Government closed 1.27 lakh companies, what does the law say on 'shell company'? - Newztezz Online

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Tuesday, February 7, 2023

Government closed 1.27 lakh companies, what does the law say on 'shell company'?

In the last 3 years, 1.27 lakh companies have been closed in the government records of the country. All these companies had not submitted an important information since 2 years.

After the report of Hindenburg Research, there has been a fresh debate on corporate governance in the country. In the report, the Adani group has been accused of misappropriating money through shell companies abroad, inflating share prices and accounting fraud. In such a situation, the opposition parties are not leaving a single chance to attack the government. From the road to the Parliament, the government is facing many sharp questions. One such question was answered by Union Minister Rao Inderjit Singh in the Lok Sabha.

The government was asked about the provisions in the law regarding 'shell companies' and the safeguards taken to avoid any kind of transaction with them. On this, in a written reply in the Lok Sabha on Monday, Rao Inderjit Singh said that in the last 3 years, 1.27 lakh companies have been closed within the country.

Financial results not given for 2 years

Rao Inderjit Singh said that 1,27,952 companies in the country have been struck off from the records in the last 3 years, that is, they have been closed. All of them had not given any information about their financial results for two consecutive financial years. On the other hand, regarding 'shell company', he said that it has not been defined in the Companies Act, 2013.

Minister of State for Corporate Affairs Rao Inderjit Singh told the House that the government launched a special drive under section 248(1) of the Companies Act. Such companies were identified which have not issued their annual returns and financial statements for the last two consecutive financial years. All these closed companies have been removed from the records of the Register of Companies.

What steps have been taken by the government for security?

Not only this, he told that the government has amended a provision in the law in March 2021 regarding security during transactions with closed companies. In such a situation, companies having relations with closed companies have to make certain types of information public.

On this, the government was asked whether the rules have been notified to allow companies to do this, especially whether any such rules have been made for startup companies that allow them to directly list their shares on foreign stock exchanges. . On this Rao Inderjit Singh replied in the negative.

The minister said that the government has not yet notified Section-5 of the Companies (Amendment) Act, 2020. This means that no such rule has come into effect which is related to direct listing of shares in foreign stock markets.

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