Economy

'10-year jail term for siphoning off funds'

'10-year jail term for siphoning off funds'”

The government said if the fraud involves public interest, the punishment would not be less than three years imprisonment.

The government on Wednesday made a decision to bar as many as 300,000 directors of companies that have defaulted on statutory compliances from serving on the boards of other firms to improve corporate governance and check financial irregularities through the use of shell companies.

The existing directors and authorised signatories of such companies have thus become ex-directors or ex-authorised signatories.

Such cases will attract a minimum jail term of six months, a government release said.

The ministry said it is also monitoring the action being taken by regulatory bodies against professionals such as chartered accountants, company secretaries and cost accountants who have been found to have colluded with the shell companies in committing financial irregularities.

The latest tweak to the rule is that strict action will still be taken against directors who even made attempts to siphon off money from these accounts. It also means that soon at least 2-3 lakh of disqualified directors of such companies will get barred and may not be able to lead any venture. Continuing its crackdown on the black money menace, the government said identification of more shell companies is in progress and efforts are on to find the "actual beneficiaries and persons" behind such entities. The department of financial services has advised all banks to take immediate steps to put curbs on bank accounts of such struck-off firms. Profiles of the directors, such as their background, antecedents and their role in running the shell companies is being complied with the help ofgovt agencies.

"The idea is also to choke the availability of slush funds for illegal purposes", the minister added.

The decision came a day after the banks were asked to immediately freeze accounts of about two lakh shell companies which had not filed returns and met other formalities.

A list of such companies has been published on the website of the Ministry of Corporate Affairs. "The restoration, as and when it happens, shall be reflected by change in the status of the company from "Struck off" to "Active", the government said in the statement.

The "struck off" companies fall within the ambit of Section 248 of the Companies Act, where the firms have failed to commence business within one year of incorporation or have not paid the subscription which they had undertaken to pay within a period of 180 days from the date of incorporation.

On Tuesday, pursuant to removal/striking-off and consequent cancellation of the registration of around 2,09,032 shell companies by the Ministry of Corporate Affairs, the Department of Financial Services had directed all the banks to restrict operations of bank accounts of such companies by the Directors of such companies or their authorised representatives.



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