Government has frozen the bank accounts of 2,09,032 suspected shell companies as part of a crackdown on illegal transactions and tax evasion.
The latest action against shell companies - which have no active business operations or assets - comes months after authorities ordered nearly 200,000 such firms to be shut down. These are mostly bogus companies with fake board of directors, false address and fictitious accounts to channel funds through illegal means and benefit themselves.
Under the order, the owners and their nominated signatories will not be able to operate bank accounts until such companies are legally restored, the finance ministry said in a statement.
“The department of financial services has advised all banks that they should take immediate steps to put restrictions on bank accounts of such struck off companies,” the statement said.
Owners of these front companies create elaborate smokescreens to guard themselves, including naming personal staff, family memebers and relatives as board directors to mask the ultimate beneficiaries, hide political investment, evade tax, commit fraud or manipulate tenders.
In his Independence Day address on Aug 15, Prime Minister Narendra Modi described such firms as “looters of the nation’s wealth”.
Section 248 of the Companies Act—which is implemented by the Corporate Affairs Ministry—provides powers to strike off names of companies from the register on various grounds, including for being inactive for long.
About the directors and signatories of the over 2.09 lakh firms, the government said they would not be able to operate bank accounts of such companies till these entities are legally restored. The restoration, as and when it happens, would be reflected in the official records by way of change in the status from ‘struck off’ to ‘active’.
The Department of Financial Services, through the Indian Banks Association, has advised banks that they should take immediate steps to put restrictions on bank accounts of such struck-off companies.
“In addition to such struck-off companies, banks have also been advised to go in for enhanced diligence while dealing with companies in general,” the release said.
A company even having an active status on the corporate affairs ministry website but defaulting in filing of its due financial statements or annual returns, among others, “should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations.”
On the crackdown on shell companies, market regulator SEBI will take stock next month