SHELL FIRMS: OVER 100,000 DIRECTORS TO BE DISQUALIFIED

Walking the talk on improving statutory compliance by unlisted companies and to check abuse of the corporate structure for money laundering, the government on Tuesday identified over 100,000 directors of suspected shell firms to bar them from the boards of other firms.

A ministry of corporate affairs statement said it had zeroed in on 106,578 directors for disqualification as of September 12 for associating with companies that had not filed financial statements or annual returns for three years.

Detailed investigations will follow to determine whether these directors are proxies representing the beneficial interests of people who use shell companies to evade taxes or to launder money. Businesses evading taxes and promoters diverting funds from companies with public interest systematically use shell companies for fudging books.

The ministry said professionals such as chartered accountants and company secretaries who have colluded with shell companies in wrongdoing are also under the radar. “The fight against black money shall be incomplete without breaking the network of shell companies,” said the ministry statement, citing minister of state for corporate affairs PP Chaudhary.

Last Wednesday, the government decided to bar 300,000 directors of such shell companies from sitting on the boards of other companies. Prior to that, the finance ministry had decided to freeze the bank accounts of more than 200,000 companies struck off the records of the registrar of companies to prevent their directors from accessing the companies’ bank accounts.