BSE to suspend 7 suspected shell firms for failing to cooperate with forensic auditors

The BSE has decided to suspend as many as seven suspected shell companies from Friday after they failed to provide the information sought by forensic auditors in a time-bound manner.

The firms facing suspension are Aadhaar Ventures India, Blue Circle Services, IKF Technologies, Prabhav Industries, S T Services, Silverpoint Infratech and Winy Commercial & Fiscal Services, the BSE said in a circular.

The securities of these companies "shall be suspended with effect from Friday, February 8, 2019, until further notice".

The decision comes after these companies failed to cooperate with the audit firms to complete the forensic audit in a time-bound manner.

The forensic audit was conducted by independent auditors appointed by the stock exchange on the direction of the markets watchdog.

Independent auditors have been mandated to conduct forensic audits for verification of credentials or fundamentals of such companies.

Shell companies are dubious entities that are mainly used for illegal money laundering. However, the term 'shell company' is not defined under the Companies Act.

Earlier in October 2018, the BSE had said that Sebi advised 18 companies including these seven "to cooperate with the audit firm to complete the forensic audit in a time-bound manner".

In case a company does not provide all information to audit firms or continue non-cooperation, consequential actions will be initiated, according to the notice.

On August 7, 2017, Sebi had directed bourses to initiate action against 331 suspected shell companies that are listed.

The regulator's directive came after the corporate affairs ministry shared a list of 331 listed companies that are suspected to be shell entities and could even face "compulsory delisting".