Office not registered? It may be classified as a shell firm, says panel

The panel has also made recommendations on remuneration for independent directors
If the office of your company is not at the registered address you have given to the Registrar of Companies (RoC), it might soon be categorised as a shell firm.

An expert committee reviewing various provisions in the Companies Act has recommended that those firms which do not maintain a registered office should be struck off the RoC. Earlier, the government had struck off names of only those companies that had not filed returns.

Committee members said this would prompt the government track the directors of such companies. Till now, the government has been cancelling registration only to track “vanishing” firms — firms that exist only on paper.

The government has already struck off 226,000 companies from the register for not filing statutory returns. Notices to another 225,000 companies are being sent for similar lapses.


As far as “vanishing” companies are concerned, the government has another drive to track each of them.

As many as 77 out of the 200 “vanishing” companies that came under the scanner between 1996 and 2004, continue to remain missing, even as others have been traced. Many of these untraceable companies did not list after filing for an initial public offering (IPO).

About 100 firms responded to notices issued on them. The Ministry of Corporate Affairs is still trying to track the missing firms.

According to government records, these companies have been termed as “vanishing” as their directors are also not traceable. First information reports have already been filed against 70 of them.


The panel has also made recommendations on remuneration for independent directors.

It has said the remuneration of an independent director should be capped at 20 per cent of their gross annual income. Apart from this, the committee has recommended ways to declog the National Company Law Tribunal.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel