Blanket action on shell firms may backfire

While the crackdown is a major step in combating tax evasion and improving transparency, it might also impact the flexibility and genuine corporate structures created to achieve legitimate objectives

The Ministry of Corporate Affairs (MCA) has in September taken stricter measures against more than 100,000 shell companies and their directors. On September 5 banks have been issued instructions by the Department of Financial Services to ensure that all the directors (ex) or their authorised signatories are restricted from operating the bank accounts of such companies and that they cannot siphon off money from these accounts.
 
There is also concerted action by the MCA and the Central Board of Direct Taxes to unearth unreported income or use of such companies during demonetisation for depositing demonetised currency. Some of these