Reflecting a sharp rise in economic momentum and activity, the number of new company incorporations in the country rose to the highest ever level of 1.85 lakh in 2023-24. This represented a 16.35 per cent jump to the number of companies incorporated at 1.59 lakh in 2022-23, official data showed.

The number of limited liability partnerships (LLPs) registered also surged in 2023-24 to touch 58,990, up 39 percent over 36,249 LLPs registered in previous fiscal.  

“MCA records the highest number of incorporations during 2023-24, surpassing any of the previous financial years”, said an MCA post in platform ‘X’, formerly Twitter, on Tuesday. 

Commenting on the MCA data on new incorporations, G Ramaswamy, former CA Institute President and Member of the MCA-appointed Company Law Committee said.

“More companies are getting incorporated now because of reforms started by the government such as decriminalisation of provisions in the Companies Act, ease of doing business, ease of compliance, and reduction in corporate tax rate. This has encouraged  more company incorporations in the country. This is also fuelling foreign direct investments into India”, Ramaswamy told businessline

He also noted that several young entrepreneurs and start-ups are keen to run their businesses in a corporate structure. 

Noorul, Partner at Lakshmikumaran & Sridharan Attorneys, said, “Increasing number of incorporations undoubtedly reveals the overall trust by the promoters and investors in the growth story of India, despite many market-oriented weaknesses.”

A plethora of factors contributed to the increase in incorporations. “Foreign entities cannot ignore India as it has largest consumer base coupled with the fact that there is a growing number of internet/smart phone users. Schemes such as Startup India aiding in seed funding and incubation support from the DPIIT along with legislative benefits under the Companies Act and Income Tax Act were one of the factors for the increase in companies and LLPs in India”, he said. 

Noorul also said that FDI policy has relaxed sectoral restrictions in insurance, space, and other sectors to boost investments. 

“Further, the production linked incentive (PLI) scheme has revolutionised the manufacturing sector in India and the ‘China Plus One’ strategy leading the global corporates to shift manufacturing bases in India is another significant step for more and more companies to grow”, he added. 

A LLP is quintessentially a hybrid between a limited liability company and a partnership. It has the advantage of being a body corporate, but at the same time internal governance and inter se relations among partners and LLP are regulated by the LLP Agreement and not by any statutory provisions.

Over the last few years, there has been increased preference to set up LLPs due to several advantages including lower compliance for such structures.