128 'vanishing companies' traced; under govt's 'watch list'

128 'vanishing companies' traced; under govt's 'watch list'

As many as 128 companies, which had vanished after raising funds from public, have been traced and are on the government's watch list, while another 32 such companies are undergoing a process of liquidation.

A total of 238 companies, which mobilised money via public issues, had been identified as "vanishing companies" by the government, as they stopped filing balance sheets with the regulators and were untraceable.

In a recent document, the government said that 128 out of the 238 "vanishing companies" were removed from this category and placed under a "watch list" after these firms started filing account statements.

Additionally, 32 firms are presently under the process of liquidation, it added.
With this, a total of 78 firms are currently placed under the category of 'vanishing'. These firms collectively raised more than Rs 310 crore from investors.

The Corporate Affairs Ministry has initiated action in case of these 78 'vanishing companies'.

"FIRs have been lodged against 78 such companies and their directors and to trace their whereabouts as well as to file cases against them under the provision of Indian Penal Code (IPC)," the document said.

"Prosecutions have also been filed against these firms and their promoters/directors ... for non-filing of Statutory Returns and ... for mis-statement in prospectus/ fraudulently inducing persons to invest money/false statements made in the offer documents, etc," it added.

A number of steps have been taken by the government to protect investors from fraudulent activities.

These include a mandatory requirement for every existing or prospective directors to obtain a 'Director Identification Number (DIN)'.

DIN process requires detailed verification of particulars of a person so that traceability of the directors is ensured.

The provision makes it difficult for individuals promoting dubious companies to defraud investors by hiding or misrepresenting their identity.

In case of incorporation of a new company or change of address of an existing company, the government has also made it mandatory for professionals to verify details of the company and to personally visit their premises and certify that the premises are at the disposal of the company.

In such cases, proof of registered address has also been made mandatory to be furnished at the time of incorporation or change of registered office address.

Moreover, the government has issued instructions to the Registrar of Companies to scrutinise balance sheets and other records of the company who raise money through public issue and monitor the utilisation of such funds.

Besides, the government has taken various preemptive measures like sensitising people through investors awareness programmes.

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