New rules for private companies set to expose shell entities

A NEW RULE shines a light into one of the darkest corners of asset ownership in India - private companies

- MENAKA DOSHI

Private companies have limited shareholders and no access to public markets hence they are lightly regulated with minimal disclosure norms.

India has all types and sizes of unlisted private companies. From Tata Sons and Serum Institute to the private holding companies of billionaires Mukesh Ambani and Kumar Mangalam Birla, to small family businesses and startups. But there are also obscure shell companies with no significant assets or operations.

With opaque ownership, shell companies can be used to evade taxes - a GST case allegedly involved 3,000 of them - create fictitious borrowers for a non-bank lender and aid in a $2 billion bank scam.

Politicians across the aisle have been accused of concealing wealth or business transactions by using - shell companies, with household staff (such as chauffeurs) named as directors/owners.

Or, as has been alleged against Adani Group, local and offshore shell companies can be used to disguise related party transactions among other things. Adani Group has denied all such allegations.

To be clear, shell companies are a global problem - used to circumvent sanctions, evade taxes and stash dirty money - and have long been the focus of international financial and tax authorities.

Well, shell or not, hundreds of thousands of private companies in India have been put on notice.