March 11, 2021 3:00:28 am
OVER 10,000 companies voluntarily sought to have themselves struck off from the Ministry of Corporate Affairs’ (MCA’s) Registrar of Companies (RoC) between April 2020 and February 2021, according to data collected by the Ministry.
Experts noted that strict monitoring of compliances, coupled with worsening business prospects, may have contributed to a large number of non-operational companies applying to be struck off from the RoC rather than bearing the cost of meeting compliances or fines.
“A total of 10,113 number of companies during the year 2020-2021 (from the month of April 2020 to February 2021) have been struck off under Section 248 (2) of the Act,” said Minister of State for Corporate Affairs Anurag Singh Thakur in a written reply to the Lok Sabha.
Section 248(2) of the Companies Act deals with a company voluntarily seeking to be struck off from the RoC, after extinguishing its liabilities and getting approval from 75 per cent of members in terms of paid-up share capital. Companies that have not started operations one year after registering the company or if they have not had business operations over the two preceding financial years can apply to be struck off under this Section.
Thakur added the MCA had not run any drive to strike off companies during 2020-21. The MCA had conducted a drive to strike off inactive and shell companies between FY18 and FY20, striking off about 55,000 companies from the RoC till March 2020.
Sunil Kumar Sinha, principal economist at India Ratings and Research, said a general tightening of monitoring mechanisms and worse prospects for business may have contributed to the large number of inactive companies being struck off voluntarily.
“Even if you have zero operations, you have to file annual returns, you have to go to a chartered accountant to file financial statements and all this becomes difficult proposition for a company not conducting any business,” said Sinha, noting that the fall in demand due to Covid may also have further contributed to non-operational companies deciding against starting or restarting operations.
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