Names of 58,000 cos may be struck off RoC’s records
PremiumRemoving defunct and defaulting businesses from the official database is expected to make the new version of the ministry of corporate affairs’ compliance infrastructure more efficient
NEW DELHI : The Registrar of Companies (RoC) identified 58,000 companies for removal from records in February for defaulting on statutory filings, data from the ministry of corporate affairs showed.
The entities are being removed as part of a drive before the ministry launches a new compliance portal.
Companies are chosen for removal from the records for not filing annual returns and financial statements for two consecutive years. Removing defunct and defaulting businesses from the official database is expected to make the new version of the ministry of corporate affairs’ compliance infrastructure more efficient.
Data showed that over 2,300 firms obtained ‘dormant status’, allowing a business to remain inactive without being a defaulter on filing requirements. Such firms can restart operations whenever they want. However, defaulting on statutory filing obligations without having the ‘dormant’ status exposes a company to possible removal from the register. Data also showed only two of three companies set up so far have survived, leading to 1.4 million active companies at the end of February.
Experts said removing shell companies will help improve regulatory oversight and make the ecosystem manageable. “Striking off defaulting companies will help lower cost of maintaining regulatory infrastructure. Besides, it helps identify shareholders and directors on boards of defaulting companies," said Amarjit Chopra, former president of the Institute of Chartered Accountants of India (ICAI).
Identifying such directors allows authorities to find out if they are on the board of any active company, using the unique identification number, and seek an explanation if warranted. In many cases, statutory filing defaults happen after companies become defunct due to economic failure.
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The ministry’s new version of the compliance portal—MCA21—is scheduled to be rolled out after the current return filing season. Removal of defaulting firms is part of efforts to improve oversight and governance. In the past few years, the ministry has scaled up disclosure requirements of businesses and have made the audit reports more detailed.
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