Parliament panel asks govt to define ‘shell companies’ in Companies Act

Note4students

Mains Paper 2: Polity | Parliament & State Legislatures – structure, functioning, conduct of business, powers & privileges & issues arising out of these

From UPSC perspective, the following things are important:

Prelims level: Parliamentary Standing Committee on Finance, Companies Act, CBI, ED, DRI, CBDT, SFIO, Department of Financial Services, Financial Intelligence Unit, Central Economic Intelligence Bureau, SEBI

Mains level: Corporate frauds and measures to curb them


News

Parliamentary Standing Committee on Finance directives

  1. A Parliamentary panel has asked the government to define “shell company” in the Companies Act
  2. It has also asked the government to ensure the distinction between those guilty of fraud and those irregular with filings

Background of the directive

  1. The government is cracking down on companies that have not been carrying out business activities for long as well as those entities being allegedly used for illicit fund flows
  2. As part of larger efforts to curb the black money menace, the corporate affairs ministry has already struck off the names of more than 2.26 lakh companies from the official records besides disqualifying a large number of directors associated with such entities

Real-time data sharing

  1. Amid instances of corporate frauds, the panel has also called for “real time data sharing” among the ministry and other agencies
  2. According to the panel, in order to prevent corporate misfeasance/ malfeasance, there should be real-time data-sharing amongst Ministry of Corporate Affairs and other regulatory enforcement agencies such as CBI, ED, DRI, CBDT, SFIO, Department of Financial Services, Financial Intelligence Unit, Central Economic Intelligence Bureau and SEBI