There are about 15 lakh registered companies but only 6 lakh companies file their annual returns.
A meeting was held in the PMO which was attended by senior officers of various departments to review the functioning of shell companies (entities that don't conduct any operations and indulge in money laundering). There are reportedly 15 lakh registered companies in India and only six lakh companies that file their annual return which suggests a lot of companies may be indulging in financial irregularities.
The initial analysis found that the shell companies are characterised by nominal paid-up capital, high reserves and surplus on account of receipt of hire share premium. The investment is usually made by unlisted companies with no dividend income, have high cash in hand and have private companies as majority shareholders. They also have low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed asset.
A small sample analysis of such companies found that Rs 1238 crore cash deposited in these entities between November and December. It has been found that 559 beneficiaries have laundered money to the extent of Rs 3900 crore with the help of 54 professionals. All the aforementioned information was shared with SIT, IT Department, Enforcement Directorate, SEBI and The Institute of Chartered Accountants of India (ICAI).
The IT Department has reopened completed assessment in these cases and the ED has initiated action under Prevention of Money Laundering Act (PMLA), 2002. ICAI has also initiated disciplinary proceedings against its members.
In order to create credible deterrence, a wholesome approach will be adopted through coordinated efforts and by leveraging technology. The call was taken that appropriate red flag indicators would be used to identify these shell companies and a database would be set up, which would also allow them to pull up the directors of such companies. The database will also capture the Aadhar number of the directors of these companies.
There will be harsh punitive action against such deviant shell companies which will include freezing of bank accounts, striking off names of dormant companies and invoke the Benami Transactions (Prohibition) Amendment Act, 2016.
A taskforce with members from various regulatory ministries and enforcement agencies has been set up under the co-chairmanship of the Revenue Secretary and Corporate Affairs Secretary to monitor the actions taken against deviant shell companies by various agencies.
The concerned regulatory ministry will ensure that disciplinary actions are initiated against the professionals indulging in malpractice and abetting the entry operators of the shell companies.
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