The Minister of State for Corporate Affairs, Mr. Rao Inderjit Singh informed that over 1 lakh companies have been struck off in the last 3 years for failure to submit financial statements for two continuous financial years. This was part of a special drive undertaken by the Government for identification and striking off companies' u/s 248(1) of the Act read with The Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, that had not filed their financial statements and/or annual returns for a continuous period of two immediately preceding financial years.
To put in place the necessary safeguards and to bring in more transparency with respect to transactions with such struck off companies, the Government amended Schedule III of the Companies Act, 2013 in March 2021, which was effective from the financial year 2021-22. By way of this amendment, companies having a relationship with struck-off companies are required to make certain disclosures such as name and nature of transactions with struck-off companies, balance outstanding (if any) and relationship with the struck-off company, if any, for the preparation of financial statements.
A striked-off Company is a company that is removed from the Register of Companies maintained by the Registrar of Companies (ROC). It can be struck off due to several reasons, either the director of the company voluntarily dissolves the existence & trade of the company; or the ROC directs the company to discontinue its operations for non-compliance with the regulatory framework in terms of Section 248 of Companies Act, 2013.
The Ministry of Corporate Affairs (MCA) through the Schedule III Amendment Notification released on 24th March 2021, aimed to increase the stringency of the regulatory framework. This amendment protects the company’s interest from further involving in business with the defunct company. Also, the dealings of the companies become more transparent for their stakeholders.