Modi govt’s crackdown on shell firms: Nearly 4 lakh companies struck off RoC records

More than 3.82 lakh companies were struck off the Registrar of Companies (RoCs) in the past three years for failing to submit their annual returns for two years or more. The Ministry of Corporate Affairs had removed the names of these companies from the official records following the “Special Drive for identification and strike off Shell Companies,” MoS Finance and Corporate Affairs Anuraj Singh Thakur said in the Rajya Sabha on Sunday. “After following due process of law as provided under Section 248 of the Companies Act, 2013 read with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, there are 3,82,581 number of Companies were struck off during the last three years,” Thakur said in a written reply to a question in the Upper House.

While the term Shell Company hasn’t been defined in the Companies Act, it usually refers to companies without active business operation or significant assets. These assets are used for illegal purpose in some cases such as tax evasion, money laundering, obscuring ownership, benami properties etc., Thakur added. The number of shell companies struck off increased from 3,38,963 during the financial years FY18 and FY19, the minister had said in the Lok Sabha in December last year.

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The Corporate Affairs Ministry and the Central Board of Direct Taxes (CBDT) had concluded an MoU for data exchange on September 6, 2017, to enable automatic and regular sharing of information including such as Permanent Account Number (PAN) data, income tax returns, financial statements filed with the ROCs, returns of allotment of shares, audit reports and statements of financial transactions received from banks relating to corporates.

Importantly, India had made an all-time high number of requests in 2018-19 to foreign financial intelligence units with respect to probing case around money laundering, terrorist financing and tax evasion cases, PTI had reported in July this year citing a report by the Financial Intelligence Unit comparing data from the last six years. “A number of cross-border company holdings, network of shell firms and undisclosed foreign assets are part of these financial investigations that require cooperation from another country,” a senior official in the Finance Ministry had said. The Financial Intelligence Unit had sent 289 legal requests to its counterparts across the world during 2018-19 vis-a-vis 177 in 2017-18 and 138 in 2016-17, the news agency had reported.