Over 12,000 companies struck off from records in FY21

While inactive companies may default on certain statutory requirements such as filing of annual returns, they are not necessarily the ones which are involved in financial crimes such as money laundering.

1 min read . Updated: 08 Aug 2021, 07:10 PM IST Livemint

The weeding out of defunct companies comes in the wake of a major shift to digital platforms by the government for various compliance enforcement and adjudication functions

The government has struck off 12,889 companies from the records in FY21 as part of a special drive to clean up the system of inactive ones, official data showed.

The weeding out of defunct companies comes in the wake of a major shift to digital platforms by the government for various compliance enforcement and adjudication functions. Removing inactive ones from records makes administration less burdensome.

The ministry of corporate affairs is expected to start adjudication of company law violations entirely in the virtual mode by the Registrars of Companies and Regional Directors starting October. This would cover breaches that are compoundable in nature – offences in which the charges are dropped in return for the payment of a penalty.

Official data showed that the number of businesses struck off from records is declining after the large-scale removal in the last two years. In FY19, over 1,56,000 companies had been struck off from records, followed by over 64,000 companies in FY20, showed data from the ministry. These were inactive companies for the previous two financial years which have not applied for dormant status. There are 1.37 million active companies in the country.

While inactive companies may default on certain statutory requirements such as filing of annual returns, they are not necessarily the ones which are involved in financial crimes such as money laundering. Many entrepreneurs incorporate companies with the intention to start a business but due to economic reasons, some of them do not take off, adding to the number of inactive companies in official records. Entities set up by corporate wrongdoers for financial offences generally tend to comply with the filing requirements to stay out of the regulatory radar. They are identified by certain red flags due to their suspicious transactions.

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