plawolf
Lieutenant General
I didn't quite get this example, could you please elaborate?
Say we have Adani Cow Urine India that made $10M in FY21 and $5M in FY22. To not report a drop of $5M, Adani starts a shell company Adani Cow Urine Singapore sometime in FY22, but how does that help him? If Adani Cow Urine India doesn't report revenue for FY22 but Adani Cow Urine Singapore does, doesn't everyone figure out that Adani Cow Urine Global has lower revenues overall?
That’s why they use shell companies and not subsidiaries. Shell companies are technically separate legal entities so their profits and losses are entirely separate from the main Adani group.
In this example, the shell company knowingly overpays Adani HQ for the bad asset so Adani HQ records a profitable sale while the Shell company records the purchased business line as an asset at massively inflated book value. Then the shell company can take the loss later and Adani HQ is completely insulated from that loss.
Thats just a bare bones illustration, in reality it’s likely far more complicated, with loss groups also involved to use the losses to wipe out corporation tax on the groups profitable parts.