10 Aug SEBI Crackdown on 331 Shell Companies
*Blocks Investors’ ₹9,000 Cr*
In a late circular on Monday, market regulator Securities and Exchange Board of India (Sebi) directed stock exchanges to immediately restrict trading in 331 companies identified as “shell companies” by the Ministry of Corporate Affairs in consultation with the Serious Fraud Investigation Office (SFIO) and the income-tax (I-T) department. The move has hit several investors, including mutual funds and small investors, who hold shares worth nearly Rs 9,000 crore in these companies.
While, by definition, a shell company is one without any business operations or assets, several companies with active business dealings too were part of the list with 331 names. At least five companies in the list have market capitalisation (m-cap) of over Rs 500 crore each.
Several probes by the I-T department and Sebi have shown that listed shell companies were being used to launder money by using the stock exchange route. The typical modus operandi has been to buy shares of shell firms, jack up the prices and sell shares after a year to claim long-term capital gains (LTCG) exemption.
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