Skip to main content

Shell companies: Govt may provide relief for disqualified directors

Shell companies: Govt may provide relief for disqualified directors
Starting January, shell companies can apply for a pardon for three months, and, for this period, the disqualification of directors will be lifted to allow them to file these documents
The ministry of corporate affairs, or MCA, will soon notify a scheme to provide relief to over 300,000 directors disqualified for associating with companies that failed to file their financial results, said two people with knowledge of the matter.
Non-compliant companies can apply for a pardon (or condonation of delay) for three months starting January; for this period, the disqualification of their directors will be lifted temporarily to allow them to file these documents. The window for filing all pending documents will be open till 30 June, said a copy of a draft circular reviewed by Mint.
In September, the government had taken two sets of action against companies that were not compliant with provisions of the Companies Act. The first was against firms that appeared to be non-functional or shell structures. On 5 September, 209,000 companies were struck off the Registrar of Companies (RoC) database and banks were directed to restrict operation of bank accounts of such companies by their directors and authorized representatives.
The second was against companies that did not file their returns/financial documents for the past three years. As per the MCA directive, 309,614 directors were barred from serving on the board of any company for the next five years. Any digital signatures by these directors on annual reports, financial results and other company documents were not to be accepted by RoC.
“The companies that do not appear to be working cannot subscribe to the scheme. They will first need to revive the company and show that they are in a working condition and get an approval from the National Company Law Tribunal (NCLT) to meet other compliances,” said one of the two people cited earlier.
“The defaulting companies which had not filed their returns for some reason or the other but otherwise look to be functional would be allowed to submit their pending documents. After submitting pending documents these companies and their directors will be able to get relief from the strictures,” this person added.
Companies and directors who do not avail of the scheme will remain disqualified and MCA will take further action against them under provisions of Companies Act, 1956/2013, the draft circular said.
“I look at this as a pragmatic move by the government to differentiate between companies that are black sheep and companies that are in the grey. With this the government will be able to focus its energies on companies that are truly non-compliant (rather than a) larger set of companies and directors who appear to be in the grey zone,” said Samir Paranjape, partner at consultancy firm Grant Thornton India LLP.
The ministry’s move comes after representations from many directors and cases filed in courts. At least 500 publicly traded firms shared directors with suspected shell companies.
The Minty, New Delhi, 20th December 2017


Popular posts from this blog

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…