Schedule III Disclosures — Benami Property, Struck-off Companies, Ratios
# Additional Schedule III Disclosures
The 2021 amendments to Schedule III introduced several transparency disclosures designed to surface governance and compliance issues. Three key disclosures:
## 1. Benami Property Held
Where any proceedings have been initiated or are pending against the company for holding benami property (property held in another's name to conceal ownership) under the Benami Transactions (Prohibition) Act, 1988, the company must disclose:
Details of the property including year of acquisition.
Amount of property.
Details of the Beneficiaries.
If property is in the books — reference to the line item in the Balance Sheet.
If property is not in the books — fact must be stated with reasons.
Where proceedings are against the company as an abetter or transferor — those details.
Nature, status of proceedings, and the Co.'s view on the matter.
## 2. Relationship with Struck-Off Companies
Where the company has any transactions with companies that have been struck off under Section 248 of the Companies Act, 2013, disclose:
| Name of Struck-off Co. | Nature of transactions with struck-off Co. | Balance outstanding | Relationship with struck-off Co., if any |
This flags potential shell-company dealings.
## 3. Mandatory Ratios Disclosure
The following ratios must be disclosed:
Current Ratio
Debt-Equity Ratio
Debt Service Coverage Ratio
Return on Equity Ratio
Inventory Turnover Ratio
Trade Receivables Turnover Ratio
Trade Payables Turnover Ratio
Net Capital Turnover Ratio
Net Profit Ratio
Return on Capital Employed
Return on Investment
### Two Key Requirements
1. The company must explain items included in numerator and denominator for computing the ratios.
2. Explanation must be provided for any change in a ratio of more than 25% compared to the preceding year.
## Audit Significance
The auditor must:
Verify ratio calculations and formulae used.
Test that >25% variances carry meaningful explanations (not boilerplate).
Verify the struck-off company list against the MCA portal (master data of struck-off companies).
For benami matters, review legal notices, communications from the Initiating Officer, and counsel's opinions.
Worked example
### Example 1
Example — Ratio variance: Company's debt-equity ratio jumped from 0.6 to 1.5 (150% increase). The auditor verifies the explanation: 'New Rs 100 crore term loan availed during the year to fund capacity expansion.' Boilerplate like 'due to changes in financing structure' is unacceptable.
### Example 2
Example — Struck-off company: During testing, the auditor finds a vendor 'XYZ Trading Pvt Ltd' with Rs 8 lakh outstanding payable. MCA portal shows the company was struck off in 2023. Disclosure required: Name 'XYZ Trading Pvt Ltd', nature 'Purchase of raw materials', balance Rs 8,00,000, relationship 'None'. Auditor must also consider whether this is a sham transaction.
### Example 3
Example — Benami: Company is named in an attachment order under the Benami Act for a flat held in the name of the CFO's wife. Disclosure includes property details (Mumbai flat acquired 2018, value Rs 2.5 cr), beneficiary (Company), the flat is not in the books, status of proceedings (PMLA tribunal pending), and the company's view (denying allegations).
⚠️ Common exam mistakes
Using boilerplate language to explain >25% ratio variances.
Failing to cross-check vendor/customer master against the MCA struck-off company list.
Disclosing only the existence of benami proceedings without details, beneficiaries, and the company's view.
Inconsistent numerator/denominator definitions for ratios across years (e.g., changing what 'debt' includes without disclosure).
Bare-Act text Schedule III, Part I — Additional Disclosures · Schedule III, Companies Act, 2013 (as amended in 2021) · click to expand
Where any proceedings have been initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and the rules made thereunder, the company shall disclose the details, beneficiaries, amount, line item reference, nature and status of proceedings, and the company's view. Where the company has any transactions with companies struck off under section 248 of the Companies Act, 2013, the company shall disclose the name of struck-off company, nature of transactions, balance outstanding, and relationship. The following Ratios shall be disclosed: Current Ratio, Debt-Equity Ratio, Debt Service Coverage Ratio, Return on Equity Ratio, Inventory turnover ratio, Trade Receivables turnover ratio, Trade payables turnover ratio, Net capital turnover ratio, Net profit ratio, Return on Capital employed, Return on investment. The company shall explain items included in numerator and denominator and explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.