Govt bets on artificial intelligence, data analytics to weed out shell cos – Latest News

The corporate affairs ministry is betting on artificial intelligence and data analysis as key elements in fighting the threat from shell companies as it works to establish an ecosystem that will have "zero tolerance" for non-compliance with regulations. Continuing efforts to have a robust corporate governance system and ensure a high level of compliance, the ministry is also in the process of having an advanced MCA 21 portal.

The portal is used for filing the applications required under company law and is also a repository for company data in the country. Corporate Affairs Secretary Injeti Srinivas said that once the third version of MCA 21 is fully operational, the portal would make "almost impossible for a shell company to survive."

In general, shell companies are those that do not comply with regulations, and many of those entities are allegedly used for money laundering and other illegal activities. Noting that the third version of the portal could be fully operational in a year from now, the secretary said the ecosystem would have zero tolerance for non-compliance.

"Compliance monitoring will be in autopilot mode with artificial intelligence (AI) and data analysis," he said. The MCA 21 system was started in 2006 and the second version is currently operational.

There are almost 12 lakh companies active in the country. Active companies are those that meet various regulatory requirements under the Companies Law.

In the past two to three years, the ministry has deregistered company names from official records for prolonged noncompliance.

"Based on the trend I see, after 4.25 lakh of shell companies have been phased out, the numbers that are added each year are shrinking. This is a clear indication that the previous scenario of shell companies that are openly dedicated to inbound Hosting has become a matter of the past, "Srinivas said. Along with the elimination of shell companies, the KYC (Know Your Customer) drive for directors and companies has fueled greater compliance.

"Now, more and more companies are complying. Compliance levels in terms of filings have crossed 80 percent. The latest new start scheme for companies and the liquidation scheme for LLP (limited liability companies) is expected. further improve compliance levels … should soon cross 90 percent, "he said.

At the end of February, there were around 19.89,777 companies registered in the country. Of these, 7,44,014 companies were closed, 41,974 entities were in the process of closing and 2,170 were assigned dormant status, according to data compiled by the ministry. According to the ministry, there were 11.95,045 companies active as of February 29.