Corporate Affairs Ministry (MCA) may in June or July this year go in for another round of crackdown on non-functional (shell) companies, official sources said.

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This will be on top of the nearly five lakh companies struck off in the recent years and to weed out firms that were used to funnel black money, sources added.

This would mean that MCA wants to keep alive the drive (of removing non-functional firms) that had gained unprecedented traction in the immediate aftermath of the 2016 demonetisation exercise.

MCA sources also noted that government have set up a separate centre that would aid in voluntary winding up of companies within 100-odd days and the previous timeframe of taking about two years for voluntary winding up of companies is now passé. 

So technically, there should not be any need for corporate houses to maintain non functional entities within their fold, it was felt. 

Such exercises of striking down of names are intended to foster some discipline among companies so that they will take the compliance requirements more seriously.

Meanwhile, MCA sources said that investigations against online lending apps that came in for regulatory scrutiny last year is now at an advanced stage of completion.

Striking off the records is the process of removing the name of a company from the Registrar of Companies. Section 248 of the Companies Act, 2013, provides for the removal of the name of a company from the Registrar  of Companies if it has not been carrying out 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.

Till year 2021-22, as many as 4,32,796 companies had been struck off in five years. Number of struck off companies was highest in 2017-18 at 2,26,166; followed by 1,12, 797 in 2018-19. In the year 2019-20, as many as 43,912 companies were struck off. While no company was struck off in 2020-21, the number came in at 49,921 in 2021-22.

Currently, the term “shell company” has not been defined under the Companies Act of 2013. Therefore non-functional firms and those that don’t comply with various rules and regulations are often seen as “shell” firms. 

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Few years back, the government had undertaken a special drive for the identification and striking off companies, which had not filed their financial statements or annual returns for two straight years.

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