The decision by the Ministry of Corporate Affairs to crack down on so-called ‘shell companies’, disqualify select directors in these entities and debar them from taking board positions for a specified period of time cannot be faulted. This would begin the clean-up of the Augean stables of firms set up in many cases with less than bona fide intent and having virtually no business operations. However, the Union government’s move to publicise the identities of some of these individuals with a view to ‘naming and shaming’ them is fraught with risk; the devil, as always, is in the detail. (______________________________________________________________________________).This was in evidence when the Securities Appellate Tribunal recently gave relief to some entities over trading curbs hastily imposed on them by SEBI. Also, given the sheer scale of the task at hand, with the ministry identifying more than 1.06 lakh directors for disqualification, it is imperative that there be great care and diligence to ensure that the authorities do not penalise anyone who for non-mala fide reasons failed to comply with the relevant provisions of the Companies Act.
- While the underlying motive for this action, as cited by the ministry, of “breaking the network of shell companies” in the government’s fight against black money is laudable, there is a real danger of inadvertently tainting genuine firms and individual
- At a broader level, the Centre and the regulatory arms need to address the underlying systemic shortcomings that have allowed so many companies, both listed and unlisted, to become vehicles of malfeasance.
- The government has already shown it is prepared to act in terms of enacting the necessary legislation to address banking sector stress by adopting the Insolvency and Bankruptcy Code.
- Both A and B
- None of the above
As the paragraph is talking about cracking down of the shell companies and the sentence before the blank tells the action plan against these companies and the former sentence is telling about the relief given to some bona fide companies which were imposed by SEBI. Only in A it is talking about both the action plan and told about the danger for genuine firms. So A is the correct choice.