SEBI headquarters in Mumbai (Photographer: Santosh Verma/Bloomberg)

Government Identifies 77 Firms In The Vanishing Companies’ List

As many as 77 “vanishing” companies remained untraced after having raised funds through initial public offers, Parliament was informed today.

Vanishing companies are those firms which cease to file their statements of return after raising capital, and whereabouts of their registered office or directors are not known.

From the IPOs, which were issued during the 1992-2001 period, a total 238 firms were identified as vanishing companies by the Coordination and Monitoring Committee , a joint mechanism of corporate affairs ministry and markets regulator SEBI.

Of these, 161 companies have since been removed from the list, as they have subsequently been traced, Minister of State for Corporate Affairs PP Chaudhary said in a written reply to the Lok Sabha.

These companies are from various states like Gujarat, West Bengal, Odisha, Bihar, Madhya Pradesh, Uttar Pradesh, Punjab, NCT-Delhi, Andhra Pradesh and Maharashtra, identified by the coordination and monitoring committee.

The minister said that First Information Reports have been lodged against these 77 companies and their directors. “Prosecutions have been filed against these companies and their promoters or directors... for non filing of statutory returns ... for misstatement in prospectus or fraudulently inducing persons to invest money or false statements made in the offer documents.”

Chaudhary added that a slew of steps have been taken by the government to save investors from frauds including frauds by vanishing companies.

These measures included amending the Companies Act, which makes it mandatory for existing or prospective directors to obtain a director identification number after submitting verification documents. In addition, the ministry has made it mandatory for the professionals to verify details of the company in case of incorporation of new firm or change of address of an existing company.

Besides, the Registrar of Companies scrutinise the balance sheet and other records of the firms that raise money through public offers and monitors the utilisation of such funds, he said.