About 35,000 companies which were defunct by end of December and did not meet their annual return filing obligations are being struck off from the records of Registrar of Companies (ROC), the ministry of corporate affairs said in an update on Friday.
Companies are removed from the official database for defaulting on annual return filing obligation for two consecutive years.
The removal of companies that are defunct and defaulting on their filing obligations follows a ‘fresh start scheme’ given in 2020 that allowed businesses to make good any filing related defaults, regardless of the duration of the default. Some companies which appealed to tribunals against being removed from official records, and got restored in the official records, were given extra time to make good their defaults without additional fee for the overdue filings.
The cleaning up of the official records of defunct companies, also comes in the context of the government’s new version of MCA21 compliance portal due for roll out in the next few months. The new portal will deploy artificial intelligence and use data analytics to find trends in corporate compliance and spot any worrying behaviour for regulatory or policy intervention.
So far, the government has struck off the names of over 727,000 defunct companies in several rounds of weeding out exercise, suggesting that one in every three companies incorporated in the country does not survive. After accounting for the defunct companies removed from records and those that are liquidated, amalgamated or have converted to limited liability partnerships (LLPs), the number of active companies at the end of December stands at over 1.4 million, showed the update from the ministry.
Companies that are not carrying on with any economic activity, and hence called defunct, also often do not file their annual returns leading to their removal from records. These companies are not to be confused with bogus entities, which are used by crooks in financial crimes such as money laundering. Such companies meet legal compliance requirements on paper to avoid attention. They get red flagged because of certain discrepancies and irrational transactions.
The largest class of new companies getting registered fall in ‘business services’ followed by manufacturing. About 13,000-16,000 companies and around 4,000 LLPs are registered every month with Maharashtra, Delhi and Uttar Pradesh being the most preferred places for incorporation of new businesses.
