Letter to BS: Govt may amend LLP Act to tighten noose on shell firms

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This refers to your front page lead report “Shell firms to face more PCA heat” by Veena Mani (June 20), about the Ministry of Corporate Affairs (MCA) getting active on the rogue limited liability partnerships (LLPs) that are clearly misusing the law, is heart-warming. The companies converting to LLPs is an example of the ingenuity of our business community. Obviously, with active assistance from company secretaries and chartered accountants — forever ready to oblige their conniving clients — wanting to find loopholes in the law and ways to go around the various provisions for achieving the goal of evading/avoiding/minimising taxes that are legitimately due to the exchequer.


There can’t be any other explanation for the thousands of companies converting to LLPs. A bulk of them are bound to be doing so for nefarious objectives. Purpose of the LLP Act was to help proprietorship firms migrate to the organised sector. Those who drafted the act would’ve never imagined that there could be sort of ‘reverse migration’ also. Or, is it possible that the loophole was intentionally left open? Easier compliance norms for LLPs have now tempted many rogue companies to take that route. Perhaps the trigger was the crackdown on shell companies. Unusual inflow and outflow of funds in many of these firms would suggest that line of thinking.


Over half a million inoperative firms, many vanishing and untraceable listed companies, companies where PAN is not traceable... this dark wonderland would need an equally, or more, alert and eagle-eyed MCA to nail the fugitives and bring them to book.


Krishan Kalra
, Gurugram

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