2.5 lakh companies sans business activity stare at closure
In India about a 2.5 Lakh companies face the possibility of being dissolved for not carrying out any of the business over the past two financial years and failing to apply for ‘dormant’ status.
From the last few weeks in public notices issued, the regional offices of the Registrar of Companies (RoC) which have named about 2,50,000 of such entities all over the country are failed to apply for ‘dormant company’ status under the Companies Act, 2013. Information from the RoCs pegs the number of such companies in various places like in Mumbai at over 71,000 and in Delhi it is about 53,000, in Hyderabad it is 40,000 and in Bengaluru it is 22,000.
An official said as per the norms, the names of these companies will struck off and the entities will dissolve in the absence of any objection. The notices that are available on the website of the ministry of corporate affairs have been issued under the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2016, which had been notified by the corporate affairs ministry on December 26, 2016. Looking on the numbers, next there are the cities of Ahmedabad, Pune and Kolkata with 11,000-12,000 companies.
According to RoC there are 4,000 companies in the notice of Chennai, in the next in Kanpur, Jaipur and Chandigarh naming 7,000, 6,000 and 4,600 companies respectively. The rules also stated that the RoC shall, ‘concurrently intimate the concerned regulatory authorities changeable in the company, central excise authorities and service-tax authorities, viz, the income-tax authorities’ to seek any objections before deregistering the companies.
Under the section 248 of the Companies Act, 2013, RoC empowered to remove the name of a company in two cases, one is if it fails to start a business within a year of incorporation, and the other is if a ‘non-dormant’ company does not do business for any two successive financial years. The Lowest number of companies that are named by RoC are Gwalior at 137 and Puducherry at 82.
Under the Section 455 of the Act that which provides for an inactive company to apply for ‘dormant’ status in cases where a company is formed and registered ‘for a upcoming project or to hold an asset or intellectual property and has no significant accounting transaction’. Data with respect to number of companies that have been acted upon being identified in these notices are still unavailable.