A Parliamentary panel has asked the government to define "shell company" in the Companies Act and ensure distinction between those guilty of fraud and those irregular with filings.

The recommendation assumes significance at a time when the government is cracking down on companies that have not been carrying out business activities for long as well as those entities being allegedly used for illicit fund flows.

As part of larger efforts to curb the black money menace, the corporate affairs ministry has already struck off the names of more than 2.26 lakh companies from the official records besides disqualifying a large number of directors associated with such entities.

The Parliamentary Standing Committee on Finance, headed by senior Congress leader and former Corporate Affairs Minister M Veerappa Moily, has said that out of the 2.26 lakh deregistered companies some may have been merely dormant ones without any fraudulent intent.

"Therefore, it is necessary that while cracking down on shell companies, the ministry needs to make distinction between those guilty of fraud and those irregular with filings," the panel said in a report tabled in Parliament on March 9.

At present, the term 'shell company' is not defined under the Companies Act, which is implemented by the corporate affairs ministry.

"To avoid any legal ambiguity and pre-empt avoidable litigation in the absence of a clear cut definition of 'shell companies' may be suitably included in the Act itself by bringing in the element of 'fraudulent' intent," the committee said.

According to the report, the ministry has decided to attempt a commonly accepted definition and attributes of shell companies.

Amid instances of corporate frauds, the panel has also called for "real time data sharing" among the ministry and other agencies.

"To prevent corporate misfeasance/ malfeasance, there should be real time data-sharing amongst Ministry of Corporate Affairs and other regulatory enforcement agencies such as CBI, ED, DRI, CBDT, SFIO, Department of Financial Services, Financial Intelligence Unit, Central Economic Intelligence Bureau and Sebi," it said.

In this regard, the committee has said that it may be apprised of the progress made within three months. #casansaar (Source - PTI, MoneyControl)