Shaming ‘shell’ company directors a good step

The ‘name and shame’ exercise involving public disclosure of the lists of disqualified directors of ‘shell companies’ across the nation as well as those associated with struckoff companies is a laudable initiative by the Narendra Modi government. While unmasking such black sheep is a step in the right direction, it is regrettable that these names were left out of public glare and in a sense shielded and given a free rein while many of them indulged in grave misdoing that robbed the national exchequer of revenue. That the Ministry of Corporate Affairs (MoCA) has said as on Tuesday that it has identified 1.06 lakh directors of 'shell companies' for disqualification under the relevant provisions of the Companies Act, 2013, is a reflection of the rot that has set in. Shell companies are typically corporate entities which do not have any active business operations or significant assets in their possession. The government views them with suspicion as some of them could be used for money laundering, tax evasion and other illegal activities. Among those bigwigs whose companies are under scrutiny are former Kerala Chief Minister Oommen Chandy, jailed Tamil Nadu politician V.K. Sasikala, Leader of the Opposition in the Kerala Assembly Ramesh Chennithala and Gulf-based business tycoon M.A. Yusufali. That four ‘shell companies’ linked to Sasikala are among the companies struck off by the Registrar of Companies (RoC) in Chennai must raise eyebrows.

If, by unearthing these ‘shell’ companies the menace of money laundering and black money can be curbed, it is a welcome development. While there always is a tendency to bring to book those who are on the wrong side of the establishment while protecting those who are on the other side of the fence, one hopes the tracking of such economic offenders is being done even-handedly. The disqualified in the lists are those who are, or had been directors in companies that had not filed financial statements or annual returns for any continuous period of three financial years. Such directors will not be eligible for re-appointment as directors in that company or for appointment in other companies for five years from the date of non-compliance. Earlier this month, the government had instructed banks to ensure that the Directors (present or former) or their authorised signatories were restricted from operating the bank accounts of struck-off companies. Directors were also warned of tough action if they had siphoned off any money even before the banks were alerted.