The total number of accountants and secretaries who have been identified as bypassing rules to help the Chinese set up shell companies is 400.


New Delhi: The lure of substantial amounts of easy money on offer may be proving too much for a section of Company Accountants (CAs) and Company Secretaries (CSs), who, despite repeated warnings by the Ministry of Corporate Affairs (MCA), are helping Chinese People’s Liberation Army (PLA) controlled companies incorporate shell companies in India.
These shell companies, after being incorporated, are being used by the PLA to indulge in theft of data and intellectual property, thus negatively impacting the Indian economy, which is trying to break its dependence on Chinese companies, unsuccessfully, for years now. While the “big” established Chinese companies use the services of established accounting bodies to do business in India, these PLA-backed individuals, who set up these shell companies, reach out to individual CAs and CSs.
Earlier this month, the Ministry of Corporate Affairs sent a detailed complaint to the Institute of Chartered Accountants of India (ICAI), a statutory body that regulates the profession of chartered accountancy in the country, detailing the names of the CAs who had helped incorporate Chinese shell companies, directing the body to take action against them and submit an Action Taken Report (ATR). A similar representation was sent to the Institute of Company Secretaries of India (ICSI).
The total number of accountants and secretaries who have been identified as bypassing rules to help the Chinese set up shell companies is reported to be 400. Following the occupation of previously Indian controlled territories in Ladakh that led to the violent confrontation between the India Army and the PLA at Galwan on 16 June 2020, in which 20 soldiers lost their lives, the highest office of the government of India has been taking multiple measures against Chinese entities earning revenue from India, including cracking down on their illegal activities.
However, what is likely to concern the Prime Minister’s Office (PMO) is that this is not for the first time that the MCA has identified such erring CAs and CSs. On 23 February 2022, the MCA sent a detailed list of 174 Chinese shell companies—that were set up by the erring CAs, CSs—to the local offices concerned to take action against these professionals for indulging in “professional misconduct” and “not discharging their responsibilities as per law”.
The Sunday Guardian has accessed this “confidential” list. An analysis of the companies that are on the list showed that most of them were set up during the same period when the Chinese troops had started occupying “disputed” Indian territory (end of 2019), while some were set up during and following the Galwan incident. Most of these companies are still functioning.
In many cases, a single CA was behind the setting up of different companies. A particular CA on the list incorporated nine such companies. A former Joint Director level officer with the MCA, explaining the reasons for CAs, CSs, indulging in such blatant “anti-national” activities, said that many of these professionals enjoy political patronage and hence are not scared to indulge in such activities. These CAs, CSs have an elaborate network in the MCA office and hence can easily help the Chinese companies, while charging a large sum of money. In rare cases, where the agencies take action against these erring CAs, CSs, their representatives put pressure on some “high-up”, who in most cases, helps them, he told The Sunday Guardian.
The Sunday Guardian reached out to both ICAI and ICSI seeking their response on the recent incident and what, if any, action was taken by them against the CAs and CSs who were identified by the MCA in February. No response was received until the time the report went to press.