About:

• • In India, there is no clear definition of what constitutes a shell company  in either Companies Act, 2013 or in any other 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.
  • These companies can be legal or illegal depending on a country’s law. 
  • In India, Shell companies come under the radar once they are found eligible to be prosecuted under any one of these three laws: 

• Benami Transaction (Prohibition) Amendment Act 2016

• The Prevention of Money Laundering Act 2002

• The Companies Act, 2013

• Under Section 248 of the Companies Act: Registrar of Companies under the Ministry of Corporate Affairs has powers to remove name of a company from register of companies where 
  • A company fails to commence its business within one year of its incorporation or 
  • The subscribers to the memorandum have failed to pay their subscription within a period of 180 days or 
  • A company is not carrying on any business or operation for a period of two years.

Why in the news?

• Government identified 2,38,223 companies as shell companies between 2018-2021.

References:

1. https://pib.gov.in/PressReleasePage.aspx?PRID=1739583 
2. https://www.financialexpress.com/economy/crackdown-on-black-money-modi-government-to-define-shell-companies-what-they-are-how-they-siphon-off-money/1229379/