The Ministry of Corporate Affairs (MCA) has struck off 29,059 non-compliant companies in Financial Year 2020-2021 and Financial Year 2021-2022.
Till 2020-2021, Under the Special Drives taken by the Registrar of Companies, 3,82,875 companies were struck off under Section 248(1) of the Companies Act. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha back in 2022.
Explaining further, the Minister stated that there is no definition of the term “Shell Company” in the Companies Act, 2013 (the Act). It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purposes such as tax evasion, money laundering, obscuring ownership, benami properties etc. The Special Task Force set up by the Government to look into the issue of “Shell Companies” has, inter-alia, recommended the use of certain red flag indicators as alerts for identification of suspected Shell Companies.
Rao Inderjit Singh, the Minister of State for Corporate Affairs, in response to an unstarred question, stated that 3,21,325 new businesses were created during the two previous financial years. As of March 31, 2022, there were 23,26,640 registered businesses and 14,37,045 active companies, and roughly 1.2% of all registered companies had been struck off according to Section 248(1) of the Companies Act of 2013. Additionally, 97,023 companies had zero turnover in 2020-21 and 2021-22, as per MCA records.
Non-compliances that lead to the striking off of company names include not commencing business within one year of incorporation, failing to carry on any business or operation for two immediately preceding financial years, not applying for the status of a dormant company within that period, not carrying on any business or operations as revealed after physical verification, and more. Registrars of Companies take action to strike off the names of companies that fail to submit statutory returns for the two immediately previous financial years, assuming that the company is not carrying on business.
Singh, who is also the Minister of State (Independent Charge) of the Ministry of Statistics and Programme Implementation and Minister of State (Independent Charge) of the Ministry of Planning, stated that the government has taken several steps to improve the Ease of Doing Business, such as decriminalizing sections under the Companies Act 2013, imposing lesser penalties for small companies, OPC, start-ups, Producer Companies, and revising the definition of listed companies. He also noted that the requirement for listed companies and NBFCs to invest 15% of the amount of debentures maturing in a specific year in specified instruments has been eliminated when such debentures are issued on a private placement basis.
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