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SFIO Crackdown on Shell Companies

Posted on September 12, 2022 by admin1  62

In News 

  • The Serious Fraud Investigation Office (SFIO) has arrested a man who had masterminded the incorporation of a large number of shell companies linked to China.

What is a Shell Company?

  • It is a corporate entity without active business operations or significant assets & they are not illegal. 
  • They are deliberate financial arrangements created to either avoid taxes or even promote startups. Earlier, generally, Shell companies were registered in tax havens, where there is nil or low tax.
  • The Companies Act, 2013 does not define the term Shell Company. However, the Organization for Economic Cooperation and Development (OECD) defines a Shell Company as a company which is formally registered or otherwise legally organized in an economy but which does not conduct any operation in that economy other than in a pass through capacity.

Serious Fraud Investigation Office (SFIO)

  • As per the Companies Act, 2013, Serious Fraud Investigation Office (SFIO) has been established through the Government of India. 
    • SFIO also has powers to arrest people for the violation of the Company law.
  • It is a multi-disciplinary organization under the Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, banking, law, information technology, investigation, company law, capital market and taxation, etc. for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds.
  • SFIO is headed by a Director as Head of Department in the rank of Joint Secretary to the Government of India.
  • Section 211 of the Companies Act, 2013, has accorded statutory status to the Serious Fraud Investigation Office (SFIO). SFIO also has powers to arrest people for the violation of the Company law.

Source: IE

 
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