DORMANT COMPANIES V. SHELL COMPANIES IN INDIA: CORPORATE CONVENIENCE OR REGULATORY VULNERABILITY?

AUTHOR – AKKSHARRA P V, STUDENT AT SASTRA UNIVERSITY, THANJAVUR, TAMIL NADU, INDIA.

BEST CITATION – AKKSHARRA P V, DORMANT COMPANIES V. SHELL COMPANIES IN INDIA: CORPORATE CONVENIENCE OR REGULATORY VULNERABILITY?, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (9) OF 2026, PG. 57-68, APIS – 3920 – 0001 & ISSN – 2583-2344. DOI – https://doi.org/10.65393/IJLRV6I97

ABSTRACT:-

The emergence of shell companies and dormant companies has become a significant concern within India’s corporate governance and financial regulatory framework. While dormant companies are legally recognized under section 455 of the Companies Act, 2013 and are intended to facilitate legitimate commercial purposes such as holding assets, preserving intellectual property, and preparing for future business activities, concerns have increasingly arisen regarding their potential misuse. Shell companies, although not expressly defined under the Indian corporate legislation, are frequently associated with money laundering, tax evasion, benami transactions, accommodation entries, concealment of beneficial ownership, and round-tripping of funds. Their opaque operational structures and limited transparency have attracted significant scrutiny from regulatory authorities and investigative agencies.

This research paper critically examines the conceptual and regulatory distinction between dormant companies and shell companies within the Indian corporate law framework. It explores whether dormant company provisions, despite their legitimate legislative objectives, may inadvertently create regulatory vulnerabilities capable of being exploited for fraudulent or opaque financial activities. The paper further analyzes the evolution of corporate regulation in India, the concept and functioning of shell companies, the risks associated with inactive corporate entities, and the increasing overlap between dormant company structures and shell companies operations.

Keywords – Dormant companies, Shell companies, Corporate governance, Corporate transparency