LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

 LACK OF “SIGNIFICANT ACCOUNTING TRANSACTIONS” FOR 3 YEARS IN A ROW WILL BE A NEW GROUND FOR DEACTIVATION OF COMPANIES BY MCA

MCA IS SET TO WIDEN THE GROUNDS ON WHICH A COMPANY COULD BE STRICKEN OFF FROM THE OFFICIAL REGISTER THROUGH THE CORPORATE LAWS (AMENDMENT) BILL, 2026.

INACTIVE COMPANIES- NEW DEFINITION

The proposed rules would consider a company inactive if it doesn't undertake meaningful commercial or financial activity beyond just fulfilling basic compliance obligations.

SHELL COMPANIES

Indian corporates may soon find it more difficult to float shell companies or maintain existing incorporated structures that serve little purpose other than tax evasion, money laundering or hiding ownership.

NEW STRIKE-OFF GROUND:

If a company has no significant accounting transactions for 3 years in a row, it can be struck off by the Registrar of Companies (ROC).

This is aimed at curbing “shell companies” that exist only on paper without genuine business activity.

The proposal in the Bill that seeks to amend Section 248(1)(c) of the Companies Act, 2013 could bring inactive and shell entities under greater scrutiny.

It seems that the concern of the government is to make sure that such inactive companies should not be used to create proxy ownership structures, avoid taxes, or conceal beneficial ownership

THE CORPORATE LAWS (AMENDMENT) BILL, 2026

The Corporate Laws (Amendment) Bill, 2026 would inter alia seek to empower the Registrar of Companies to dissolve a company if it hasn’t conducted any “significant accounting transactions” for three years.

DEFINITION OF SIGNIFICANT ACCOUNTING TRANSACTION:

·       Includes transactions like payment of statutory dues, allotment of shares, or business-related financial activity.

·       Routine compliance filings alone may not qualify as “significant.”

MANDATORY DORMANT STATUS:

Inactive companies may be required to shift to dormant status before eventual strike-off, ensuring transparency in records.

OTHER MAJOR AMENDMENTS IN THE CORPORATE LAWS (AMENDMENT) BILL, 2026

DIRECTOR IDENTIFICATION NUMBER (DIN) DEACTIVATION:

MCA can deactivate DINs if directors fail to verify their particulars, automatically vacating their positions across all companies.

“FIT AND PROPER” CRITERIA:

 Expanded disqualification rules for directors, auditors, and insolvency professionals.

DECRIMINALIZATION OF MINOR OFFENCES:

 Over 20 offences shifted to monetary penalties instead of criminal liability.

RESTORATION POWERS:

Transferred from NCLT to Regional Directors to speed up reinstatement of struck-off companies.

IMPLICATIONS FOR COMPANIES

·       Companies must ensure at least one significant transaction annually to avoid being flagged as inactive.

·       Startups in incubation or firms waiting for funding may need to maintain minimal activity to avoid strike-off.

SUMMARY:

The MCA’s 2026 Bill is tightening rules to eliminate inactive or shell companies. Companies with no significant transactions for three years will face risk being struck off, making proactive compliance and minimal activity essential for survival.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,