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NEW DELHI: Over 37,000 companies are in the process of getting struck off from records, the ministry of corporate affairs said, indicating the extent of businesses that have not been filing their statutory documents regularly.

Inactive companies are removed from the official register for not filing statutory documents for two consecutive years. In the absence of economic activities, companies have the option to stay dormant by filing a special application and such companies are not struck off from records.

Weeding out of defunct companies from records makes administration less burdensome. In FY19, over 1,56,000 companies had been struck off from records, followed by over 64,000 companies in FY20. The government is currently relying heavily on digital platforms for statutory filings and is in the process of rolling out e-adjudication of compliance lapses.

While inactive companies may default on certain statutory requirements such as filing of annual returns, they are not necessarily the ones which are involved in financial crimes including money laundering. Many entrepreneurs incorporate companies with the intention to start a business but due to various genuine reasons including economic factors, some of them do not take off, adding to the number of inactive companies in official records. Shell entities set up by corporate wrongdoers for financial offences generally tend to comply with the filing requirements to stay away from regulatory radar. These are identified by intensive data mining by regulatory agencies.

Data from the ministry showed that as of end of August, there were 1.39 million active companies in the country. During August, 13,290 new companies were set up with an authorised capital of over 96,800 crore. This shows that the number of new businesses getting registered in a month remains stable. It had fallen to single digits during the first wave of the pandemic. 

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