More than 36 per cent (680,000) of registered companies in India have “closed” down as per the latest numbers provided by the ministry of corporate affairs (MCA) in Parliament. There are around 1.9 million companies registered with the government, the data shows.
While the percentage has moved up only marginally since 2017-18, it is a big jump from the 20 per cent share that closed companies occupied in earlier periods.
The reason for the jump is the inclusion of companies not filing financial statements or annual returns for two years into the category of “closed” companies. The government identified such companies and declared them defunct under the Companies (Removal of Names of Companies from the Register of Companies) Rules (along with amended Rules 2019), coined under Section 248(1) of the Companies Act, 2013.
Maharashtra and Delhi lead the pack of states in terms of absolute number, with 142,425 and 125,937 closed companies, respectively. This data was presented by Finance Minister Nirmala Sitharaman in a reply to a question in Parliament earlier this month.
Four states — Maharashtra, Delhi, Tamil Nadu, and West Bengal — constitute more than half the universe of registered companies. However, their shares of closed companies differ.
After the re-categorisation of non-compliant companies as “closed”, the share of closed companies in Maharashtra rose from nearly 15 per cent to 38 per cent. In Tamil Nadu, it rose from 24 per cent at the end of 2016-17 to 44 per cent in May 2019. The share of closed companies moved the slowest in West Bengal.
Apart from “closed” companies, the share of dormant companies, those under liquidation, and under the process of strike-off form less than 3 per cent of the universe.
Further, the MCA removed the names of nearly 220,000 and 110,000 companies from the list of registered companies in 2017-18 and 2018-19, respectively. These “shell” companies now cease to be part of the universe of registered corporates.