2.5 lakh companies sans business activity stare at closure

NEW DELHI: About a quarter million companies in India face the possibility of being dissolved for not carrying out any business over the last two financial years and failing to apply for 'dormant' status. 

In public notices issued over the last two weeks, the regional offices of the Registrar of Companies (RoC) have named about 250,000 such entities across the country which failed to apply for 'dormant company' status under the Companies Act, 2013. Information from the RoCs pegs the number of such companies in Mumbai at over 71,000, 53,000 in Delhi, 40,000 in Hyderabad and 22,000 in Bengaluru. 

As per norms, the names of these companies will be struck off and the entities dissolved in the absence of any objection, an official said. The notices, available on the website of the ministry of corporate affairs, were issued under the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2016, which was notified by the corporate affairs ministry on December 26, 2016. Looking at the numbers, next are the cities of Ahmedabad, Kolkata and Pune with 11,000-12,000 companies. 

RoC Chennai names only 4,000 companies in the notice, while those in Kanpur, Jaipur and Chandigarh naming 7,000, 6,000 and 4,600 companies, respectively. The rules also state that the Registrar of Companies shall, ‘simultaneously intimate the concerned regulatory authorities regulating the company, viz, the income-tax authorities, central excise authorities and service-tax authorities ’ to seek any objections before deregistering the companies. 

Section 248 of the Companies Act, 2013, empowers the RoC to remove the name of a company in two cases — if it fails to start business within a year of incorporation, and if a ‘non-dormant’ company does not do business for two successive financial years. The least number of companies were named by RoC Puducherry at 82 and RoC Gwalior at 137. 

Section 455 of the Act provides for an inactive company to apply for ‘dormant’ status in cases where a company is formed and registered ‘for a future project or to hold an asset or intellectual property and has no significant accounting transaction’. Data with respect to number of companies that have acted upon being identified in these notices is still unavailable.