MCA Plans To Deregister Up To 400 Chinese Firms In 3 Months Over Financial Fraud: Report

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New Delhi: The Ministry of Corporate Affairs is planning to deregister up to 400 chinese companies across 17 states in the next three months due to issues with incorporation and financial fraud. A government official stated that over 700 Chinese companies are currently being investigated by the MCA, according to a report by Moneycontrol on Saturday.

“The inquiry on almost 600 Chinese companies stands completed. There will be a substantial number of anywhere between 300-400 companies which will be struck off. These include loan apps, online job companies, etc.,” the official shared with Moneycontrol.

The MCA has been investigating loan apps operating in India especially those involved in predatory lending, fraud or breaching financial rules. There is increasing worry about the rise of digital firms. These apps are facing allegations of using harsh tactics, imposing high interest rates and participating in unethical behaviours like harassing borrowers.

“In most cases, such companies are those that are not available at the registered offices. Some are those for which investment had come but are now into some other business. These are incorporation related fraud and financial frauds. Some companies have an Indian director, but the bank account is operated from China. There are companies which have had no transactions,” the official mentioned.

Section 248 of the Companies Act details the procedure for removing companies from the official register. The process begins with sending a notice to the company which allows them three months to reply. After one month, a follow-up notice is sent. If the company does not respond to either notice it will be struck off the register.

The official stated, “The 300-400 firms likely to face striking off are based in 17 states, including Delhi, Bengaluru, Uttar Pradesh, Andhra Pradesh, Mumbai, Chennai, etc.” Further investigation has been initiated for 30-40 more chinese which includes those in the mobile screens and batteries sectors, based on preliminary findings. If the inquiry report supports it, action will be taken; otherwise, the remaining companies will be reviewed more closely.