Defining the Shell Companies in India

Shell Company definitions are not available in the books but still they exist

The purpose of this article is Defining Shell Companies in Indian parlance. Though there have been significant actions taken on the Indian companies by their regulators, tax authorities and the company registration offices, in reality there is no clear definition of what shell company is ?

Neither the Companies Act 2013, nor Companies Act 1956 nor any other Act has defined this term. There is however, a little bit of research done by one of the Indian forensic accounting firm (private firm) called Indiaforensic Research Foundation has done efforts to define the different types of Shell Companies in its certification program Certified Anti Money Laundering Expert.

RegtechTimes offers certified anti money laundering expert program globally in association with Indiaforensic

Objectives of Shell Companies

Typically shell companies are incorporated for three different motives such as to avoid taxes. The Shell companies may also be incorporated with the objective of manipulating the prices of the shares. In Indian parlance, it includes creating layers of companies and using them for changing the colour of money from white to black or from black to white as the need be.

Red flags of Shell Companies

  • Most shell companies do not manufacture any product or deal in any product or render any service.
  • They would not have business websites. Generally a genuine business these days try and reach out to the customers on web.
  • Generally, these companies hold assets only on paper and not in reality.
  • These companies conduct almost no economic activity.

Globally there have been a significant research done, however India will learn from its own experiences and the enforcement of the shell companies.

Read our resources on the shell companies