NEW DELHI: Government’s efforts to simplify the process for registration of companies under its policy of ease of doing business have apparently been misused by shell companies. Union Corporate affairs minister Arun Jaitley on Friday said that speedy steps are being taken against shell companies but a balance needs to be maintained between the ease of doing business and ensuring that the firms are not misused.
Jaitley said that there is no definition for shell companies under the Companies Act but such entities are used for round tripping of money.
“The real owners behind such entities need to be identified and expeditious steps are being taken under the Benami and Income Tax laws,” the minister said during Question Hour.
The minister also agreed about turmoil in the market following markets regulator Sebi’s action against suspected shell companies. On August 7, Sebi had asked the stock exchanges to take action against 331 suspected shell companies which were referred to it by the corporate affairs ministry.
Jaitley was responding to a supplementary question by Congress member and he said that there is a distinction between dormant and shell companies. “There is potential for dormant companies being misused as shell companies but there is an additional instrument to deal with such entities, he said adding that if business is being done under a fake name, then the Benami law would be applicable.
On whether there is a need to amend the Companies Act and strengthen the inspection and oversight mechanisms to prevent formation of shell companies, Jaitley said, “there is no such proposal under consideration.”