Crackdown on Shell Companies: 1 Lakh Directors to Be Disqualified

In a crackdown on black money, more than 1.06 lakh directors of shell companies will be disqualified.

Banks have been asked to restrict operations of these companies’ bank accounts by their directors or their authorised representatives.

(Photo: Reuters)

More than 1.06 lakh directors will be disqualified for their association with shell companies, according to the government, as it steps up the fight against black money.

The latest move comes close on the heels of the corporate affairs ministry cancelling the registration of 2.09 lakh companies that have not been carrying out business activities for a long period.

Besides, banks have been asked to restrict operations of these companies' bank accounts by their directors or their authorised representatives.

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The ministry has “identified 1,06,578 directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on September 12, 2017,” an official release said.

Under Section 164, a director in a company that has not filed financial statements or annual returns for three financial years continuously would not be eligible for re- appointment in that company or any other firm for five years.

Further, money laundering activities performed under the aegis of these companies are also under the scanner, the release said.

The ministry, which is implementing the companies law, has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the defaulting companies.

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According to the release, there are about 11 lakh companies with active status after deregistration of over 2.09 lakh firms.

The Minister of State for Corporate Affairs PP Chaudhary is also monitoring the situation emerging out of cancellation of registration of the companies, and is holding regular meetings with officials of the ministry and various related organisations.

The disqualification under Section 164 of the Act is by operation of law. We are identifying the defaulting directors of these shell companies. My officers have assured me that by the end of this month, we would be ready with the relevant details of all defaulting directors of these shell companies.

PP Chaudhary, Minister of State for Corporate Affairs

He also said that the whole exercise would go a long way in creating an atmosphere of confidence and faith in the system paving the way for ease of doing business in India.

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