Search Report Smart Decision

What is meant by Search Report?

A search report of the Registrar of Companies (ROC) is one of the most important tool. This report is a document that provides a complete view of a company’s financial, legal, and operational status as incorporated with the Ministry of Corporate Affairs (MCA). The structure and utility help the stakeholder Search Report smart decision in the business decision.

The overall content of an ROC Search Report is as follows:

1. Company Detail-Seeking an ROC Search Report

• Name and the registration number
• Date of Incorporation
• CIN number of the company
• Registered Office Address
• Nature of Business

2. The Capital Structure

• Authorized Share Capital
• Paid-Up Share Capital
• Details of the Shareholders and their Shareholding Pattern

3. Details regarding the Director and Management

• Names and Designations of Directors
• Change in Directorship
• Compliance with Director Disclosures

4. Charges and Borrowings

• Details of Secured and Unsecured Loans
• Creation, Modification, and Satisfaction of Charges
• Lenders and Collaterals Information

5. Litigation and Proceeding

• Pending Legal Cases
• Order of compliance

What is the purpose of ROC Search Report

ROC Search Report is needed in numerous areas of activity by different groups of persons. The main of them are:

1. Investors: The report is required by the investors to evaluate a company’s financial profile and its previous compliance history for investment purposes.
2. Lenders (Banks and Financial Institutions) : To verify the creditworthiness of a loan seeker based on its current economic status. Also, to safeguard against abuse of the loans or credit facilities provided.
3. Potential Buyers in M&As: They, too, need it to protect themselves from legal, financial, and operational standing claims verification during target company takeovers.
4. Business Partners: The report enables them to ascertain the financial and legal standing of a company or its officials so that proper evaluations may be carried out before entering into a business partnership or a negotiable contract, including the determination of the credibility and compliance of the partner company.
5. Suppliers and Vendors: To determine the financial stability of a company prior to entering into large supply contracts, then there is a risk of non-payment being reduced or eliminated.

The Process doing Search Report

Step 1: Accessing the Ministry of Corporate Affairs Portal

• CAs, Company Secretaries or any other legal personal are the only professionals with the credentials to enter the Ministry of Corporate Affairs Portal by filling in a pre set user and password.
• In case you seek to get more relevant information, having the Corporate Identification Number or the name of the specific company can prove to be beneficial.
• Some of the most common documents which are available and can be downloaded include:
• Certificate of Incorporation
• Audited Financials
• Annual Returns filed in MGT 7
• All charge related forms including: CHG 1, CHG 4
• Form DIR 12; Directors disclosures
• All other forms of filings.

 

Step 2: Proprietor’s Analysis of the Company

• Basic details About the Company: Gather all the relevant information including the name of the company, Registration number, date of when the company was registered, address of the registered office. Make sure to check if the company is still active or not.
• Overview of the Company: Familiarize yourself with the type of the company which has sought the MoA.

Step 3: Assessment of Financial Status

• Balance Sheet and Profit and Loss Statements: This involves assessing total assets and production performance in the last 3 to 5 years. Overall trend in revenue generation, profit margin, and balance sheet items.
• Share Capital Structure: Also provide information on the amount of share capital that has been issued and fully paid. View how ownership is carried out and what the control or voting structure looks like.

Step 4: Analysis of Charges and Other Borrowings

• Charge Details: If any charge is created, modified or satisfied, check the kind of loans taken out (secured or unsecured) and the assets for which such loans are collateralized.
• Lenders: Recognize the various lenders and their borrowing agreements.

Step 5: Company’s Directors Overview

• Director Names: Current and previous directors along with the time and date of their appointment/resignation should be scrutinized. Further, the Compliance to Companies Legislations as to their DIN number has to be verified also.
• Changes in Top Management: Changes in the last 2 to 3 months with particular emphasis on senior management should also be highlighted.

Step 6: Run Legal and Litigation History Check

• Pending Legal Cases: Ongoing and even obsolete litigation to be searched for disputes. Also, review courthouse orders or notifications for the company.
• Regulatory Actions: Against regulatory authorities such as fines or investigations.

Step 7: Preparation of the Report

• Amalgamation of findings: Organizing results into legislated sections:
• Overview of company
• Financials
• Director and management details
• Charges and borrowings
• Compliance status
• Litigation history
• Professional Formatting: The report must be well-structured and easily readable report with clear headings and subheadings.

Step 8: Report submission

• Client Review: The draft shall be shared with the client to provide feedback or inputs.
• Finalization and delivery: The final report is submitted through means preferred by the client whether digitally or hard copy.

Value of an Investigation Report

1. For Investors: This report will enable investors to find out the financial health and compliance history of the company before making investment decisions.
2. For Lenders: Lenders and other financial institutions rely on this report to find out the creditworthiness of a borrower, and also assess the risk involved in lending.
3. For Mergers and Acquisitions: This is an instrument for due diligence in terms of mergers, acquisitions, or any other strategic partnerships when the integrity of a company, in terms of its legality and finances, is to be certified.
4. For Internal Assessment: For the companies themselves, it is the search report through which they will find compliance gaps in the same and find solutions to any risks.

