This working group had found more than 2 lakh of these companies whose names it had removed from the Registrar of Companies (RoC) under section 248 of the Companies Act, 2013. One of the main problems that hindered the investigation and prosecution of companies involved in financial irregularities was the lack of an adequate and uniform definition of “letterbox companies”. He came to a criterion for defining “letterbox companies” and proposed some possible parameters for determining whether a company was created to launder money or take advantage of regulatory arbitrage. It is expected that the government will soon present a definition of letterbox business based on these proposals. In addition, SEBI has also established specific parameters to identify these shell companies, and these characteristics are as follows: a) absence of significant operational activities, b) lack of physical assets and c) operations in a transmission capacity. Letterbox companies that do illegal business, as they usually do, can be a major obstacle to the economy by engaging in tax evasion, money laundering and other criminal activities. There is a big problem in India when it comes to working with these companies. This is because there is no specific rule of law that deals with Shell companies. In addition, there is no legal definition or recognition criteria. A correct definition of Shell Company is necessary to create a clean economy and allow these authors to come out of their shell before they start to do more harm to the economy.
For example, we may examine the definition of letterbox companies under Rule 405 of the U.S. Securities Act and Rule 12b2 of the Exchange, which the shell company defines as follows: “A company that does not engage in nominal or no nominal activities; and either no assets, or nominal assets consisting of cash and cash equivalents, or assets consisting of cash and cash equivalents and other nominal assets. The need for a consistent structure to deal with letterbox companies is very pronounced. Such a structure must also ensure that such regulation does not create unnecessary obstacles for legal entities that appear to be letterbox companies. It is assumed that letterbox companies pose a serious risk to investors. Due to the lack of a correct definition of letterbox companies, it is difficult for investors to identify a legal company and a mailbox company that have been manufactured for illegal purposes. The network of letterbox companies endangers the interests of investors and shareholders. It also adds fuel to the fire threat of black money. Recently, a joint working group was also set up to identify these mailbox companies with false goals. As a result of these initiatives, the Ministry of Corporate Affairs and the working groups removed more than two Lakhs letterbox companies from registration because they did not have proper transactions and returns. In Satyam Scam, the country`s biggest accounting scandal, the company distorted its accounts to its investors, stakeholders, stock exchanges, regulators and board members.
and has therefore been booked in accordance with the above laws. P. Chidambaram was accused by the CBI of falsification, corruption and fraud under the IPC in the INX Media case, and in addition, the effectiveness of these laws can be seen from the fact that in the Panama Papers case, the leak uncovered 2,14,488 shell companies for many companies around the world. SEBI has asked the exchanges to take action against 331 alleged letterbox companies and ban them from trading. BSE and NSE have placed 162 and 48 companies at Level VI of the Graduated Supervisory Measure (GSM), meaning that these shares would not be available for active trading. In a landmark decision this week, the Supreme Court ruled that all women have the right to safe and legal abortion. A bank presided over by Justice D.Y. In the INX media case, former minister P.
Chidambaram was involved in issuing illegal foreign investments (FIPB) in order to obtain bribes. These bribes were paid through shell companies run by his son Karti Chidambaram. The investigation department found that several letterbox companies were registered in India and overseas that had an investment of more than Rs 300 crore. His son also received large sums of payments from a company outside India, which were also published in the Panama Paper. Letterbox companies help launder money, illegal cash flows, and tax evasion that hurt the economy. Iv. Legal provisions against letterbox companies and their illegal targets Nevertheless, according to the different state institutions, letterbox companies are usually established for one of the following reasons: [6] LLP, S., 2022. Challenges for letterbox companies in India. [online] Sbsandco.com. Available at: [Accessed March 13, 2022]. The LetterBox Companies Working Group has met 8 times since its inception and has taken proactive and coordinated steps to reduce the threat posed by letterbox enterprises. Many wealthy people in India use a large number of shell companies for illegal business and tax evasion etc.
Recent cases involving shell companies in India include: Yes Bank Scam: Yes Bank Founder Of Yes Bank, Mr. Rana Kapoor, along with her family, has made public more than 100 shell companies for embezzlement and financial maneuvers, according to information from the Central Directorate of Investigation and Law Enforcement. These companies were used to cover up the illegal money earned and were named after Mr. Rana`s parents. Due to the lack of regulations on letterbox companies, Mr. Rana was able to set up more than 100 companies to commit a major economic crime that became fraud. Thanks to the above characteristics of a mailbox company, it can be concluded that the simple motive behind the creation of these companies is to commit economic crimes by laundering the illegal money earned by the great businessmen with the help of powerful people.