Directors May Face Up To 10 Years Jail for Embezzlement by Shell Companies

The government has also identified chartered accountants, company secretaries and cost accountants associated with shell firms in certain cases.

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Directors of deregistered Shell companies can be jailed up to 10 years if they are found siphoning off money, said the Ministry of Corporate Affairs on Wednesday.

The move follows the announcement on Tuesday September 5 that it had frozen the accounts of 2.09 lakh “struck off” companies as they had not carried out any business operations in the past two years. As a result of their deregistration directors and authorised signatories of these companies no longer had the power to operate company bank accounts.

In a further warning the ministry said in a media that if the directors or signatories are found to have siphoned off money before or after the deregistration’s they will face penalties and jail time as punishment.

The government has also decided to bar directors of those companies that have not filed returns for three or more years form any further directorial positions.

Directors of such shell companies which have not filed returns for three or more years, will be disqualified from being appointed in any other company as director or from being reappointed as director in any of the companies where they had been directors, thereby compelling them to vacate office. It is expected that as a result of this exercise, at least two to three lakh of such disqualified directors shall get debarred.

Also Read: Centre asks banks to restrict  of 2.09 lakh  current accounts

The ministry said all efforts are being made to identify the actual beneficiaries of these deregistered or “shell” companies and investigate the backround and role played by the directors.

Professionals, chartered accountants, company secretaries, cost accountants associated with such shell companies and involved in illegal activities have been identified in certain cases and the action by professional Institutes such as ICAI, ICSI and ICAoI are being monitored,” the statement said.

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