Over 2 lakh companies have their bank accounts frozen on suspicion of shell companies

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Precisely 2,09,032 suspected shell companies have their bank accounts frozen as a way to suppress tax evasion and illegal transactions, said the government on Tuesday. Banks have also been instructed to be cautious about active companies not filing mandatory returns.

These suspected companies have now been de-registered by the Registrar of Companies (RoCs) and the directors and signatories of these companies will now be ex-directors and ex-authorised signatories. Therefore, until the National Company Law Tribunal restores these companies, they will be incapable to operate the bank accounts of their former companies.

The department of financial services has stated that all banks should take instant action to restrict the bank accounts of these “struck off” companies. Initially these companies were not adhering to the compulsory obligations to provide imperative information to its stakeholders, the department said.  However, companies can be “struck off” on several grounds like not commencing business within a year of its incorporation or not making a request to attain the position of an inactive company, for instance.

Tax authorities say that shell companies often use massive measures to conceal their business. Owners often designate their drivers and domestic helpers as board of directors to evade tax, conceal political investments, commit fraud, or manipulate tenders.

The matter was brought to light when the government assured action against these shell companies subsequent to the demonetisation incident. And, in his Independence Day speech, Prime Minister Narendra Modi labelled these shell firms as “looters of nation’s wealth”.

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