Modi govt cracks down on shell companies: 16,500 entities confirmed, another 80,000 under investigation

In a boost to the fight against black money and illicit fund flows, the government has identified more than 16,500 companies as ‘confirmed shell companies’, while it has also put another 80,000 under the suspect category.

The Ministry of Corporate Affairs (MCA) had constituted a task force on shell companies in February 2017, three months after demonetization. The task force has identified 16,537 confirmed shell companies on the basis of the information received from the various law enforcement agencies of the companies found to be involved in illegal activities.

The task force has also identified 80,670 suspected shell companies drawn up by SFIO using certain red flag indicators. “The Task Force has identified certain red flag indicators, which will be used to identify more shell companies,” informed the MCA statement.

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It includes officials from the Department of Financial Services, direct and indirect tax departments, Central Bureau of Investigation, Enforcement Directorate, SFIO, FIU-IND, RBI, SEBI, DG-GSTI and DG-CEIB.

The Modi government has decided to fight against black money generated from the corporate sector, especially cracking down non-serious companies and shell companies registered under the Registrar of Companies (RoC). The companies, which are suspected to have little business, but large amounts of fund flow, are typically classified as shell companies usually route illicit funds in a complex way back into the domestic economy.

The government seems to be seriously fighting against the black money. Last year the Enforcement Directorate had crackdown large number of shell companies involved in Money Laundering in more than 16 cities. These shell companies were linked to various political leaders like YSR Congress chief Jagan Mohan Reddy, NCP leader Chhagan Bhujbal and a controversial Noida bureaucrat Yadav Singh.

In another crackdown carried out by MCA in 2017-18, it had blacklisted more than 3,00,000 directors of various companies for defaulting on statutory compliance. These include the directors of shell companies which haven’t filed returns for the past 3 years. MCA has identified another 2,25,910 companies for being struck-off in 2018-19.

Last month, the MCA had released data in which almost 73,000 companies have been deregistered and have made to deposit more than Rs. 24,000 crore in bank accounts post demonetization. The Ministry document said that there are 68 companies are under investigation. The Serious Fraud Investigation Office (SFIO) is also probing 19 companies while the Registrars of Companies (RoC) are investigating 49 firms, it added. In another report, the data show that the direct tax collection post demonetization has increased by 15.3%, which amounts to the collection of Rs. 9.80 crores of direct tax alone.

It seems that the government has taken the issue of black money and illicit fund flows very seriously. Earlier, the Modi government intensified the crackdown on benami Transactions by announcing a reward scheme to clamp down on benami properties. Under this scheme, the person who passes on any specific information about Benami transactions will be rewarded up to Rs 1 crore.

Prime Minister Modi has taken a pledge to weed out all the black money in the country The present government has taken several steps like withdrawing of high currency values, from usage, enforcing strict measures to track illicit funds and other steps to eliminate the menace of black money from the system.

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