Stock Scams

Vanishing cos to include pvt ltd, unlisted cos
Divya Trivedi

New Delhi, Dec. 10

The Standing Committee on Finance has recommended that unscrupulous players among the unlisted and private limited companies should also be included under the ambit of ‘vanishing companies'. Currently these are out of the purview of the term.

In a move to protect investors' interests, the Committee has recommended widening the definition of ‘vanishing companies' to include within the statutory ambit any entity that collects huge sums of money from the public by way of IPOs, deposits, insurance and myriad savings schemes.

Currently, private limited and unlisted companies that raise deposits from the public are out of the scope of the definition of ‘vanishing companies'. This has resulted in weak enforcement action against entities defaulting on public money, according to the Committee.

The Ministry of Corporate Affairs (MCA) and Securities and Exchange Board of India (SEBI) had set up a Coordination and Monitoring Committee (CMC) to identify and take action against unscrupulous promoters who raised money from investors and misused them.

A company is deemed to be a ‘vanishing company' if it fails on any one of the three counts. If it fails to file returns with the Registrar of Companies and Stock Exchanges for a period of two years since floating an IPO, does not maintain its registered office at the notified address or if none of its Directors are traceable.


Going by this definition, which covers only listed companies, not a single company has been identified as a ‘vanishing company' since 2011, according to the MCA.

In order to bring transparency in utilisation of IPO proceeds, the Committee recommends expedient institutionalisation and on-line activation of the coordination mechanism between the MCA and SEBI.

The Committee found the one-line response of MCA in the matter: “it will be taken up with SEBI”, to be “lackadaisical and non-committal”, and called for immediate action by the Ministry and appraisal of the progress made.

The above is from Businessline

The people who are involved in these scams should not be let off so easily.
The names of all the directors who were involved in these companies should also be published. These directors may be MDs, EDs, Wholetime or appointed external directors.
It is only when the government takes such a step will people who lend their names for nominal fees without looking at the running of the company, be more vigilant.
The Satyam case would never have occurred if the directors had been more vigilant.
Further, the bank accounts of all people who are vanish with public money should be frozen so that they do not enjoy their ill-gotten wealth.