PURPOSE OF SETTING UP A SHELL CORPORATION 

The term shell company is a business organization lacking any present business operations or substantial assets. Presently, neither the Companies Act nor a different Act provides an explanation of a Shell corporation. , a shell company is a company that merely exists on paper. The corporation does not have any concrete active business operations or any noteworthy amount of assets. Such corporations do not involve themselves in any financial activities but have roughly some corporate legal personality. 

 Siphoning off Funds refers to using the funds for a use for which the credit was not authorized. It thus means clearing off of money from corporate without possessing any real authority. On the contrary, if the transmission of resources is appropriately recorded in the books of accounts with a valid description and the same is a correct clarification which is not considered to be fictitious or dishonest, then no courts can hold that such valid transfer of money as illegal drain off of funds. This Shell company are commonly formed with the objective of laundering money 

The foremost reason for setting up a native company is to realize a tax haven abroad. Most of the large companies, for e.g. Apple, have placed their jobs and proceeds offshore, thereby taking a benefit of less strict tax statutes. This is referred to as the process of "offshoring" or "subcontracting" work that was conducted only domestically at some period. There is a different manner in which shell companies support the financial need of the institutions to regulate their business activities in the foreign markets. This permits the companies to increase their finance in capital markets outside their borders and understand the future savings on tax.

The important explanations as to why a shell company can be formed are:

 · To keep or to stock money briefly when the owner of the main company decides to start a new company.

 · If the corporation wants to keep a secret as to its transactions with different companies, which has a corrupt status, a shell company may be created exclusively to involve with such a company. 

· A shell company can also be formed to set up an intimidating seizure. Such an event occurs when one company purchases another company, without any sort of consent of the organization of the company to be purchased. 

· If the company wishes to safeguard its assets from lawsuits. 

· In the event of a company having its operations in an unsafe country, for example, with widespread terrorist happenings, then such corporations might initiate shell companies to save their finances to evade offenders. 

· Shell companies can be formed to gain admission to international markets.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.