The Ministry of Corporate Affairs (MCA) under the Modi government will ban 400 Chinese companies across 17 states within the next three months. Although most of these Chinese companies are owned by Indians and have been very important to the country’s economy and the reports have found out that these companies are doing financial frauds. 700 Chinese companies are under investigation to see their activity and about their financial fraud.
When a business is deregistered it loses its status as a legal entity and is removed from the official Registrar of Companies (RoC). Therefore business can no longer be an incorporated business as it is not registered with the government and will turn into unincorporated business. An official revealed that nearly 600 Chinese firms have already been investigated and out of these around 300 to 400 banned and deregistered.
Many of these apps have been accused of predatory lending, aggressive recovery methods and charging excessive interest. The rise of digital lending platforms in India which are linked to Chinese business has raised serious concerns, leading to increased scrutiny. “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 said.
The process of banning a company under Section 248 of the Companies Act usually takes three months. Notices are issued first with a month given for response. If the company does not respond a second notice follows. Failure to address the second notice results in the business being banned. Investigations are also ongoing for 30 to 40 more Chinese firms mostly involved in mobile components. Depending on the findings further actions will be determined.
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The Potential Disadvantages Of Modi Government To Ban 400 Chinese Companies
There may be many advantages of the Modi Government To Ban 400 Chinese Companies as it will save people from fraud and other bad activity. However it will also have some disadvantages. Firstly the unemployment in the country will increase because when these 400 Chinese firms will be banned therefore the Indian labor employed in these firms will be unemployed leading to an increase in the country’s unemployment rate.
Secondly, government direct tax revenue will reduce as they will be able to get less finance through the income tax as the people will be unemployed and the government will also not be able to take taxes from the Chinese firms which it used to take therefore this will reduce the government overall tax revenue therefore they might experience budget deficit.
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