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Govt takes strong actions against 2.24 lakh suspected shell companies

Delhi: Taking a strong action against shell companies, the Ministry of Corporate Affairs (MCA), has cancelled around 2.24 lakh companies for remaining inactive for a period of two years or more and has disqualified 3.09 lakh directors in the process, according to an official release from the ministry.

Several of these companies are suspected to be shell companies, and restrictions have been imposed on the operation of their bank accounts and sale of movable and immovable properties until they are restored. The decision was taken based on data received from 56 banks post demonetisation.

According to ministry officials, preliminary enquiry of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs 17,000 crore was deposited and withdrawn post demonetization. In one case, a company which had a negative Opening Balance on 8th November, 2016, deposited and withdrew Rs 2,484 crore post-demonetization.

One company was found to have as many as 2,134 accounts. The information with respect to such companies have been shared with enforcement authorities, including Central Board of Direct Taxes (CBDT), Financial Intelligence Unit (FIU), Department of Financial Services (DFS) and Reserve Bank of India (RBI), for further necessary action.

The Prime Minister’s Office has also constituted a Special Task Force (STF) under the Joint Chairmanship of Revenue Secretary and Secretary, Corporate Affairs, to oversee the drive against such defaulting companies with the help of various enforcement agencies. The Special Task Force has so far met five times and action has been initiated against several defaulting companies, which is expected to help in the drive against black money.

Separately, action has also been taken to disqualify Directors on the Board of Companies that have failed to file Financial Statements and/or Annual Returns for a continuous period of three financial years during 2013-14 to 2015-16. Around 3.09 lakh Directors have been affected by this action. Preliminary enquiry has shown that over 3,000 disqualified Directors are Directors in more than 20 companies each, which is beyond the limit prescribed under the Law.

Further, in the light of the evidence with respect to abuse of the Corporate Structure through multi-layering, not more than two layers are now permitted beyond the wholly owned subsidiary. This is in addition to the existing restriction which prohibits a company to make investment through more than two layers of investment companies.

In order to address the criminality angle, the Director, Additional Director or Assistant Director of have been recently authorized to arrest any person believed to be guilty of any fraud punishable under the Act. Under Section 447 of the Act, which defines fraud, stringent punishment including imprisonment up to 10 years is stipulated. Further, reference has been made to the Ministry of to include it as a Scheduled Offence under the Prevention of Money Laundering Act.

With a view to checking the problem of Dummy Directors, action is underway to seed DIN with PAN and Aadhaar at the stage of DIN through matching for new applications.

With an objective to strengthen the regulatory mechanism, a separate initiative is underway to develop a software to put in place an ‘Early Warning System’ (EWS), which will be housed in SFIO, sources said.

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