Money & Banking

Shell firms: Jail for directors siphoning funds

Our Bureau New Delhi | Updated on January 10, 2018

Term not less than 3 years, says govt

The Centre on Wednesday decided to hand down jail terms for directors of shell companies found siphoning off money from the bank accounts of de-registered or “struck off” companies.

The imprisonment would be not less than six months and could extend to 10 years. If it is found that the fraud is detrimental to public interest, the punishment shall not be less than 3 years, and fine may be imposed which would be three times the amount involved, an official release said.

This decision was taken at a review meeting chaired by Minister of State for Corporate Affairs PP Chaudhary here on Wednesday.

It was also decided that the directors of such shell companies that have not filed returns for three or more years will be disqualified from being appointed to the board of any other company or being named to boards of those companies where they had previously held the position, thereby compelling them to vacate office. It is expected that as a result of this exercise, at least 2-3 lakh such directors would get debarred.

The Centre has already deregistered 2.09 lakh firms for undertaking dubious transactions or being dormant companies.

On Tuesday, the Centre had asked banks to restrict the directors or their authorised signatories from operating the accounts of such companies so that they cannot siphon money.

Published on September 06, 2017

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