DNA Money Edit: An effective tool to crush shell companies

A recent move by the government to make it mandatory for individuals holding 10% or more in a company but not registered as a shareholder to declare their interest as 'significant beneficial owners' will go a long way in exposing myriad shell companies in the country. This will bring transparency to complicated corporate structures and aid the government's continued fight against black money.

Individuals have been given 90 days to file ownership details with the company while companies have been asked to file the information with the Registrar of Companies within 30 days. Non-compliance will invite legal action that includes a fine of Rs 10 lakh and imprisonment of a maximum of five years. As per the Companies (Significant Beneficial Owners) Rules, 2018, significant beneficiary owner has been defined as an individual whose name is not registered with the company as the shareholder but is holding ultimate beneficial interest of not less than 10% in it.

It's not uncommon in India to hide the true ownership of a corporate entity by creating a complex web of companies and use them for laundering money, evading tax and undertaking benami transactions. The new rules will surely make life difficult for such companies and help identify the ultimate owner of the company.