The Centre has initiated action against more than two lakh shell companies as part of Operation Clean Money. Separately, the market regulator Securities and Exchange Board of India has identified 331 companies and initiated action against them. Shell companies are typically corporate entities which do not have any active business operations or significant assets in their possession. In India, there is no specific law relating to “shell companies.” However, some laws help, to an extent, in curbing illegal activities such as money laundering and can indirectly be used to target shell companies — Benami Transaction (Prohibition) Amendment Act 2016; The Prevention of Money Laundering Act 2002 and The Companies Act, 2013.
Companies can be removed from the rolls of the Ministry of Corporate Affairs by two means: strike off by Registrar of Companies (RoC) — (Section 248 (1) of the Companies Act, 2013) and voluntary strike off — (Section 248 (2) of the Companies Act, 2013). Voluntary closure can be done with the approval of the board and shareholders and the firm should have nil liabilities. Further, in case a company has not filed financial statements or annual returns for two financial years consecutively, the RoC shall issue notice and include it in the register of ‘dormant’ companies. But a shell company is one which is typically suspected of illegal activities. The shell companies subject to their respective circumstances would have to make an application before the National Company Law Tribunal for restoration which the NCLT will decide on a case-to-case basis.