Govt’s new platform to alert regulators on risky entities

Wiser from the IL&FS collapse, the government is setting up an algorithm-based platform to alert regulators about companies which are perceived to be risky due to weak and stressed finances or have seen the exit of directors as well as auditors. Modelled on the lines of the income tax department’s platform, the ministry of corporate affairs (MCA) has begun work on what is being called the Central Scrutiny Centre that will scan filings of all companies and raise red flags. The shortlisted entities are then proposed to be taken up for further scrutiny by the registrar of companies and may also be referred to other regulating agencies, sources told. Apart from various financial parameters, MCA is also planning to get assistance from other agencies such as the income tax department in identifying companies that will be taken up for scrutiny.

For instance, companies that have filed their corporate returns but have not submitted their tax returns will be one area of cooperation for sharing of data, for which an MoU has already been signed. The task of putting in place an algorithm has been given to the e-governance cell and the platform may be in place over the next few months, sources said. Some filing requirements are also expected to be tweaked to enable better use of data that is already available with the registrar of companies. Further, sources said companies with high levels of leverage due to heavy borrowings may appear on the radar, too, with inter-corporate dealings to be one of the criteria that will attract scrutiny. If something like this was in place, with adequate disclosure norms, we could have spotted the build-up of stress in IL&FS much earlier, said a source. Already, MCA has developed a mobile app that will have some sort of a database on companies that have not maintained their registered offices and are liable for their names to be struck off.

Leave a Reply

Your email address will not be published. Required fields are marked *