Shell companies crack down: Ministry of corporate affairs deregisters 50,000 companies within a week

As a part of the ongoing drive against the shell companies, the ministry of corporate affairs (MCA) has deregistered nearly 50,000 companies last week. The Mumbai Registrar of the Companies (RoC) has deregistred more than 11,000 companies whereas the Delhi RoC has has stranded the names of more than 30,000 companies over the past three days.

“These companies have been stuck off for not carrying any business or operations for the last two consecutive years. More such companies are likely to be stuck off in the next few days,” said the senior government official. “Notices of deregistration have been sent to all these companies,” he added. In the last monetary, the government had deregistered nearly  250,000 companies which were not operating or were having zero turnovers for the two consecutive years.

According to the estimate made by MCA, around the same number of companies could be de-registered in the current fiscal as well. A task force within the ministry is scanning separately the registers of all the RoCs and is undertaking the same exercise, the official said. There are more than 1.1 million active companies in India.

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Under Section 248 of the Companies Act of 2013, the government can proceed with action against dormant companies which have been passive for two consecutive years. The government, through the Registrar of Companies, has to serve a notice on the abeyant companies and their directors. They need to submit their response within 30 days before the company’s name is smacked.

“Sections in the Companies Act allow the government to remove name of a company from the register if it fails to commence business within a year of incorporation or if the capital subscription has not been made within 180 days. Companies can also be stuck off in a situation where a company has not carried on business for two years,” the official aforesaid.

The ministry has also plans to weed out the limited liability partnerships (LLPs) those haven’t done any business in the past two years. The ministry has already derecognized 4000 such companies. In January 2018, government had taken an initiative to deregister 1.20 lakh firms as part of its continuing fight against the black money menace. The latest decision to strike off more 1.20 lakh companies from official records came after a review meeting of the actions taken with respect to deregistered.

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