On March, 24 2021, The Ministry of Corporate Affairs (MCA), made an amendment in Schedule III of the Companies Act, 2013 to provide better “transparency” to the users of the financial statements. This amendment mandatorily directed companies to provide additional disclosures such as declaring transactions with MCA struck off companies, details of benami property, undisclosed income etc. To reduce the year-end hassle, Companies have to incorporate these disclosure requirements while preparing the annual financial statements.
According to the MCA notification, Companies have to disclose the Name, Nature of transactions, Balance Outstanding, and Relationship with the struck-off companies (if any) that they have dealt with (vendors, partner companies, clients etc).
So, what is a Strike-off Company?
A Strike-off Company is a company which is removed from the Register of Companies maintained by the Registrar of Company (ROC). It can be struck-off due to several reasons, either the director of the company voluntary dissolves the existence & trade of the company; or the ROC directs the company to weed out their operations for non-compliance with the regulatory framework issued in the Section 248 of Companies Act, 2013 & Section 560 of Companies Act,1956:
· When a company has failed to commence its business within one year of its incorporation.
· When a company is not actively carrying on any business operations for a period of past two financial years and has not made any application within such period for obtaining the status of a Dormant Company under Section 455 of the Companies Act, 2013.
How do you know a company has been struck-off by MCA?
Searching for the MCA struck-off status of a company can be a tedious process. There are 25 ROCs (Registrar of Companies) which update the information about ‘Defunct’ (Struck-off Companies) on their official website on a quarterly basis. You have to look up individual companies in individual ROCs to know about their struck-off status. There is no single source which provides the consolidated information from all the ROCs about struck-off companies.
Can a struck-off company still trade?
No, once a company has been removed from the Register of companies, it ceases to exist and cannot be legally involved in any business activities. The company cannot sell its assets or even make payments. Also, the trade name of the company is made available for new companies to apply.
Why MCA seeks additional disclosures regarding Struck-off Companies?
The Ministry of Corporate Affairs (MCA) through Schedule III Amendment Notification released on 24th March 2021, is aiming to increase the stringency of the regulatory framework. This amendment protects the company’s interest from further involving in business with defunct company. The business dealings made by a defunct company are not valid, as the existence of the company can be proven. Also, the stakeholders of the company get more transparency with the business dealings made by the company.
When additional disclosures regarding Struck-off Companies have to be submitted?
These amendments are effective for the financial year 2021-22, i.e., companies have to disclose additional information regarding transactions with Struck-off companies with the financial statements prepared for FY 2021-22.
How can you find the MCA struck off status of a company in an efficient and effective manner?
Free up hundreds of hours of the finance team. Strike That is a service by ConTeTra that helps you get the details of “Struck off” companies, for hassle-free compliance with the new mandatory disclosure requirement of Schedule III.
ConTeTra understands how valuable your time and resources are, and therefore we have you covered.
All you have to do is:
Step 1: Upload your list of vendors/suppliers with their GST numbers (which is easily available with every finance team). No hassles with looking for their CINs.
Step 2: Receive the output in record 72-hours (powered by our AI-enabled tool that scrapes through MCA website for you – leaving no room for manual errors)
And you’re done! You’re free to allocate your resources to more productive activities.
Dear contetra.com admin, Thanks for the well-researched and well-written post!
Dear contetra.com owner, You always provide clear explanations and step-by-step instructions.
Dear contetra.com administrator, Your posts are always on topic and relevant.
To the contetra.com owner, Your posts are always well-written and easy to understand.
Dear contetra.com owner, Your posts are always informative and well-explained.
Dear contetra.com administrator, Your posts are always well-structured and logical.
Hi contetra.com admin, Your posts are always well-formatted and easy to read.
Hello contetra.com administrator, Your posts are always a great source of knowledge.
Hi contetra.com admin, Your posts are always well thought out.
Hi contetra.com administrator, Keep up the great work!
Hi contetra.com owner, Your posts are always well-received and appreciated.
Hello contetra.com webmaster, Your posts are always well-referenced and credible.
Hello contetra.com webmaster, Thanks for the well-organized and comprehensive post!
To the contetra.com owner, Keep it up!