The movement for curbing black money through recognising shell companies is at full force by the NDA government. In a latest news, the Ministry of Finance stated that, 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. A shell company is one which uses fake entity established by a dishonest employee to bill a company for goods and services it does not receive. In other words, shell companies can be used for tax evading and their own benefit. Since launch of demonetisation, the Ministry of Corporate Affairs (MCA) and Sebi has been working  to recognise these fraud companies and struck them off in order to eliminate finance terrorism.

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The ‘Task Force’ was set up in February, 2017 by the Prime Minister’s Office under the joint Chairmanship of the Revenue Secretary and Secretary, MCA 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.

The Finance Ministry said, “The major achievements of the Task Force include the compilation of a database of shell companies by SFIO. This database, as on date, comprises of 3 lists, viz 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 directorships with the confirmed shell companies.

The Suspect List has 80,670 suspected shell companies and has been drawn up by SFIO using certain Red Flag Indicators. The Task Force has identified certain Red Flag Indicators, which will be used to identify more shell companies.

In the financial year FY18, with the help of MCA supervision, the Registrars of Companies (ROCs) 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 financial 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 for non-filing of Financial Statements or Annual Returns for a continuous period of immediately preceding 3 financial years (2013-14, 2014-15 & 2015-16).

With the concerted efforts of the Ministry of Corporate Affairs, Department of Financial Services and Indian Banks Association the ex- directors / authorized signatories of the struck-off companies have been restricted from operating the bank accounts of these companies and they cannot withdraw any amount from these bank accounts, other than for specified purposes, till the company is restored u/s 252 of the Companies Act.

The ministry added, “To help the genuine corporates in regularizing their pending returns, the Condonation of Delay Scheme, 2018 was brought in. It was effective from 1.01.2018 to 1.05.2018. A total of 13,993 companies benefitted from the scheme.”

Continuing the investigation for shell companies, a second drive will be launched during current fiscal FY19, under which the MCA has already identified a total of 2,25,910 companies for struck-off under section 248 of the Companies Act, 2013 along with 7191 LLPs for action under section 75 of the LLP Act, 2008 due to non-filing of financial statements for the years 2015-16 and 2016-17.

An opportunity of being heard will be given to these identified companies and LLPs by way of notices regarding their default and the proposed action. Appropriate action will be taken after considering their response, as per the ministry.

The Ministry of Corporate affairs will also be launching a public awareness campaign soon to make the public aware of the need to get the registrations of their defunct companies cancelled themselves.

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.