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June 29 To July 5, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 58MCA likely to amend LLP Act to
track down shell companiesNEWS, DATED, 20-6-2019
Recently, the Ministry of Corporate Affairs
(MCA) has found that a number of companies
that were converted into LLPs have doubled
after the Government enhanced disclosure
norms on companies with a view to crack
down shell companies.
Since its inception, the MCA has tightened
noose on the shell companies however, a few
loopholes still remains intact, therefore, the
MCA is looking to bring measures to amend
the LLP Act whereby only small companies
would be allowed to convert into LLPs.
Why such companies opted for conversion?
There is no denial that exemption provided
to the LLPs under the LLP Act are more
as compared to that of Companies. Due to
enhanced disclosure norms, the Companies
find it easy to convert into LLPs to enjoy the
exemptions available to LLPs. The following
exemptions to the LLP are:
i. No Board Meeting: Unlike companies, the
LLPs need not to require hold board
meetings in a year.
ii. No Annual General Meeting: Holding an
AGM is a statutory requirement under
the Companies Act whereas in case of
LLP, no need to hold any AGM.
iii. No Statutory Auditor: The Companies
Act is compelled the Companies to ap-
point its statutory auditor of the year
for period of 5 years. On the contrary,
the LLP is exempted to have statutoryaudit unless turnover and contribution
doesn’t exceed in a financial year.
In the backdrop, the MCA had identified more
than 16,500 shell companies and blacklisted
more than 30,000 directors from the corporate
sector. Various disclosure requirements have
also been introduced by MCA which ACTIVE—
Form for verification of physical address
of registered office of Companies, DIR—3
KYC for annual KYC of the directors of the
company, DPT—3 for disclosure of acceptance
of deposits by the companies, MSME—1 form
for reporting overdue by companies to MSME,
etc. These disclosures have been introduced
to trace down shell companies. MCA’s move
to tighten noose on LLPs will further plug
in the loop holes that are used by companies
for certain activities such as tax evasion,
tax—avoidance and money laundering.SEBI prescribes certain factors for
assuring confidentiality in applica-
tion filed under settlement normsCIRCULAR NO. SEBI/HO/EFD2/CSD/
CIR/P/2019/0000000072, DATED, 18-6-2019
The market regulator, SEBI has come up
with the new set of rules through which
an applicant could be ensured confidentially
after filing the petition under the settlement
mechanism. In order to assure confidential-
ity to an applicant who provides assistance
in examination proceedings, the Board may
assess the information/assistance/cooperation
rendered during such examination proceedings
by inter alia considering various factors such
as nature of assistance provided and gravity
of the matter.Corporate Laws
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