In the first half of the ongoing financial year, 25,074 companies were struck off the records by the Ministry of Corporate Affairs, until September 2022. This is also 91 per cent more than the number of companies struck off in the first half of FY 2019-20; 13111 companies were struck off by the MCA then.
Striking off the records is the process of removing the name of a company from the Register of Companies. Section 248 of the Companies Act, 2013 provides for the removal of the name of a company from the Register of Companies if it has not been carrying on any business or operation for a period of two 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.
In FY21 and FY22, during the first and second waves of the pandemic, as many as 4,080 and 12,855 companies, respectively, were struck off in the country. As of now, of a total of 24.1 lakh registered companies in the country, 7.8 lakh companies have been struck off the list. In H1-FY23, June saw the maximum number of companies being struck off– 13,479. This is, in fact, 624 companies more than the number struck off in the first half of FY22.
Experts think there could be few reasons for this. “This could be a crackdown on shell companies. There have been instances where individuals have started companies to evade taxes. Striking them off would mean well for the economy,” says Chanakya Shah, Managing Director, Holistique Business Consulting Pvt Ltd.
Lalit Kumar, Partner, J Sagar Associates, agrees with Shah. “This could be a clean-up exercise for closing dormant companies. Also the list could include small companies that were badly hit during the pandemic,” he says.
“During September 2022, a total of 2,318 companies were struck off, of which names of 610 companies were removed from the Register of Companies by MCA, and 1,708 applications were received from companies to strike off their names from the register,” says the MCA’s September bulletin, which was out earlier this year.
The MCA bulletins also show that 98 companies were liquidated or dissolved between April and September 2022. This is out of the 11,372 liquidated companies in the country over multiple financial years. Liquidation is the process by which a company that is in debt, winds up its operations and sells its assets to repay liabilities. While 175 companies were liquidated in FY20, the number of companies dissolved in FY 21 and FY22 were 28 and 55 respectively.