
The bill would bring about some far reaching changes, Srinivas said, adding that almost 100 sections would get revised and many would contribute towards the ease of doing business.
“At the same time, there is also strengthening of provisions relating to areas such as identification of mismanagement, fraud detection, disclosures and related party transactions,” he said.
The MCA 21 system — which is used by the companies to submit their filings to the ministry — is a strong technology platform that is well entrenched, he noted.
“It is a very robust platform for regulation of companies. It is a huge resource of filings from more than 1.5 million companies. It is user-friendly… It also facilitates better enforcement without being unduly invasive,” Srinivas said.
At the end of November 30, there were a little over 17.12 lakh companies and out of them more than 11.36 lakh entities were active.
Source: Times of India
