Black money crackdown: Govt to disqualify 4.5 lakh directors

India Infoline News Service | Mumbai | October 06, 2017 10:18 IST

The government is likely to disqualify as many as 4.5 lakh directors for their association with shell companies as a move to fight against the black money menace, reported a leading business daily quoting Minister of State for Corporate Affairs PP Chaudhary.

The government has said that it will examine the profiles of all disqualified directors and non-compliant companies which are tarnishing image of the good ones, even as he asserted that genuine corporates will not face action.

The ministry of corporate affairs has struck off names of 2,17,239 companies from the records as on 22 September, 2017 as these have not been carrying out business activities for long and have also defaulted on compulsory filings.

“As on September 22, a total of 3,19,637 directors have been identified and flagged as disqualified under Section 164 (2) (a) of the Companies Act, 2013... It is estimated that the final list may touch the figure of about 4.5 lakh (directors),’ said Chaudhary.

The SEBI’s move to come down hard on suspect shell companies is important to protect investor interest. Companies with financial irregularities, set up by errant promoters for the sole purpose of money laundering, can cause heartburn to investors.

A shell firm is one that has no or nominal operations and assets. The assets must consist mainly of cash and cash equivalents with very little other assets. In other words, a shell company should not have active business operations or assets.