Government struck off 2.38 lakh Shell Companies during 2018-2021
Government identified 2,38,223 companies as shell companies and struck off between the years 2018-2021. This information was shared by the Ministry of Corporate Affairs (MCA) vide PIB press release dated 27th July, 2021.
Shell Company has become one of the fancy words in the media. Lets understand the meaning of Shell Company and whether it is illegal?
There is no definition of the term “Shell Company” in the Companies Act, 2013. In general parlance, a shell company is a company without active business operations or significant assets. These types of companies are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public.
The Organization for Economic Cooperation and Development (OECD) defines a Shell Company as a company which is formally registered or otherwise legally organized in an economy but which does not conduct any operation in that economy other than in a pass through capacity.
Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh also stated in Rajya Sabha on 27th July, 2021 that Shell Company refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc.
Under the Companies Act, 2013, Section 248(1)(c) provides for removal of name of company from the register of companies if it is not carrying on any business or operation for a period of 2(two) immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under Section 455.
Based on the above mentioned provision, the Government has undertaken a Special Drive for identification and striking off Shell Companies during the last three years and 2.38 lakh companies were identified under this category between 2018-2021 and were struck off from the register of companies.
Reference:
PIB-Government of India, Press Release dated 27th July, 2021