In a written reply to the Lok Sabha, Corporate Affairs Minister Arun Jaitley said auditors are also required to report to the central government on frauds above a prescribed threshold.
Jaitley replied in the negative to a question on whether the present companies law is so loosely drafted and has so many loopholes as to make it possible for unscrupulous persons to set up shell companies to launder money and send money out of the country and then bring it back through the Mauritius route.
Further, the law requires physical verification of registered office addresses of companies by practising professionals and intimation to the Registrar of Companies in the event of setting up or change in the registered office.
Jaitley said stringent penal provisions have been provided for fraud.
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"These provisions appear sufficient to ensure companies and its directors are traceable and financial transactions of the company are properly and completely reported," he noted.
Most provisions of the Companies Act, 2013 came into force from April 1, 2014.
To a query on whether the government has any mechanism to ensure the authenticity of the registering companies within a day, Jaitley said authenticity is ensured by obtaining a declaration and certification by a professional such as an "advocate/ chartered accountant/ cost accountant/ company secretary in practice".
Besides, the person named in the Articles of Association as a director/ manager/ secretary of the company has to give a declaration confirming the fulfilment of all requirements for registration under the Companies Act and rules.