More than 4.32 lakh non-operational companies have been removed from official registers under special campaigns and among them, 49,921 companies have been removed in the last financial year, the government has informed. Parliament Wednesday.
According to the government, it has taken special action to identify and deregister front companies even though there is no definition of the term “Shell Company” and also “Fraudulent Shell Company” in the Companies Act 2013 (the Act). 4,32,796 number of companies have been delisted in these special campaigns undertaken through 2021-22.
A shell company is a company with no active business activities or significant assets. Not all of these types of companies are necessarily illegal, but they are sometimes used illegitimately, for example to conceal ownership of a business from law enforcement or the public. In some cases shell companies are used for illegal purposes such as tax evasion, money laundering, concealment of ownership, benami properties, etc.
“However, there are provisions for the deletion of the name of the company under Section 248 of the Companies Registry Act, if it does not carry on any business or operation for a period of 2 years immediately preceding exercises (non-operating companies) and has made no application within the said period to obtain the status of a dormant company under article 455 of the law. The Registrar of Companies (ROC) is removing the names of these companies from the Companies Registry after following due process,” said, Corporate Affairs Minister Nirmala Sitharaman.
According to the Minister, Section 164(2)(a) of the Act empowers the Ministry of Corporate Affairs to disqualify directors of companies who have failed to file financial statements or annual report for a continuous period of three financial years .
These persons may be prevented from being reappointed as directors of the company concerned or of other companies for five years.
“By invoking the said provision, the ministry also disqualified 5,68,755 administrators,” Sitharaman said.
The government had also ordered an investigation into the true ownership of 68 such companies which had deposited Rs 25 crore or more in bank accounts and exceptionally withdrew after demonetization.