Shell companies are typically corporate entities which do not have any active business operations or significant assets in their possession. A shell company may be a legal entity or not.
Issues associated with shell companies:
- There is no clear definition of shell companies. Even under the companies act they are not defined. Out of the registered 15 lakh companies only 6 lakh file return annually. This shows the quantum of shell companies.
- Absence of specific law to deal with the shell companies. They are covered partly be PMLA 2002, Benami act and companies act, 2013.
- Data collection of shell companies and finding about the companies is a daunting task. It is also difficult to distinguish between a genuine and an illegal shell company.
- Shell companies are used for lowering down the profit and hence the tax liability. This ultimately lead to lower tax revenue.
- Shell companies are used for funding political parties. It also increase the role of money power 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z"/> Subscribe on YouTube