Shell cos: Banks scan transactions of disqualified directors, others

MUMBAI: Banks have started the process of scanning account details of directors disqualified by the ministry of corporate affairs to analyse their links with shell companies and check whether they diverted funds, according to senior executives of four public sector banks, who did not want to be named.

“The exercise will take at least three weeks to complete because the list runs into several hundred pages. After shortlisting the names, we will prepare a report on the transactions conducted and submit to the government,” said one of the four officials, a banker with a large Mumbaibased bank.

Shell companies, though not defined under the Companies Act, are those that adhere to basic company laws and are used to avoid taxes and launder black money.

On September 5, the finance ministry restricted the directors of around 200,000 dormant companies struck off official records from accessing their companies’ bank accounts. Subsequently, the ministry of corporate affairs issued a statement on 12 September, saying it had identified 106,000 directors of companies that did not file their financial statements or annual returns for three straight years, violating provisions of the Companies Act, 2013. Later, the names of these directors were made public.

According to bankers, the list of disqualified directors will be matched with the records of the banks to check if they also have links to accounts of companies other than shell companies.

“Since these are defunct companies, most of them have only a few transactions. So whatever transactions that took place with the related party will be studied,” said the second of the four unnamed bankers.

In cases of active accounts linked to the shell companies or disqualified directors, there will be stepped-up vigilance to ensure that loan exposure, if any, is not risk for default, said the second person.