Banks begin searching for accounts of shell companies' directors

A Shell company is an entity without any active business operations or significant assets. In India it has presently stolen limelight as it has become a cause of concern in regards to black money.

Key Highlights:

Ministry of Corporate Affairs identify more than 3 lakh directors under shell companies

Banks start scanning accounts of a list of disqualified directors

Directors have been disqualified under Section 164 (2)(A) of the Companies Act

Banks have started scanning account details of directors who were disqualified by the ministry of corporate affairs as part of alleged shell companies.

A LiveMint report stated that the exercise will take atleast three weeks to complete as the list runs into several hundred pages. After shortlisting the names, a report will be prepared on the transactions conducted and then the final statement will be forwarded to the government.

More than 3 lakh directors have been disqualified under Section 164 (2)(A) of the Companies Act.

To identify, bankers will match the records of the disqualified directors with the records of the banks to check whether they have also link accounts of companies other than shell companies.

On September 05, the Ministry of Finance stepped up its fight against black money and struck off names of over 2 lakh companies and also made their bank accounts inoperable.

The ministry said, "The names of 2,09,032 companies have been struck off from the Register of Companies under Section 248 (5) of the Act. The existing Directors and Authorised Signatories of such struck off companies will now become ex Directors or ex Authorised Signatories.”

Since such ‘Struck off`’ companies have ceased to exist, action was initiated to restrict the operation of bank accounts of such companies.

Later, it was decided that these disqualified directors may also attract imprisonment of not less than six months and extendable to 10 years.

If the fraud involves public interest, the punishment shall not be less than three years and fine may also be imposed, which would be three times the amount involved.

List involves some of politicians from Mumbai to Himachal Pradesh and many businessmen including non-resident Indians too. Click Here to know the list of directors as per MCA.

According to ministry, if a company even having an active status on the website of the Ministry of Corporate Affairs but defaulting in filing of its due Financial Statement (s) or Annual Return (s) of Particular of Charges on its assets on the secured loan should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations to file this vital information for availability to its stakeholders.