Government considering to ease rules for disqualified shell companies directors

In a bid to provide relief to the disqualified directors of shell companies, the governemnt seems to be considering to ease the rules. Over 300,000 directors of shell companies were disqualified earlier this year after their owned companeis failed to file the financial returns consecutively for 3 years.

According to a livemint report, the government is considering to offer a 3 month period starting January 2018. The period will see the ban temporarily lifted from these directors and they will be asked to file the missed returns. The window for filing all the pending returns will be open till end of June 2018.

The crackdown on these directors started in September this year under two categories. The first one included comapnies which seemed non-functional. Over 209,000 such companies were put in the category of shell companies and the banks were asked not to transact with these companies and their associated bank accounts were put on hold. The second category included the companies which had not filed their returns for a period of 3 consecutive financial years. 309,614 directers were blacklisted through this move and they were barred from holding a directors position on any company for a period of 5 years. Also, their digital signatures on annual reports and financial filings were not to be accepted by RoC.

The above mentioned report also cites a couple of professionals aware of the developments. According to them, the companies which were barred for being non-functional will first have to prove their activities and only in that case, they will be allowed to be eligible for other compliances.

Since the government launched its crackdown on such companies, a number of directors reached court against their disqualification. According to publicly available data, over 500 banned directors were also on the board of publicly trading companies.