Over 4 Lakh Companies Have Been Removed From Official Record In 5 Years: Union Minister

A total of 4,32,796 companies have been struck off from official records in the past five years by the Ministry of Corporate Affairs. In the past five years, the most number of companies (2,26,116) were removed from the Registrar of Companies in 2017-18.

“Section 248 of the Companies Act, 2013 (the Act) provides for the removal of the name of the company from the Register of Companies, if it is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within the said period for obtaining the status of a Dormant Company under section 455 of the Act,” Minister of State for Corporate Affairs Rao Inderjit Singh said on Monday in a written reply to a question in the Lok Sabha.

According to the reply, a total of 2,26,166 companies were struck off in the financial year 2017-18, 1,12,797 firms in 2018-19, 43,912 in 2019-20, Nil in 2020-21, and 49,921 entities 2021-22.

Singh said there is no rule-making power provided under Section 59 ‘Voluntary liquidation for corporate persons’ in the Insolvency and Bankruptcy Code, 2016. A dormant company is covered under the provisions of section 455 of the Act.

Regarding dormant companies, the minister said a total of 451 firms got the dormant status in 2017-18, 362 entities were dormant in 2018-19, 570 in 2019-20, 81 in 2020-21, and 116 in 2021-22.

Recently, Singh in a reply in Parliament said a total of 1,12,509 companies in the past three years have been struck off by the Registrar of Companies. Out of the total companies struck off, Delhi had the highest number at 19,464, followed by Maharashtra (16,023 firms), Uttar Pradesh (12,823), West Bengal (11,044) and Tamil Nadu (6,989).

Singh said the government has undertaken a special drive for identification and striking off shell companies. The shell companies refer to companies without active business operation or significant assets. In some cases, such companies are used for illegal purposes, such as tax evasion, money laundering, obscuring ownership and benami properties. However, under the Companies Act, there is no definition of the terms ‘shell company’ and ‘fraudulent shell company’.

In a recent reply in the Rajya Sabha, Corporate Affairs Minister Nirmala Sitharaman also said the government has undertaken special drives for identifying and striking off non-operational companies under Section 248 of the Companies Act.

She also said Section 164(2)(a) of the Companies Act empowers the corporate affairs ministry to disqualify the directors of those companies that have not filed financial statement or annual return for any continuous period of three financial years. Such individuals can be barred from being re-appointed as the company’s director concerned or in other companies for five years.

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