September, 2019

Hi Folks

A few weeks back I got a frantic call from one of my friends, Krish. When I didn’t reply, he messaged me “Crisis. Please call back”. Was it a medical emergency ? Was it a financial crisis ? Was it a relationship issue ? Was it a business setback ? The brief but startling message distracted me from the workshop I was in. One of my colleagues was explaining how to incorporate a company, what are the compliances and what are the consequences of violations to a bunch of fresh engineering graduates at a leading incubator, who were to begin their journey as entrepreneurs. Here I was, wondering how are these young things going to manage the compliance-chakkar which is increasing by the day ? How long will these businesses last ? Not that I doubted their capability but the sheer amount of compliances under the various law is quite overwhelming to say the least, to a 20+ year old who has never worked in a corporate before. How many cofounders will drop out to take up a corporate job or pursue further education ? How many will part ways due to differences ? How many will take compliances seriously ? What if the burden falls only on the ones left behind in the company ? Of course the purpose of the workshop was not to intimidate the young entrepreneurs but to sensitise and alert them about the pitfalls of not paying attention to compliances. I shook myself from these thoughts and gave them a friendly advice to choose a good professional within their budget and set up a process of 2 way communication.

Soon after, there was a 2nd reminder about the ‘crisis’. I stepped out and called my friend Krish. He sounded anxious and impatient. All that he could say was “Sharada, one of my friends is in deep trouble. Some trouble with his business. Please help him out immediately”. The agitated friend Kumar came on line and pleaded “Madam, somebody told me that my company is going to be struck off. I don’t know what it means but I fear Government is shutting down my business. I have employees to pay. Customers to serve and family to take care. I have not done any mistake or fraud. Can you please stop this closure ?” While at the workshop, I was extolling the advantages of having a company and also alerting them of the pitfalls, here I was, listening to a desperate cry for help from an entrepreneur to save his company. Truly, an existential crisis ! Though Kumar claimed that he had filed all the returns with the Registrar of Companies, I knew some gaps must be there and hence he must have got a ‘Strike-off Notice” from ROC. I didn’t assure him any relief but I said I will check and revert. Needless to say, contrary to his claims of 100% filings, his company had failed to file the Audited Accounts and Annual Return (mandatory annual filings) with the ROC since incorporation i.e. 2013. Consequently in line with the Governments’ consistent action against errant companies, his company was listed as “Under strike-off”. He had received a notice a few months back and on the advise of someone had sent some non-committal reply. And he had completely forgotten about it. When we enquired with the ROC, they said they had provided enough opportunities to make good the lapse and now it was a matter of few days before the company would be legally struck off, meaning it would be ‘dead’. No business can be carried on after that, unless it is legally revived. This was not a shell company but a hale and hearty, thriving one with consistent turnover, stocks, employees, customers, vendors and orders. And here was the sword dangling on Kumar’s neck….he was likely to lose them all in one stroke of the ROC. How unfortunate !

Normally I do not sympathise with promoters who do not even complete their basic responsibility of atleast filing the annual accounts. But with Kumar it was a bizzare story of how an unqualified professional, claiming to be a Company Secretary had duped him. Kumar travelled 40kms on his 2 wheeler braving the Bangalore traffic to come to my office with whatever files he had. He explained in detail how he did approach Sankar, a ‘professional’ in his neighbourhood to help him with his accounts, audit and ROC filings. Having known Sankar for years, he trusted him completely when he said “Don’t worry saar, I will take care of everything. Just focus on your business”. Initially I was sceptical about all that Kumar was saying since it is easy to blame a professional for your own lapses. But when I heard the entire story of how Sankar had mishandled the compliance affairs, how he had got moneys transferred to his account from time to time but failed to file with ROC, how he had used different auditors to get the audit done, with Kumar not even being aware of who his company auditor was and how he had finally abandoned the city after duping Kumar and several others, I was shocked. How can a Company Secretary do this ? Why would he do this if he were a professional actually ? As I heard more and more about Sankar, I was convinced he was not a member of our Institute at all. My fears were proved right when I checked ICSI Member directory and didn’t find his name or registration number. Obviously he had fooled Kumar into believing that he was a CS and that he would take care of everything. Little did Kumar know that a CS is a professional registered with a professional body to which he is accountable. He didn’t know what filing with ROC meant, what proofs he could expect, how to verify if the filing was actually done or not. You may wonder if a company director would be so ignorant and gullible. May be. May be not. But Sankar had taken him for a royal ride and swallowed large chunks of money on the pretext of professional fee and filing fee over the years, without filing any documents. And 6 years later, Kumar was facing the heat from ROC. He was on the brink of losing his company.

Well, we worked round the clock to help him complete the filings and rescue him from the death-bed of ‘strike-off’ but the filing fee alone came to a whopping 4.5 lac, considering the normal fee, additional fee and per day fee. Kumar had to struggle to gather this kind of an amount which he paid us in instalments for completing the filing. Why am I sharing this long story ? Because all of us need to follow the doctrine of “Trust but Verify” even in case of a ‘so-called professional’. Sad but true. In this context, I believe UDIN (Unique Document Identification Number) introduced by all the 3 professional bodies – ICAI, ICSI & ICAI (Cost Accountnats) – for certifications and authentications done by a Chartered Accountant, Company Secretary & Cost Accountant in practice is very, very relevant and timely. There can be no back-dating, no duplication, no professional signing as a practitioner and at the same time working in some corporate, no faking of documents etc. It is true that all these unholy acts are being done by qualified professionals. What to talk of unqualified crooks like Sankar ? UDIN has been made compulsory by ICAI since 1st July, 2019 while the other 2 bodies have made it mandatory from 1st October, 2019. This is a welcome use of technology for improving governance, transparency and accountability. Hopefully the stakeholders at large will begin to trust us more. Sankars will not thrive and Kumars will become alert !

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