Geo-tagging: Government’s Solution to Curb Shell Companies

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In a move to crack down on shell firms, the government has planned to geo-tag the registered addresses of companies in India

The government of India has decided on geo-tagging, that is, providing data on the exact location of offices. Companies may be asked to geo-tag their registered offices in the statutory filings with the Registrar of Companies (RoC). The plan is to identify too many companies operating from the same location and to check if there is any fraudulent activity carried out.

The decision comes into the picture in the wake of scams through shell companies and it aims to prevent abuse in the corporate sector in terms of fake invoices and money laundering. P.P. Chaudhary, Minister of State for Corporate Affairs, said that the move would help in identification of one office being used by hundreds of shell companies as their registered office or of companies citing vacant plots as their registered office addresses. He added that geo-tags would also serve as an early warning system for detecting the growth of shell companies in disguise.

The registered offices would be acting as key sources to extract data in the ministry’s IT infrastructure, called MCA21. The idea is to zoom in on firms with common details such as in addresses, contact numbers, directors and sudden changes in revenue. This would be followed by finding out the coordinates of the registered office when they file their annual returns.

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Geo-tags are the result of constant efforts by the government to define what a shell company exactly is. In the past few months, the government struck off over 226,000 such shell companies from the records for not filing their annual returns for two or more years. Moreover, a few cases were also probed.  It has been reported that investigations are going on regarding the ownership of 68 companies that deposited ₹ 25 crores or more after demonetisation.

In the wake of an increasing desire for transparency, geo-tags are being viewed as one solution to curb the issue of shell firms. However, experts’ say on the initiative is that sharing a common address does not prove any wrongdoing.

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