Task Force takes steps to check the menace of Shell Companies

• The Task Force on Shell Companies has met 8 times since its constitution and has taken pro-active and coordinated steps to check the menace of shell companies. The Task Force was set up in February, 2017 by the PMO with a mandate to check in a systematic way, through a coordinated multi-agency approach, the menace of companies indulging in illegal activities including facilitation of tax evasion and commonly referred to as ‘Shell Companies’.

• Department of Financial Services, CBDT, CBEC, CBI, ED, SFIO, FIU-IND, RBI, SEBI, DG GSTI and DG-CEIB are its members.

List by SFIO

• SFIO has compiled a list of shell companies which comprises of 3 lists – the Confirmed List, Derived List and Suspect List.

• The Confirmed List has a total of 16,537 confirmed shell companies on the basis of the information received from the various Law Enforcement Agencies of the companies found to be involved in illegal activities.

• The Derived List has 16,739 companies identified on the basis of 100% common directorship with the confirmed shell companies.

• The Suspect List has 80,670 suspect shell companies and has been drawn up by SFIO using certain Red Flag Indicators.

Highlights

• In a drive carried out under the supervision of the Ministry of Corporate Affairs in the Financial Year 2017-18 the Registrar of Companies identified and removed from the register of companies under Section 248 of the Companies Act, 2013 the names of 2,26,166 companies, which had not filed their Financial Statements or Annual Returns for a continuous period of two or more years.

• As many as 3,09,619 directors were also disqualified u/s 164(2)(a) read with Section 167(1) of the Companies Act, 2013.

• The 2nd drive to be launched during the current financial year 2018-19 a total of 2,25,910 companies have been further identified for being struck-off. An opportunity will be given to these identified companies regarding their default and the proposed action.

Significance

• The government expects that its efforts to clean up the registry will create a transparent and compliant corporate ecosystem in India, promote the cause of ease of doing business and enhance the trust of the public.

Background

• The existence of black money creates imbalances in the economy, finances terror and crimes like money laundering etc., puts the honest at a disadvantage, deprives the State of the much needed revenues and ultimately adversely affects the poor of the country.

• The Government has launched a sustained campaign in the last 4 years against black money and has taken several bold steps including constitution of the ‘Special Investigation Team on Black Money’, enactment of the ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’, Income Declaration Scheme, 2016, Benami Transactions (Prohibition) Amendment Act, 2016 and the demonetization scheme.

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