Shell Companies

How shell companies with no real business are used to launder money through fake transactions, and India's 2017 drive striking off over two lakh companies.

Shell companies exist on paper with little real business.

Uses

Laundering black money through fake invoices and loans.
Accommodation entries: showing cash as legitimate income.
Hiding ownership.

Crackdown

In 2017, the government struck off over two lakh inactive companies and disqualified directors.

Beneficial ownership

Rules require disclosing significant beneficial owners.

Legitimate shells

Not all shells are illegal; some are holding companies for real investment.

Economics

Shells raise the cost of detection, making evasion easier.

The accommodation entry

A trader pays cash to a shell company, which returns it as a loan, disguising black money as legitimate funds.

Thinking all shell companies are illegal

Some are legitimate holding firms.

Key takeaways

Shell companies launder money.
Over two lakh were struck off in 2017.
Beneficial ownership must be disclosed.
Not all shells are illegal.