Shell companies: Govt makes names of disqualified directors public | business-news | Hindustan Times
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Shell companies: Govt makes names of disqualified directors public

Earlier this month, the government had said more than 1.06 lakh directors will be disqualified for their association with shell companies.

business Updated: Sep 20, 2017 08:20 IST
Jayshree P Upadhyay
The government’s move is a clean-up exercise mainly targeting shell companies suspected of money laundering.
The government’s move is a clean-up exercise mainly targeting shell companies suspected of money laundering.(Representative Image)

The ministry of corporate affairs (MCA) has made public the names of directors whom it disqualified last week for associating with companies that have not filed their financial statements or annual returns for three financial years.

This is possibly the first of its kind naming and shaming exercise aimed at directors who have been barred from assuming directorships at other firms for five years as the government continues its crusade to eradicate the black economy.

The names include some that are similar to prominent politicians, from Arunachal Pradesh to Tamil Nadu, and businessmen, including non-resident Indians.

Mint couldn’t ascertain whether these directors were indeed popular public figures. (This story will be updated as and when we reach out to people). There is no way of confirming this from the details released.

On 12 September, the MCA issued a statement saying that it has identified 106,000 directors of companies that did not file their financial statements or annual returns for three straight years, violating provisions of the Companies Act, 2013. Prior to that, it struck off 200,000 firms that were suspected to be shell companies and directed banks to restrict operation of bank accounts of such companies by the directors of such companies or their authorized representatives.

Shell firms, though not defined under the Companies Act, are those that adhere to basic company laws and are used to avoid taxes and convert black money into white.

At least 17 registrars of companies (RoCs) of various states have released these names. In some cases, they have released the names of directors in companies that been struck off the RoC list as well. At least six RoCs, including those in Patna, Jaipur and Kolkata, are yet to release a list of such directors.

“The government in the past had introduced a mechanism to encourage companies to close down voluntarily if their financials did not check out. But the current exercise seems to be of a different magnitude and scale. Apparently, a lot of data analytics and data mining has gone into putting together such voluminous data. It seems like a fallout of demonetization—an integrative, consultative and inter-regulatory action to track black money and instill a culture of compliance,” said S.N. Ananthasubramanian, practising company secretary and past president, Institute of Company Secretaries of India.