The government on Tuesday identified over 1 lakh directors of suspected shell companies to bar them from the boards of other firms.
The ministry of corporate affairs said it had zeroed in on 1,06,578 directors for disqualification as of September 12 for associating with companies that had not filed financial statements or annual returns for three straight years, it said in a statement. Under Section 164(2)(a) of the Companies Act, 2013, directors of such companies are not “eligible for re-appointment director in that company or appointed in other company for a period of five years”.
Last week, the government had ‘struck off’ names of over 2 lakh companies from the Register of Companies, and frozen bank their bank accounts. Directors found using bank accounts of these companies will be jailed for up to 10 years, the government said.
The identification of these directors and the inquiry into their business activities will make it easier for the Income Tax Department to act against them, by putting them on a ‘watch list’, Rani Singh Nair, former chairman of Central Board of Direct Taxes told BloombergQuint over the phone.
Identification of shell companies, their bank accounts and directors will help in 360 degree profiling of fraudulent activities and money laundering.Rani Singh Nair, Former Chairman, CBDT
The corporate affairs ministry is also analysing the data of the 2.09 lakh firms available with the Registrar of Companies to identify all beneficiaries of these companies.
“Profiles of directors such as their background, antecedents and their role in the operations/functioning of these companies are also being compiled in collaboration with the enforcement agencies,” the ministry statement said.
All stakeholders involved in fraudulent transactions are being targeted now, said JN Gupta, former executive director at SEBI and managing director of Shareholders Empowerment Services, a corporate governance research and advisory firm.
If further investigations against these directors find them being involved in any fraudulent activities, punitive action should be taken against them,JN Gupta, Former Executive Director, SEBI
The ministry said professionals such as chartered accountants, company secretaries and cost and works accountants who have colluded with shell companies in wrongdoing are also under the radar.
“The fight against black money shall be incomplete without breaking the network of shell companies,” Minister of State for Corporate Affairs PP Chaudhary was quoted saying in the statement.