1. Government identifies over 1 lakh directors for disqualifying as shell companies crackdown continues

Government identifies over 1 lakh directors for disqualifying as shell companies crackdown continues

The government today said it has drawn up a list of more than 1 lakh directors of various companies for disqualifying them, close on the heels of the deregistration of 2.1 lakh companies earlier this month as part of its crackdown on shell companies.

By: | Published: September 12, 2017 5:52 PM
The finance ministry said that following the ban on the 2.1 lakh companies last week, the government is also keeping a close watch on the money laundering activities of the remaining 11 lakh active companies. (Image: PTI)

The government today said it has drawn up a list of more than 1 lakh directors of various companies for disqualifying them, close on the heels of the deregistration of 2.1 lakh companies earlier this month as part of its crackdown on shell companies. The Ministry of Corporate Affairs has MoCA identifies 1,06,578 Directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on September 12, 2017, the Ministry of Finance said.

Further, the finance ministry said that following the ban on the 2.1 lakh companies last week, the government is also keeping a close watch on the money laundering activities of the remaining 11 lakh active companies. “About 11 Lakh companies now retain ‘active’ status in the Registry of Companies after action was taken against 2.1 lakh defaulting companies,” the Ministry of Finance said in a tweet, adding, “The money laundering activities performed under the aegis of these companies are also under scanner.”

The Ministry of Corporate Affairs is continuously analysing the data of these companies available with the Registrar of Companies to identify the directors and beneficial interests behind these companies, the government said.

Earlier last week, the Ministry of Finance said it has deregistered over 2.09 lakh companies and has initiated action to restrict their bank account operations, for failing to comply with regulatory requirements. The government struck off the names of these 2.09 lakh companies from the register of companies, and barred the directors of these companies from operating the bank accounts till the time the entities are legally restored.

But apparently, that was just the beginning of the crackdown on shell companies, as a CNBC TV18 report said last week that the probe into the matter runs much deeper to include over 10 lakh such companies.

The government has recently taken up a crackdown on shell companies, which are allegedly used as conduits for illicit fund flows and tax evasion. Earlier last month, SEBI had suspended trading in the stocks of 331 suspected shell companies identified by the government. Following demonetisation, the government claims to have identified as many as 37,000 shell companies.

The government action of the last week on 2.1 lakh companies was under the ambit of Section 248 of the Companies Act, which provides the government powers to strike off names of companies from the register on various grounds, including for being inactive for long. The existing directors and authorised signatories of the struck off companies will now become ex-directors or ex-authorised signatories, and will not be able to operate company bank accounts till such companies are legally restored.

The SFIO (Serious Frauds Investigation Office) and the income-tax department will continue the ongoing crackdown on shell companies, the CNBC TV18 report had said last week, adding that the enforcement agencies have been asked to work in tandem to clean up the system. The idea is to identify real companies and wipe out the dormant or shell companies, as the removal of shell companies will help expand tax base and curb money-laundering, the report said.

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