The government plans to deregister more than 2.25 lakh suspected shell companies in the current financial year for not filing annual returns for the financial years 2015-16 and 2016-17.
Besides these 2.25 lakh firms, 7,191 limited liability partnership firms have also been identified and are likely be struck off from the RoC under Section 248 of the Companies Act, 2013 for non-filing of financial returns, according to a finance ministry statement.
“An opportunity of being heard will be given to these identified companies and LLPs by way of notices regarding their default and the proposed action,” the statement said. Appropriate action will be taken only after considering their response, it added.
In the previous financial year, MCA had struck off 2.26 lakh companies under Section 248 of the Companies Act, which gives powers to the Registrar of Companies to remove companies on various grounds, including for being inactive for two years. MCA also disqualified 3.09 lakh directors on the board of these companies last year. Bank accounts of these companies were frozen by the government till the time these companies are restored.
Shell firms are those that have negligible business activity and are used as an front for money laundering and tax evasion.
Task Force On Shell Companies
A task force headed by Finance Secretary Hasmukh Adhia and Corporate Affairs Secretary Injeti Srinivas was set up in February 2017 to check the menace of shell companies through a coordinated, multi-agency approach.
The panel has now classified shell companies into three categories: confirmed list, derived list and suspect list, the release said.
- Confirmed list: About 16,537 companies that were found to be involved in illegal activities by enforcement agencies have been put under this list.
- Derived list: It has 16,739 companies identified on the “basis of 100 percent common directorships with the confirmed shell companies”.
- Suspect list: It includes 80,670 suspected shell companies and has been created by the Serious Frauds Investigations Office using certain red flag indicators. The finance ministry statement did not elaborate on what these indicators are.
The panel has met eight times since it was set up, the statement added. Members include representatives from the Department Financial Services, Central Board of Direct Taxes, Central Board of Indirect Taxes and Customs, Central Bureau of Investigation, Enforcement Directorate, SFIO, Financial Intelligence Unit, Reserve Bank of India, Securities and Exchange Board of India, Directorate General of Goods and Services Tax Intelligence and Directorate General-Central Economic Intelligence Bureau.
“The Task Force has directed all member Law Enforcement Agencies to send to Institute of Chartered Accountants of India, the details of action taken against Chartered Accountants by them,” the finance ministry said.