More than 1300 listed companies under scanner for not filing financial statements

More than 1,300 stock market listed companies are under the government's scanner for not filing financial statements for at least two consecutive years or more, as a larger plan to check the menace of shell companies.

The ministry of corporate affairs (MCA) has observed that 736 out of the total 1,313 firms or companies were either never listed or have been delisted from the domestic bourses, a senior government official told Moneycontrol.

“The government is examining 80 more entities to find out if they have ever been listed at Indian stock exchanges,” the official said.

Currently, the registrar of companies (RoC) is looking at the matter and may send notice to over 700 companies. In case of no response, names of these entities will be struck off from RoC.

In September, last year, MCA had sent the list of over 1,300 companies to the market regulator Securities Exchange Board of India (SEBI), before acting against the entities for not filing necessary documents, as prescribed under the Companies Act.

In April, the market regulator replied that as per their records, these companies are not listed on any of the domestic stock exchanges.

It was only after this revelation that MCA found out that RoC had considered these 736 companies as listed only on the basis of their prospectus that they had filed with them before their initial public offering (IPO).

Filing a draft red herring prospectus (DRHP) is a mandatory step towards listing a company on the domestic bourses. However, in this case, the companies did not launch their issues even after filing the DHRP.

In 2006, MCA shifted from keeping paper records to computerized records and automatically considered these companies as listed without actually checking if their issues were launched.

As a part of its measure to clampdown on black money and checking the menace of companies engaging in illegal activities, the government has launched a drive that has put 2,25,910 unlisted companies under the scanner for being struck-off under Section 248 of the Companies Act, 2013.  These entities have not filed financial statements for the years 2015-16 and 2016-17.

Last financial year, more than 2.26 lakh firms were struck off, as they defaulted in filing necessary documents, such as financial statements or annual returns as mentioned in the companies law.