Limitations of an Search Report

The ROC Search Report, while valuable, has the following limitations:

1. Dependence on the accuracy of filed information: The report is dependent on the facts that have been reported pertaining to that company. Thus, exaggeration or delay in filing creates false and misleading reports.
2. Limits itself to publicly available information: Doesn’t entail proprietary or internal company information.

Why Would One Want to Choose us for the ROC Search Report Requirements?:

We brings the richness of ROC search reports-an essential requirement of a standard report based on the need. Also the other importance are given below:

• Experts: These are results provided by experienced Chartered Accountants, Company Secretaries, and lawyers.
• Desired Insights: Identifying important red-flag critical moments with expert commentary that allows informed decisions.
• Above and beyond confidentiality and compliance: We pursue the highest data confidentiality standards and compliance in all regulatory requirements.
• Timely Delivery: It thus guarantees that the report reaches you within the timelines agreed upon for swift decision-making.

Other reports covered in Search Report:

ESI Compliance.

The scheme of Employee State Insurance (ESI) provides social security and health insurance benefits to the employees of the companies. ESI is mandatory for companies that employ ten or more workers (in most states) along with employee wages of up to ₹21,000 in compliance with the current stipulated norms. Aspects covered in the search report:

• Registration:
  • Whether the company is registered under the ESIC Act.
  • Validity of the ESI registration number.
• Contribution Payments:
  • Timely contributions of 4% of gross salary (3.25% by employer and 0.75% by employee).
  • Verification of payment challans.
• Employee Coverage:
  • Whether benefit covers all eligible employees under ESI.
• Inspections and Notices:
  • Any notices, penalties, or audits that can be reported to ESIC.

2. Provident Fund compliance

The Employees’ Provident Fund gives benefits to employees after they retire and is applicable to companies hiring 20 or more workers. The following aspects are covered in a search report:

• PF Registration:
  • Whether a company is registered under the EPF Act.
  • EPF Code Number verification.
• PF Returns Filing:
  • Monthly EPF contributions filing through ECR (Electronic Challan Cum Return).
  • Submission of annual returns (Form 3A and Form 6A).
• PF Payment of Contribution:
  • Timely payment of contributions (12% of basic wages: 12% by employer with administrative charges, if applicable).
  • Checking challans and payment records of contributions.
• PF Employee Coverage:
  • Whether all eligible employees earning up to ₹15,000 per month are enrolled.
• PF Inspections and Notices:
  • Pending notice/penalties/audits from EPFO.

3. GST Compliance

GST is an indirect tax imposed on businesses, which has exceeded a specific turnover threshold: ₹20-40 lakhs depending on state and type of business. The aspects that could be Covered in Search Report:

• Registration:
  • GSTIN (Goods and Services Tax Identification Number) verification.
  • Validity and active status of the GST registration.
• Returns Filing: Timely filing of monthly/quarterly returns such as:
  • GSTR-1 (outward supplies).
  • GSTR-3B (summary of sales, ITC, and tax payment).
  • Annual Return (GSTR-9).
  • Reconciliation of GSTR-2B (ITC) with purchase records.
• Tax Payment:
  • Timely payment of GST liability.
  • Review of payment challans.
• ITC Claims:
  • Validity of Input Tax Credit claims.
  • Identifying mismatches that lead to discrepancies in ITC.
• Litigations and Notices:
  • Notices/demands raised by GST authorities.
  • Ongoing litigations/non-compliance levied with penalties.

4. Shops and Establishments Act

• Objective: All establishments that are in trade, business, or services are required by this Act to register themselves with the appropriate state authority in order to be within the legal framework.
• Verification in ROC Search Report: The search report usually incorporates the assessment of whether the company has registered under the applicable state Shops and Establishment Act. The registration certificate must be valid and renewed. Registration details such as registration number and date of issue as well as coverage of operations under the certificate is verified.

5. Labour Law Compliance

• Objective: The purpose of compliance with labour laws is for the adherence of the company to the legal provisions regarding the rights and welfare of the employees.
• Relevance under ROC Search Report: During the search report, the compliance of the company with significant laws relating to labour such as:

– Payment of Gratuity Act, 1972 entitles the employees to gratuity after attaining certain eligibility.

– Time-bound payments to the employees are governed by Payment of Wages Act, 1936.

– The Maternity Benefits Act, 1961 entitled for giving maternity leave and benefits for female employees.

• Verification in ROC Search Report: The search report verifies regarding maintenance of statutory registers, such as wage registers. Filing of periodic returns with labour authorities (e.g. annual returns under labour laws). Details of inspections or notices from labour departments, if any. And Non-compliance with the rules may attract penalties, legal actions, or a tarnishing reputation.

6. Fraud and Regulatory Breaches:

• Objective: To detect any fraudulent act or regulatory breach and to evaluate the integrity and compliance rating for the company.
• Verification in ROC Search Report: The report deals with records of financial irregularities or allegations of frauds against the company. Non-compliances with applicable sectoral regulations could lead to penalties or show-cause notices issued by the relevant regulatory authority against companies like SEBI, RBI, etc.). Ongoing or past litigations which relate to fraud or statuary breaches will also be checked here. This will lead to red flags that keep an investor, lender, or other stake holders from holding out investments.

