The strange case of 'shell companies' and their directors

Apart from shell companies, ‘vanishing’ companies are also on the ministry’s radar. As many as 400 companies are not traceable, despite being listed on the bourses.

Illustration: Uttam Ghosh/Rediff.com

As many as 13,993 companies are now eligible for restoring their names at the registrar of companies (RoCs).

And, 30,000 persons are again qualified for being directors of companies, after their names were struck off as part of an official exercise to weed out ‘shell companies’.

In the first phase of this weeding, about 225,000 companies and 300,000 directors faced the axe.

Of these, 13,993 companies and 30,000 directors had availed of a scheme for condonation of delay in this regard, opened for five months by the ministry of corporate affairs, officials said.

This was meant to help genuine corporates to regularise their delayed filing of returns.

The ministry is also working on a better definition of shell companies. Some of the suggestions to define these include excessive leveraging, rotation of transactions and disproportionate investment.

In the first list, companies were found not filing annual reports and returns, based on which the ministry struck these off.

There is a second list of 225,000 entities with the characteristics of shell companies but probe into the first list is not over.

The government has been asking banks for details of transactions of many of these. However, thousands of them do not have a Permanent Account Number (PAN, given by the income tax department).

PAN is compulsory for any transaction above Rs 50,000. So far, the government has transaction details of only 73,000 companies.

These companies had deposited Rs 240 billion at the time of demonetisation.

The income tax department is investigating seeming irregularities at some of the companies in question.

During a meeting of the task force on shell companies on November 30 last year, the director-general of corporate affairs suggested the department approach the RoCs on the matter of revival of these entities, in the interest of revenue earning.

It is possible that of the 1.1 million companies registered with the RoCs, only around 500,000 would be fully operative.

Apart from shell companies, ‘vanishing’ companies are also on the ministry’s radar.

As many as 400 companies are not traceable, despite being listed on the bourses.