Company registrations decline by half in Apr-Aug 2014

Only 21,260 new firms formed during the period, versus 43,601 a year ago; tough provisions on shell firms in new Companies Act cited as reason

The number of new companies registered in the country more than halved to 21,260, during the first five months of 2014-15 compared to preceding year, with the new companies law putting in place safeguards against floating shell firms.

As many as 43,601 companies had got registered during April-August period of the last financial year.

According to Minister of Corporate Affairs Arun Jaitley, the decline in registration of companies in the current fiscal was not due to compliance issues under the Companies Act 2013.

"There is no evidence or feedback suggesting that the decline is in any way attributable to 'tedious compliance' entailed by the new (Companies) Act," the Minister said in a written reply to the Rajya Sabha today.

However, it is a fact that the provisions of Companies Act, 2013 have safeguards against floating 'shell companies'," the Minister added.

Further, he said that the drop in number of registrations "is also attributable to introduction of new e-forms and time taken by professionals to become familiar with such forms".

He said the Ministry has set up an expert committee with an aim to review e-Forms, suggest changes aimed at simplifications of such forms and removal of difficulties faced by stakeholders.

Month-wise, April witnessed the least number (765) of company registrations. As many as 9,026 firms had got registered in the same period year-ago.

The highest number of registrations (7,229) were seen in July. This was, however, less than 8,784 company registration in the same month last year.

Besides, May saw 1,789 registrations, while June and August saw 4,801 and 6,676 registrations respectively, this year.

"About 60 percent of the provisions of the Companies Act 2013 entered into force from April 1, 2014, " Jaitley said.

"The Companies Act, 2013 and rules made thereunder contain essential features of good corporate governance which are to be adopted by companies incorporated under the Companies Act, 2013," he added.

Jaitley also noted that the government had included "all policy elements recommended by the Committee on Corporate Governance (Adi Godrej Committee)" in the new companies law.

The Corporate Affairs Ministry is responsible for implementation of Companies Act and all entities registered under this law have to make their filings electronically through MCA21 portal.

In recent times, the Ministry has issued many circulars and notifications with regard to the new companies law.

Among others, four new e-Forms were introduced while two others were modified in September.