The Securities and Exchange Board of India (Sebi) and the Ministry of corporate affairs have been working to weed out several shell companies that emerged following the government’s demonetisation move. One of the initiatives that is being considered is the dematerialisation of shares of public companies that aren’t listed.
Experts suggest this will essentially bring in more transparency in the functioning of these companies, as these companies may now have to issue electronic stocks in much the same format as listed companies do.
Sumit Agrawal, Suvan Law Advisors, is of the opinion that the move will bring down the number of frauds relating to dividend payouts and equity shares. He says, “There have been number of cases where the holder is one (person) and the dividend is taken by another person. This will stop, as some identification will be possible.” He adds that this will make it easier for the government to keep an eye on suspect companies and initiate an investigation, if need be.
The state will also benefit by way of tax collections as it will not be possible to evade payment of capital gains tax through benami holdings.
As on July 31, 2017, there were 67,884 public companies of which 66,601 were privately owned, while the rest are government-owned unlisted public companies. There were more than 63,500 public companies in 2015-16, of which 56,000 were unlisted. Out of these, 55,000 are privately owned while 1,000 were government-owned enterprises. As far as private companies are concerned, around 6,000 are registered with the Registrar of Companies (RoC).