Government releases compliance schedule to ensure MSME payments

The government has decided to crack down on companies delaying payments to small businesses by insisting that all defaulting entities mandatorily provide it details of outstanding money with reasons by April or face action that could result in imprisonment up to 6 months or fine of not less than Rs 25,000 up to Rs 3 lakh. It has also asked over 12 lakh active registered companies in India to mandatorily upload all their particulars, including details of registered offices, in an e-filing to the government as the Centre continues with its crackdown on "fly-by-night and dummy" entities incorporating stringent KYC regulations.

The Ministry of Corporate Affairs, which notified new guidelines to address the concerns of small businesses over delayed payments in January, has now released a compliance schedule under which private and public companies will be required to fill Form DPT 3 on or before April 22, for disclosure of details of outstanding money or loan received by company but not considered as deposits. 

This one-time filing will help the government to build a database of companies dealing with MSMEs and their payment profile. In addition, for all outstanding dues to MSME suppliers for a period exceeding 45 days, an annual filing system has been developed under which corporate entities will fill yearly Form DPT 3 on or before June 30, for one- time disclosure of details of outstanding money or loan received by company for the previous financial year.

Corporate entities have already filed "MSME FORM I" with the registrar of companies (RoC) by February 22 giving details of all outstanding dues to MSME suppliers existing on the date of notification of rules on January 22, 2019. "MCA has now put the system in place that will allow MSME to make fresh investment in their ventures that otherwise were getting delayed due to late payments from companies," said a government official asking not to be named.

As per the new guidelines, all entities will also have to file a return as per MSME Form I by 31st October for the period from April to September and by April 30 for the period from October to March. If there are any delays in payments, it has to be mentioned in the returns with the MCA reserving the right to penalise defaulting entities.

The annual return under the compliance scheme will need to file by November 29, 2019. With regard to checking proliferation of dummy companies, the Ministry of Corporate Affairs has notified the Companies (Incorporation) Amendment Rules, 2019. Under this all companies registered before December 31, 2017 are required to file eForm ACTIVE (Active Company Tagging Identities and Verification) - INC22A on or before April 25, 2019.

Failure to file e-Form Active by will lead to a penalty of Rs.10,000 with companies in default being declared ACTIVE non-compliant. Once a company is marked as ACTIVE non-compliant, it would not be able to make changes in companies' capital structure or go ahead merger or amalgamation deals . Such non complainant companies would also not be able to rotate their directors or make change in their registered office.

Last year, MCA introduced new Know Your Customer (KYC) norm affecting about 33 lakh directors of companies. Under it, directors were required E-file forms providing details such as personal mobile number, e-mail address, Permanent Account Number (PAN) and Aadhaar.  Also, a video verification feature requiring directors to upload a 30-second video clip introducing themselves was also made mandatory.

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The tightening of the noose around the companies comes after a major crackdown by the government post-demonetisation in FY18 in which it struck off 2.26 lakh companies for failure to file their financial statements or annual returns for a period of two or more successive years. Similarly, more than three lakh directors were disqualified for non-filing of annual returns by the companies for three years. 

In another crackdown last year, the MCA identified another 2.25 lakh companies for action.