Government, will soon launch a second attack on at least one lakh firms to weed out shell companies.
The Ministry of Corporate Affairs sent show cause notices to 2,25,000 companies during the first phase of its crackdown on shell companies.
Of these, 70,000 have been struck off and another 1 lakh will soon go, a senior official told Business Standard.
The first list of suspected shell companies had around 3 lakh entities. The ministry has frozen bank accounts of firms that have been struck off and all their transactions are being scrutinised.
The corporate affairs ministry has launched a mega KYC drive for company directors, in which they have to provide passport, PAN number and contact details such as personal phone number and email addresses by September 15.
This is part of the government’s larger strategy to clamp down on shell or paper companies that seek to operate outside regulatory boundaries. Many such companies are under the authorities’ lens for allegedly serving as conduits of undisclosed funds to evade taxes.
“We are trying to trace the directors of vanishing companies. At present, we are targeting are about 70 of them. Over the years, we have been able to identify many companies that listed on the bourses, but are not traceable. For the remaining, while we are trying to locate their offices, an attempt is being made to look for their directors,” a source told .
Between 1996 and 2004, 77 of the 200 vanished companies in the government’s eye remain missing, while others have been traced. Many of them did not even list after their initial public offering.
The ministry issued notices to all these companies, to which over 100 has responded. They were classified as missing since they did not maintain registers at the address, according to stock exchanges and Registrar of Companies (RoC). Also, their directors are not traceable.
The Minister of State for Corporate Affairs PP Chaudhary informed Parliament recently that the highest number of vanishing companies, at 17, were from Gujarat. He said the government had filed its first information report against over 70 companies.
The RoC has been ordered to examine balance sheets and other financial records of companies that raise money through public issue, along with how the money is being utilised.
More than 4,000 companies were found missing between 1992 and 1996 and they were found to be guilty of money laundering.>