Shell Companies Crackdown: $1 Billion Unearthed During Black Money Hunt

The government has unearthed $1 billion from 20, 000 shell companies during the last year demonetization drive. With this success the government is speeding up its fight against black money.

A Boost for Fight against Black Money

$1 billion which equals to around Rs 6500 crore will definitely going to boost the confidence of the government that has been facing criticism on fight against black money and especially on the results of demonetization. The money that has been unearthed from 20,000 companies by the Finance Ministry and probe is going on to deeper side. The Serious Fraud Investigation Office is also probing around 1500 companies that are alleged for violating companies Act. Another 809 listed companies are getting probed which were untraced by the SEBI.

Minister in Corporate Affairs, PP Chaudhary said that the government aims increase compliance in order to boost the confidence of investors. He also said that government has already de-registered 200,000 companies and now is considering to limit property transfer to trace black money hoarders. Directors those are disqualified are near about 450,000 and the government is now investing companies that have deposited money during demonetization using AI, said the minister.

The Gradual Tightening of Grip

The ministry of corporate affair and Central Board of Direct Taxes (CBDT) will jointly investigate such shell companies by sharing data. This will help the agencies in having a focused approach towards the shell companies. On the other hand, SEBI is planning to tighten listing norms in order to regulate and target shell companies. The planning is to increase the net worth to Rs 3 crores while the tangible assets should be around 5-10 crores. It also wants that the company should be in profit for at least 3 years since going into public. These regulations may be applied by this month.

The listed companies should also have a track record of generating profits and distributing dividends. There are around 4000 companies listed out of which 2000 companies are suspected to be shell companies only on paper.

The other Aspect of Black Money Crackdown

No matter how well intentioned the move is, a wrong approach may turn out to be disastrous. Many genuine companies have also felt the heat due to excessive monitoring. Those companies that are black listed have no channels for negotiation to relist again. Making stricter laws may have its wrath on small companies that have less liquidity. In order to ensure that the genuine and honest companies remain untouched, the government must be well aware of their problems and should take proper steps to address their problems.