Modi govt freezes over 200,000 bank accounts of suspected shell companies

Bank accounts of delisted companies inoperative

The bank accounts of 209,032 suspected shell companies have been frozen, the government said on Tuesday, while advising banks to be cautious about active ones not filing statutory returns.

The Registrar of Companies (RoCs) of 24 jurisdictions have deregistered these firms and because of that “the existing directors and authorised signatories of these companies will now become ex-directors or ex-authorised signatories,” the statement said. 

These individuals will, therefore, not be able to operate the bank accounts of their erstwhile companies till such entities are restored by an order of the National Company Law Tribunal. 

The restoration, as and when it happens, will be reflected by a change in the status of the company from “struck off” to “active”.

The Department of Financial Services has, through the Indian Banks’ Association, advised banks that they should take immediate steps to put restrictions on the bank accounts of such companies. 

Besides, banks have been advised to go in for enhanced diligence while dealing with even those not struck off by RoCs. Even if a company has active status but has defaulted in filing its financial statements or annual returns relating to the assets on the secured loan, it should be seen with suspicion.

Prima facie, it implied that these companies were not complying with its mandatory statutory obligations to furnish vital information for its stakeholders, the department said.

An RoC can strike off the name of a company on several grounds: If it fails to commence its business within a year of its incorporation; and for not carrying on its business in two preceding financial years and not making an application to obtain the status of a dormant company. 

However, the issue came into the limelight recently after the government promised action against shell companies in the aftermath of demonetisation.