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Government identifies 16,500 entities as shell companies, another 80,000 under lens

Government identifies 16,500 entities as shell companies

NEW DELHI: The government has identified over 16,500 companies as “confirmed shell companies”, while another 80,000 are under the lens and have been put in the suspect category, the finance ministry said on Friday.

The companies, which are suspected to have little business but large amounts of fund flow, are typically classified as shell companies as money — often collected in cash — is routed through a web of entities. While the Serious Fraud Investigation Office (SFIO) has created the database on the basis of “red flags” put together by law enforcement agencies, the government is unwilling to disclose them. Common directorship across the confirmed shell companies is, however, a criteria that the task force jointly headed by revenue and corporate affairs secretary has relied on to identify the shell companies.

In a statement, the finance ministry said that as part of the drive to get companies to file the returns mandated under the Companies Act, the registrars of companies (RoCs) have identified and removed the names of 2.26 lakh companies with close to 3.1 lakh directors getting disqualified. As part of the next round of action, another 2.26 lakh companies have been identified for not filing returns. In addition, over 7,000 limited liability partnership firms are also on the radar for not filing returns for 2015-16 and 2016-17. So far, the action is limited to issuing notices.

“With the concerted efforts of the MCA, department of financial services and the Indian Banks’ Association, the ex-directors/ authorised signatories of the struck-off companies have been restricted from operating the bank accounts of these companies and they cannot withdraw any amount from these bank accounts, other than for specified purposes, till the company is restored,” the statement said. The ministry is about to launch a campaign to make the public aware of the need to get the registrations of their defunct companies cancelled themselves.

The action against the socalled shell companies is part of the fight against black money, which has picked pace after demonetisation. The move is meant to compliment the action being taken by the tax authorities with more steps planned. For instance, the statement said the task force has directed law enforcement agencies to send to the Institute of Chartered Accountants of India the details of action taken against chartered accountants by them. In addition, the mechanism for data sharing between the agencies has also been finalised.

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