Govt., regulators mull ‘shell firm’ definition

Govt., regulators mull ‘shell firm’ definition

Shell firm; economic offender

News

1. The government is looking to provide a proper definition of shell companies

Important Facts:

1. There is no clear definition of shell companies.  It is term generally used for companies that are set up for financial transactions only or are kept dormant for some future use.
2. Shell companies exist only on paper can be used for money laundering and other financial wrongdoings
3. The lack of a proper and uniform definition of shell companies hinder investigation against entities using ‘shell companies’ for financial irregularities
4. The  definition by Organization for Economic Cooperation (OECD) defines shell company as a firm that is formally registered, incorporated or otherwise legally organised in an economy but which does not conduct any operations in that economy other than in a pass-through capacity.
5. At present, the Ministry of Corporate Affairs is considering suggestions from a multi-agency taskforce. The agencies include: Enforcement Directorate, Financial Intelligence Unit, Directorate of Revenue Intelligence and SEBI.
6. SEBI has defined Shell Company as any entity having no significant operational assets or business activity of its own but acting in a pass-through capacity as a conduit.