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Over 4 lakh companies fail to comply with KYC norms, only 60% active

Deadline for complying with the government's latest disclosure norms ended on June 15.

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Only 60% of over 11 lakh firms registered in the country have been found to be active, as per the Know-Your-Customer (KYC) exercise conducted by the Ministry of Corporate Affairs (MCA). The deadline for complying with the government's latest disclosure norms ended on June 15.
The ministry initiated the exercise three months back to hunt down bogus or shell companies as well as to get more details about the firms functioning in the country. Under this, all the companies registered till December 2017, were mandated to file the new KYC e-form ACTIVE (Active Company Tagging Identities & Verification), also known as INC-22A, along with photographs of their registered office, directors, and details of CEO and other key managers.
Out of a total of 11.35 lakh companies, 6.93 lakh completed the KYC process as on June 15.

STERN ACTION

  • Deadline for complying with the government's latest disclosure norms ended on June 15  
  • Erring firms can complete KYC process upon the payment of Rs 10,000 and become compliant
As far as the rest of the firms (39%) are concerned, the ministry has started labelling them as 'Active-non compliant' in MCA-21 database.
"No company would like this tag. We will wait for about a month or so before referring them for a detailed investigation. If the companies still don't come forward, their details will be handed over to the Central Board of Direct Taxes (CBDT), while that of listed companies will be shared with the Securities and Exchange Board of India (Sebi)," said a person privy to the development, adding the firms found bogus or shell companies used to round-trip money will be deactivated after getting reports from the agencies.
Meanwhile, the MCA has barred the non-compliant companies from carrying out regular compliance functions. This includes changing their authorised capital, paid-up capital, registered office or their directors. These 'Active-non-compliant' companies will also not be allowed to undergo amalgamation and de-merger activities until they comply with the new KYC norms. The action will be taken under sub-section (9) of section 12 of the Companies Act, 2013.
Meanwhile, the erring companies can complete the KYC process upon the payment of Rs 10,000 and become compliant with the new norms, as per the disclosure rules.
The companies will be required to do the KYC compliance every yearAs many as 3.38 lakh shell companies have so far been deactivated over failing to file annual returns for a period of two years in a row.
The MCA had launched a similar KYC exercise for directors in October 2018.
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