Consider the following statements about Shell Companies and identify the correct one s 1 Shell Compa...........

Economic Affairs Industrial sectors

Consider the following statements about Shell Companies and identify the correct one/s

1. Shell Companies are the companies defined in the Companies Act, 2013 as the companies having significant assets but very little or no Business operations.

2. The Ministry of Corporate Affairs has the authority to cancel the registration of a Shell Company involved in tax evasion and illegal activities.

3. Shell Companies also have legitimate uses like facilitating asset transfers, mergers, protecting trade secrets etc.

Select the correct answer using codes given below

1 and 2 only

2 and 3 only

1 and 3 only

All of the above

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Explanation:

- Statement 1 is incorrect. Shell companies are not specifically defined in the Companies Act, 2013. Generally, they are known as entities that primarily exist on paper, having no or minimal business operations or significant assets. They can be used for legitimate purposes, but their lack of transparency often makes them a vehicle for illegal activities like money laundering.

- Statement 2 is correct. The Ministry of Corporate Affairs (MCA) in India does have the authority to deregister companies, including shell companies, if they are found to be involved in unlawful activities such as tax evasion or money laundering.

- Statement 3 is correct. Shell companies can also serve legitimate purposes such as facilitating mergers and acquisitions, transferring assets, and protecting trade secrets. They may also help in structuring cross-border business transactions.

Correct Answer: Option 2 (2 and 3 only)