As part of the crackdown on shell companies, over a third of the 11 lakh active Indian companies face the prospect of their names being struck off or deregistered as they have failed to file their returns for three financial years.
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Starting last month, notices are being sent out to over four lakh companies, which have failed to file returns for 2013-14 and 2014-15 with the registrar of companies, sources told TOI. These companies have also not filed their returns for the 2015-16 financial year, but the window for filing has not completely shut down.
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The companies are being given 30 days to file the returns, failing which the government intends to strike off their names. To ensure that the defunct companies are unable to undertake transactions, the ministry of corporate affairs (MCA) will make their names public and also share information about the companies and their directors with the income tax department, banks and the Reserve Bank of India.
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While the Companies Act now provides for companies to seek a "dormant" tag, very few companies have actually opted for it. At the end of March 2015, there were 14.6 lakh companies, but only 10.2 lakh were considered active with just 214 classified as dormant.
The sources said that just the threat of names being struck off has prompted several companies to file their returns.
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"We do not know if these companies actually transact any business or are just paper companies. First, we need to know their status," said a source justifying the action initiated by MCA. In the next stage, the government is identifying companies that have low turnover but have issued shares at a hefty premium or have high reserves.
These companies are seen to be shell companies, where "entry operators" accept cash issue shares at a premium and route the funds through a series of companies in an effort to make the money legitimate or "white".
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The identified cases will then be sent to the Serious Frauds Investigation Office (SFIO) for scrutiny and the tax department and the Enforcement Directorate will be roped in for further investigations.
The government has launched an offensive against so-called shell companies, several of which were found to have deposited cash during demonetisation, and has set up a ttask forceto chart out a roadmap to ensure that they are not used as vehicles for tax evasion and money laundering.