3 Lakh Directors Of Shell Companies Blacklisted By Ministry Of Corporate Affairs

In a crackdown on black money, the government has announced that Directors of shell companies that have not filed tax returns for three or more years will be barred from taking similar positions elsewhere or getting reappointed.

In its press release, the government declared that in case the Director or authorised signatory of any “struck off” company tries to unauthorisedly siphon-off money from its bank account, he/she may attract punishment of imprisonment of “not less than six months extendible to 10 years”. If it is found that the fraud involves public interest, the punishment “shall not be less than 3 years and fine may also be imposed which would be three times the amount involved”.

The Ministry of Corporate Affairs, currently led by Finance Minister Arun Jaitley, regulates unlisted companies.

The Ministry stated that it has also decided to track down the beneficial owners of suspected shell companies and take penal action against those who divert funds from companies that are struck off the records of the Registrar of Companies (RoC).

According to Livemint, as many as 3,00,000 Directors of companies that have defaulted on statutory compliances could be restricted from serving on the boards of other firms.

The Ministry has also cancelled of the registration of 2,09,032 shell companies. The Department of Financial Services and the Ministry of Finance have also reportedly directed all banks to restrict operations of bank accounts of such companies by the Directors of such companies or their authorised representatives.

The decisions have been taken with the intention of improving corporate governance and checking financial irregularities through the use of shell companies.

The MoS (Corporate Affairs) PP Chaudhary, who was recently appointed to the position, said that the exercise of weeding out shell companies would not only help in checking the menace of black money but also would promote an ecosystem of “Ease of Doing Business” and enhancing investors’ confidence.

Chaudhary said that the financial status of the companies would be reflected in a true and fair manner which would “minimise the possibility of frauds and tax evasion … Further, the availability of funds for illegal purposes will also be choked … the interest of stakeholders would be fully protected and the image of the country in the global business arena and fora would substantially improve.”

Enforcement agencies are compiling profiles of directors, including their background, antecedents and role in the operations and functioning of these companies.

“… all efforts are also being made to identify the actual beneficiaries and persons behind such shell companies,” Chaudhary said.