Deregistered firms deposited Rs 17,000 crore post note ban

To further curb the menace of shell companies used to illegally route money, the government plans to set up a National Financial Reporting Authority to test check company statements, empower the SFIO officials to arrest errant directors and limit creation of multiple levels of subsidiary companies typically used to mask the main corporate structure.

“In the light of the evidence with respect to abuse of the Corporate Structure through multi-layering, not more than two (2) layers are now permitted beyond the wholly owned subsidiary. This is in addition to the existing restriction which prohibits a company to make investment through more than two layers of investment companies,” the government said.

“In order to address the criminality angle, the Director, Additional Director or Assistant Director of SFIO have been recently authorized to arrest any person believed to be guilty of any fraud punishable under the (Companies) Act. Under Section 447 of the Act, which defines fraud, stringent punishment including imprisonment up to 10 years is stipulated. Further, reference has been made to the Ministry of Finance to include it as a Scheduled Offence under the Prevention of Money Laundering Act,” it said.

Also, to keep a tab on dummy directors being appointed to the boards of corporates, work is on to put in place a mechanism wherein new applications for directorship would be linked with PAN and Aadhaar numbers of the individual concerned.

“Preliminary enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs 17,000 crore was deposited and withdrawn post demonetisation,” the statement said.

In one case, a company which had a negative opening balance on November 8, 2016, deposited and withdrew Rs 2,484 crore post demonetisation, it added.

Last November, the government cancelled old Rs 500 and Rs 1,000 currency notes as legal tenders as part of larger efforts to fight the black money problem and corruption.

According to the government, one company was having as many as 2,134 accounts. The information regarding such firms have been shared with enforcement authorities for further action.

With respect to deregistered companies, state governments have been advised to disallow registration of properties of such entities. The government has initiated steps to disqualify directors who are on the boards of the companies that failed to file annual returns for three financial years — FY14 to FY16.

While noting that about 3.09 lakh directors have been affected by the action, the government said preliminary enquiry has shown that over 3,000 disqualified directors are “directors in more than 20 companies each, which is beyond the limit prescribed under the law”.

“With a view to checking the problem of dummy directors, action is underway to seed DIN with PAN and Aadhaar at the stage of DIN application through biometric matching for new applications. The same may be extended to legacy data in due course,” the release said.