61. Consider the following statements about Shell Company
1. A shell company is a non-operational company that is used as a vehicle for various financial manoeuvres, or is kept dormant for future use in some other capacity.
2. They are illegal and not recognized by the government.
Which of the above statement(s) is/are correct?

Only 1

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Only 2

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Both 1 and 2

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None of the above

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Solution

The correct option is A Only 1
A shell company is a non-operational company that is used as a vehicle for various financial manoeuvres, or is kept dormant for future use in some other capacity. Interestingly, the term “shell company” is not defined under the Companies Act, 2013. A shell company is per se not illegal — as long as it is not used for an illegal act, such as manipulation of share prices, evading taxes, or financial fraud

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