Names of 55K Directors Linked to Delisted ‘Shell Companies’

The Ministry of Corporate Affairs has made the names of directors linked with shell companies public. The registration of these shell companies was earlier canceled by MCA.

Highlights:

  • Name of 55,000 directors made public by MCA, they are linked to the shell companies
  • The directors are associated with companies that have not filed their financial statements for three consecutive years
  • Directors will not be eligible under Section 164(2) to be re-appointed as a director of that company or appointed in any other company for five years from the date of default
  • MCA has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the shell companies

The Ministry of Corporate Affairs had already delisted around 2,09,032 companies and now the names of the disqualified directors linked to the defaulting companies have been made public. The directors were associated with companies which have not filed their financial statements or annual returns for three financial years.

It is for the first time such naming and shaming of directors is done in public, but it is aimed at directors who have been associated with shell companies and have not complied to the rules of the Companies Act. They have been barred from directorship position and are not eligible under Section 164(2) of the Companies Act to be re-appointed as a director of that company or appointed in any other company for five years from the date of default. The rule was initiated from November 2016 and these directors cannot be eligible until October 2021 to hold a position in a company.

An intensive exercise is being carried out to gather all profiles of these directors including background, antecedents and their role in the operations/functionality of the companies are kept in records. Any money laundering activity done under the shelter of these companies are also under the scanner. The Ministry is likely to spill more names in the public in the recent times.

On Sep 2018, the MCA issued a statement saying that it has identified 1,06,000 directors of companies that did not file their financial statements and annual returns for three years consecutively, which is a violation to the provisions of the Companies Act. MCA had also struck off 2 lakh companies prior to declaring the names in public. It had even ordered banks to restrict the operation of bank accounts of such companies.

At least 17 Registrar of Companies(RoCs) of various states has released these names. There are still six RoCs including Patna, Jaipur, and Kolkata who are yet to release the list of such directors. RoCs will scrutinize the data further to find out people with beneficial interests.

The government is in full force to curb out money laundering and black money that is in circulation through shell companies in India. It is using its power under the Section 248 of the Companies Act, which says that it is permitted to take strict action against companies that have failed to start its business within one year of incorporation, or companies that have not carried out any business for two financial years, or have failed to file returns for three years.

There are speculations that the disqualified directors have connections with various political and corporate groups. Some names made public are similar to prominent politicians, from Arunachal Pradesh to Tamil Nadu, and businessmen, including non-resident Indians. But such links are not confirmed as only names and DINs (Director Identification Number) have been made public.

The government in the past had introduced a mechanism to encourage companies to shut down themselves voluntarily if their financials are not up to date. But the current drive seems to chuck out a lot of shell companies and directors involved in those companies. The Ministry has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the defaulting companies and the list will be out in the future.

The government needs to break the entire network of shell companies if it has to fight against black money circulated among corporates. The shell companies are the ones not defined under the Companies Act and are used to avoid taxes and convert black money into white.

To search for any company registered under Ministry of Corporate Affairs, visit InstaFinancials. You can get reports on any company’s  Annual Returns and Financials and about the past and current directors of any shell companies. You can get the Director’s details and the potential related parties they are associated with.

Reference Links:

  1. Govt releases names of 55K directors linked to delisted ‘shell companies’
  2. Shell companies: Names of disqualified directors made public
  3. News Analysis: Names of 55K shell companies’ Directors made public
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