Shell shocked in Kerala

The clampdown on shell companies, set up with a fraudulent purpose in mind, is indeed a welcome move.

Published: 21st September 2017 04:00 AM  |   Last Updated: 21st September 2017 02:42 AM   |  A+A-

The clampdown on shell companies, set up with a fraudulent purpose in mind, is indeed a welcome move. If it began with markets regulator Sebi initiating action a few days ago against ‘laundry’ companies, the action soon shifted to Delhi. It was then the turn of the Ministry of Company Affairs which put in the public domain the names of over one lakh directors associated with shell companies; they were disqualified under the provisions of the Companies Act, 2013. In this ‘name-and-shame’ exercise, it was natural that Delhi and Mumbai led the list.

Strangely, Kerala too figured prominently with over 12,000 such directors named. For a state not known for its prowess in setting up companies, it was an eye-opener that so many had tried to venture into business, whatever the motive. Given its penchant for entering areas that would in other states be the preserve of the private sector, the fact the Kerala government too had its share of companies that fell under the shell category shouldn’t have surprised many.

But it did surprise quite a few Gulf-based entrepreneurs when their names were shamed. That it came merely for lending their expertise to state government enterprises which were not prompt in updating their annual reports within the stipulated period can’t minimise the embarrassment—as it also means they would not be eligible to continue in other companies once their term ends. Now doubts have been raised and clarifications sought regarding the legality of the Registrar of Companies invoking the disqualification clause against government companies.

The other worry would be the immediate shortage of professionals who don the role of director in more than one company. Meanwhile, those who follow the shenanigans of corporate India can’t have forgotten the allegations Reliance Industries had to face about leveraging what were widely known to be shell companies during its many mergers and demergers. In this age of fast-changing narratives, we now have a new set of names to shame.


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