Company directors may be on govt’s watch list; 19 lakh directors already axed so far

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Published: December 3, 2019 6:28:20 PM

The government has so far deactivated the identification number of more than 19 lakh directors for not filing their KYC details.

shell, shell companies, directors, DIN, directors deactivated, ghost directors, independent directorsIn the last two financial years, Registrar of Companies (ROCs) had struck off over 3.38 lakh firms for failing to file financial statements or annual returns.

If you are a director and have not filed the Know Your Client (KYC), financial statements or annual returns, you can be the next one on the government’s watch list to get deactivated. The government has so far deactivated the identification number of more than 19 lakh directors for not filing their KYC details, Anurag Thakur, MoS, Ministry of Finance, said in a reply to a question in Rajya Sabha. These companies can also be called as ‘Shell Companies’ and the directors as ‘Ghost Directors’, however, they are not officially recognised by these names.   

In the last two financial years, Registrar of Companies (ROCs) had struck off over 3.38 lakh firms for failing to file financial statements or annual returns. This also included the disqualification of 4.24 lakh directors. In many incidents, the fake directors and firms are found involved in stashing Indian currency in tax havens. 

Also, these firms with no verified directors may be involved in the transaction of black money as well. The government’s move is likely aimed at controlling such leakages. 

Also Read: Independent Director resignations surge; why there are few takers for this lucrative job

However, it is not that only the government is facing trouble due to ghost directors, sometimes, the directors also face the burden of strict compliance and failure in distinguishing the liabilities of different directors. The independent directors have been consistently complaining about the increasing difficulty in holding their posts as the information provided to them is much less than that given to a full-time director, but ironically they are sent notices, hurting their reputation and taking up a lot of litigation time and effort.

Meanwhile, as many as 606 independent directors have resigned in 2018, which is projected to further rise sharply in 2019, as 412 independent directors have already resigned till July this year. Surprisingly, 377 of such directors did not state any reason for their resignation last year. 

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