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,
