The government on Wednesday said a director or an authorised signatory of a “struck-off” company may face six months to 10 years in jail if found guilty of siphoning off money, as it steps up an offensive against shell companies that are used to funnel black money.
However, if the fraud involves public interest, the punishment won’t be less than three years, along with a fine that will be three times of the amount involved, the corporate affairs ministry said in a statement. The crackdown comes after the mining of the data following the demonetisation exercise.
The directors of such shell companies, which have not filed returns for three or more years, will be disqualified from being appointed in any other company as directors or from being reappointed as directors, thereby compelling them to vacate office. At least 2-3 lakh such directors will get debarred due to such an exercise, the ministry said in the statement after a review meeting chaired by the minister of state for corporate affairs PP Chaudhary.
On Tuesday, the government announced it had struck off 2,09,032 firms, most of which were believed to be shell firms, from the Register of Companies and barred the operation of bank accounts of such firms. The department of financial services has advised all banks to take immediate steps to put curbs on bank accounts of such struck-off firms.
The government has also warned that it has initiated steps to identify more shell companies as part of its drive against black money.
Banks have also been advised to go in for enhanced diligence while dealing with companies in general.
The companies that have been struck off fall within the ambit of Section 248 of the Companies Act and their existing directors and signatories will be considered ex-directors and ex-authorised signatories. “These individuals will, therefore, not be able to operate bank accounts of such companies till such companies are legally restored under Section 252 of the Companies Act by an order of the National Company Law Tribunal. The restoration, as and when it happens, shall be reflected by change in the status of the company from ‘Struck off’ to ‘Active’,” the government said in the statement.