7. Audit Report Updates

• Objective: These reports serve the purpose of determining the financial and operational health of a company including whether there are red flags or areas of concern.
• Verification in ROC Search Report: There is much more than checking the compliance standing of the company to recommendations and remarks made in its audit reports. This will, in turn, ensure financial transparency and better risk management. Important checks include:
• Raise Flags: Here, you can detect problems such as tax liabilities, poor operational efficiency, or even fraud.
• Qualifications and Adverse Remarks: Should comment on corrective actions for any gaps in internal controls, or risk management with respect to.
• Compliance Status: Verification of its status with respect to the said financial disclosures and a rectification of the discrepancies identified.

8. Intellectual Property (IP) Aspects

• Objective: The IP assets include trademarks, patents, copyrights, etc., which figure as the specific intellectual capital for a company.
• Verification in ROC Search Report: The search report would include information about trademarks, patents, and copyrights registered with the company; pending or current IP litigations or disputes; and verification, Authenticity of the claims made by the company about its IPRs in its filings. Registration and ownership should be in all counts complete for avoiding unfair disputes arising in future, as well as for increasing the business valuation of the company.

9. Coverage under Insurance

• Objective: Adequate insurance will protect the company from financial risk and liability.
• Verification in ROC Search Report: The report ascertains policies held by the company and their insurance counterparties such that there exist Business Liability Insurance covering legal liabilities arising from third party claims, Employee Compensation in compliance with labor welfare, Asset Insurance covering critical assets such as Machinery, Inventory, and Property, and other nominated classes. The report provides details of premiums paid by the company and adequacy of coverage. Without adequate insurance, financial exposures and operational vulnerabilities will result to the company.

Other information Lenders might Require:

1. Analysis of cash flows.

It provides financial disclosures concerning cash flows gained over the past three years according to various cash flow trends shown during annual financial filings (i.e., Form AOC-4) to consider both cash inflows (revenue, investments) and outflows (operating expenses, loan repayments). This analysis will draw the attention of the investor for an assessment of liquidity and operational efficiency of the company to fulfil short term obligations. Investors and lenders prospect from this data to point out any shortages in cash flows or positive trends that indicate healthy cash flow. Poor cash flow performance may indicate operational inefficiencies or financial strain, impacting the company’s ability to attract investments or secure loans.

2.Related Party Transactions (RPTs)

 The search report explores the disclosures related to related party transactions (RPTs) in financial statements and board reports submitted to the ROC. These mostly consist of important transactions with directors, subsidiaries, or associated companies. It further describes the various kinds of transactions, its monetary values, as well as the parties concerned. This research is extremely beneficial for investors in identifying any potential conflict of interest, risks in terms of governance, or company preference in benefits extended to related parties. It should be rightly disclosed for that purpose; otherwise, it might raise red flags for investors or lenders regarding the company’s governance and fairness in business dealings.

 

3. Market Position

 

This aspect of the market position of the entity is not dealt with directly in the ROC search report. However, the filings of the company could provide indirect pointers into its standing in the market. For instance, information on the growth in revenues, the expansion of business, or acquisitions would serve as indicators to show where it stands against competition. Investors can retrieve this information to compare with reports from other sources and analyze the market share, industry rank, and level of competition of the company. The report also contains some key operational indicators such as turnover and the type of shareholders, which can be employed in assessing the position of the entity within the industry. A good market position makes the company more attractive to investors and lenders in terms of stability, which is positive for their growth potential.

 

4. Litigative Evolutions

The searching report encompasses ongoing or past litigations involving the company as well as directors and other stakeholders. It classifies them as regulatory, civil, or criminal cases indicating their nature and outcome. This trend analysis of litigation is important for the investor or lender to understand how exposed a company is to operational, legal, or compliance risks. Frequent or unresolved litigations would point to some deeper governance or operational problems translating to risks related to the company’s reputation and profile. On the other hand, minimal or hardly any advertisements in the court may point to effective legal and compliance management, both of which are an important ingredient for the confidence of investors.

5. Historical Data

Historical trends in the ROC search report include changes in the capital structure, appointments of directors, and compliance performance. It will be tracking changes in authorized or paid-up share capital; hence, it would be capital dilution or fund-raising trends.

The director appointments and resignation would show stability towards leadership governance. The compliance history shows how regulatory disciplines would be reflected, whether via filing deadlines or penalties imposed. Investors and lenders will use the data to evaluate the sustainability of the company through its long-term practices, governance quality, and trajectory of financial growth. Trends in the positive historical lens reflect an operation’s stability while otherwise indicating management or structural issues.

 

Contact:

Prakasha & Co is all set to associate with you in making your financial investments decisions right and well-informed with reliable ROC search reports. Connect with us at 07019827351 or by email at crp@prakashaAndco.com.