Continuing its efforts to clamp down on bogus companies in its second term, the Modi government expects to deregister 20,000 companies by the end of this year, a senior government official told.
The move comes after the ministry of corporate affairs(MCA) sought know-your-customer (KYC) details of all the registered companies in March.
Since the 2016 demonetisation exercise, the Modi government has deregistered over three lakh companies, including thousands of shell firms.
Action against these companies was taken after they failed to provide proof of business transactions, or didn’t pay taxes, or didn’t file financial statements.
The bank accounts of these companies have been frozen and they have lost the license to carry out businesses.
Shell companies are ghost entities, created for the purpose of diverting money. They don’t have any active business operations or significant assets.
Usually created for an illegal purpose, shell companies do not disclose details of actual ownership or business and revenue model to divert the unaccounted money and avoid tax.
The Serious Fraud Investigation Office has already started investigation against the companies that the Modi government has deregistered.
Dummy directors brought to task
Last year, the government also initiated a KYC drive for the directors of registered companies.
The companies were asked to submit the PAN, qualifications and details of remuneration packages of their directors.
Under a ministry directive, companies are required to update the KYC details of their directors annually.