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Shell companies: NSE seeks clarification from firms on disqualified directors

LiveMint logoLiveMint 29-09-2017 PTI

Mumbai: The National Stock Exchange (NSE) said clarification has been sought from various companies about continuance of disqualified directors on their respective boards, amid the government cracking the whip on suspected shellcompanies .

As part of its fight against illicit fund flows, the corporate affairs ministry has disqualified more than 1 lakh directors for their association with shell companies.

Against this backdrop, the NSE has asked for clarification from various companies about the continuation of such directors on their respective boards. “We confirm that NSE has sent out the letters to concerned companies and has sought clarification on the subject matter,” an exchange spokesperson said.

The response came to a query related to whether the bourse has asked about 200 companies listed on it to consider whether directors disqualified by the ministry should continue on their boards. Specific details could not be immediately ascertained.

When asked whether the BSE has also issued such communications to companies listed on its platform, an exchange spokesperson declined to comment.

The ministry has “identified 1,06,578 directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on 12 September 2017,” according to an official release issued on 12 September.

Under Section 164 of the Companies Act, 2013, a director in a company that has not filed financial statements or annual returns for three financial years continuously would not be eligible for re-appointment in that company or any other firm for five years.

Last month, the Securities and Exchange Board of India (Sebi) had imposed trading restrictions on 331 suspected shell companies after receiving such a list from the ministry. Subsequently, the curbs on some of these entities have been lifted.

The ministry, which is implementing the companies law, has also cancelled the registration of more than 2.09 lakh firms that have not been carrying out business activities for a long period. More entities are likely to face such action.

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