Shell companies are a menace. They are like cancer to a country which aims to keep its markets and business environment clean. Such companies, which usually exist on paper alone without any considerable assets, office space or employees are used by anti-social, and anti-national elements to effectuate their nefarious designs, which can range from tax evasion, to funding anti-India activities like Naxalism and even terrorism. Such companies have been on the radar of the Modi government for quite a long time, and in the past three years, a massive crackdown against shell companies has been carried out.
In a reply to the Rajya Sabha, Minister of State for Finance and Corporate Affairs, Anurag Singh Thakur stated that the Ministry of Corporate Affairs (MCA) has identified and struck off over 3.8 lakh shell companies during FY18-20. The Special Task Force set up by the government to look into the issue of “shell companies” has recommended the use of certain red flag indicators as alerts for identification of shell companies. The government has undertaken a special drive for identification and striking off such companies, he said.
“Based on non-filing of Financial Statements (FS) consecutively for two years or more, ‘shell companies’ were identified and after following due process of law, 3,82,875 number of companies were struck off during the last three years up to financial year ended 2020,” Thakur said. In addition, the minister also revealed that no companies were struck off in the current financial year, in a development which suggests that the government’s cleaning drive is beginning to show results.
Anurag Thakur also informed the parliament that the Securities Exchange Board of India (SEBI) had intimidated that they had received a list of 331 shell companies from Ministry of Corporate Affairs along with a letter of Serious Fraud & Investigation Office (SFIO) which contained the data base of shell companies along with their inputs, for initiating necessary action. SEBI also informed the Stock Exchanges that they should take various pre-emptive, interim measures, such as: (i) place identified listed companies under surveillance Measures; (ii) restrict share transfer by promoters and directors of such identified companies and; (iii) verify credentials of such companies.
With such a vast quantum of shell companies being struck off in the past three years, the Indian government has also been able to starve various anti-India industries of much needed funds. Such companies have historically been used for money laundering, and also for funnelling dirty foreign money to destabilise the country. Whether it be anti-India protests, violent campaigns, terrorism or Naxalism – shell companies have always been the oxygen of those seeking to ruin India. The Modi government, however, is not one which will stand as a mute spectator to this brazen invasion, which is why it has struck at the heart of the bustling anti-India industry, and starved it of all the cash it requires.