The government today said the companies law has stringent penal provisions to deal with frauds as well as sufficient ones to ensure firms are traceable and financial transactions are properly reported.
In a written reply to the Lok Sabha, Corporate Affairs Minister Arun Jaitley said auditors are also required to report to the central government on frauds above a prescribed threshold.
Jaitley replied in the negative to a question on whether the present companies law is so loosely drafted and has so many loopholes as to make it possible for unscrupulous persons to set up shell companies to launder money and send money out of the country and then bring it back through the Mauritius route.
Under the companies law, only individuals having Director Identification Number (DIN), which is allotted on identification and address proof, can become directors of a company.
Further, the law requires physical verification of registered office addresses of companies by practising professionals and intimation to the Registrar of Companies in the event of setting up or change in the registered office.
Jaitley said stringent penal provisions have been provided for fraud.
“These provisions appear sufficient to ensure companies and its directors are traceable and financial transactions of the company are properly and completely reported,” he noted.
Most provisions of the Companies Act, 2013 came into force from April 1, 2014.
Meanwhile, the Corporate Affairs Ministry has set up a central registration centre for processing ‘name availability’ applications for starting a new company.
To a query on whether the government has any mechanism to ensure the authenticity of the registering companies within a day, Jaitley said authenticity is ensured by obtaining a declaration and certification by a professional such as an “advocate/ chartered accountant/ cost accountant/ company secretary in practice”.
Besides, the person named in the Articles of Association as a director/ manager/ secretary of the company has to give a declaration confirming the fulfilment of all requirements for registration under the Companies Act and rules.
“Any false statement in this regard is punishable under Section 448 of the Companies Act, 2013,” Jaitley added.