Over 3 lakh shell companies have been struck off from the Registrar of Companies (RoC) till the financial year 2020-21, Union Minister of State for Corporate Affairs Rao Inderjit Singh said in a written reply to a question in Rajya Sabha on Tuesday.
Under the special drives taken by RoC, 3.82 lakh companies were struck off under section 248 (1) of the Companies Act till the financial year 2020-21.
The minister said that the Registrar of Companies (RoC) struck off those firms after following the due process of law.
The companies are removed when RoC has reasonable cause to believe that those companies are not carrying on any business or operation for a period of two, immediately preceding financial years.
The RoC also verifies that such company has not made any application within such period for obtaining the status of a dormant company under Section 455 of the Act.
Explaining further, the minister stated that there is no definition of the term “shell company” in the Companies Act, 2013 (the Act). It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purposes such as tax evasion, money laundering, obscuring ownership, benami properties etc.
The special task force set up by the government to look into the issue of "shell companies" has recommended the use of certain red flag indicators as alerts for identification of suspected shell companies.
The minister stated that the government has undertaken special drives for identification and struck off companies by invoking the provisions of Section 248 (1) of the Companies Act.