After freezing bank accounts of 200,000 shell companies, the Ministry of Corporate Affairs has identified 106,578 directors to bar them from the board of not only these but also others firms for five years.
The ministry said some members of the Institute of Chartered Accountants of India (ICAI), The Institute of Company Secretaries of India (ICSI), and other associations involved in these shell companies have also been identified. These bodies have been asked to take action against the persons concerned. These associations are also being monitored, said the ministry.
ICAI sources told Business Standard the association has identified 26 chartered accountants associated with such shell companies. It was gathering more evidence.
Sources in the ISCI, however, claimed no company secretary was involved with shell companies, though some might have violated norms. A source said, “We have identified 30-40 company secretaries violating norms... but they are not involved in any shell company.”
“The ministry has identified 106,578 directors for disqualification under Section 164(2)(a) of the Companies Act, 2013,” the government said. More directors could face the heat.
The ministry is analysing the data of these companies, available with the Registrar of Companies (RoC) to identify the directors and the significant beneficial interests behind these companies.
Profiles of directors — their background, antecedents and role in the functioning of shell companies — is also being compiled in collaboration with the enforcement agencies. The Serious Fraud Investigation Office SFIO, the RoC, the Department of Financial Services, and the Indian Banks’ Association are involved in the crackdown against shell companies.
Minister of State for Company Affairs Arjun Ram Meghwal said, “All the agencies concerned are handling this issue on priority. The fight against black money shall be incomplete without breaking the network of shell companies.”
A statement from the government said this whole exercise would go a long way in creating an atmosphere of confidence and faith in the system, paving the way for ease of doing business in India. “The interest of stakeholders would be protected and the image of the country in the global business arena would substantially improve,” the government said.
Recently, the ministry also issued notices to companies that are supposed to function as non-banking financial companies, but have not registered with the Reserve Bank of India.
Before the government cracked the whip on suspected shell companies there were 1.3 million entities registered with the RoC. Now, with 210,000 closed, there are about 1.1 million active registrations.