The ministry of corporate affairs (MCA) has directed the Serious Fraud Investigation Office (SFIO) to cull out details of directors of over 50 companies who have gone underground after raising funds from the public.
The ministry’s move is aimed at identifying promoters of vanishing companies and prosecute them under the Companies Act. According to sources, the government wants to not only apprehend the “invisible” promoters but also set a precedent for future cases.
“The SFIO has been intimated of the move. The list of vanishing companies comes to over 100. The mandate is with the ministry to identify the promoters,? an MCA official told FE. He said the task would be an arduous one. It could take some years for the investigating agency of MCA to pin down the promoters of such firms. According to records with the ministry, there are 115 such firms that have literally disappeared since coming out with an IPO.
The list includes Chennai-based Unicorn Pharmaceuticals (India) Ltd, Hyderabad-based Rhino Tyres, New Delhi-headquartered Zed Investments, Asian Vegpro Industries from Mumbai, Grapco Mining and Quality Pharmaceuticals from Kolkata. ?Most of the vanishing firms had raised money as far back as twenty years ago. Though in the recent past there have been no reports of vanishing firms, as the parent ministry we have to be on our guard,” the MCA official added. According to MCA’s list of vanishing companies, a chunk of these firms raised funds as far back as 1984.
According to the official, once these promoters are identified, MCA would also be in a position to trace the end use of such money. Over the last few years, the ministry has been looking at several options to identify the end use of such money. Last year, the government had set up a committee to tackle the issue. It had representatives from MCA, Sebi and RBI. The committee is headed by the MCA secretary. According to one of the proposals, MCA had asked Sebi to also start tracking the end use of IPO money, which the market regulator refused.
“The issue of identifying vanishing companies is multi-fold,” explained the MCA source. According to him, not only are the addresses filed by these erring firms with the registrar of companies incorrect, personal details of directors are also purposely withheld. ?The disclosure procedures now are simple yet comprehensive,” the source added.