The Indian government disclosed on Monday that a significant number of private companies have ceased operations in the country over the last five years. Official data shows a massive corporate clean-up, with more than two lakh entities shutting down through various legal processes.
Scale of Corporate Closure Revealed
In a written reply to the Lok Sabha, Minister of State for Corporate Affairs Harsh Malhotra provided detailed figures. According to the data, a total of 2,04,268 private companies were closed down between the financial years 2020-21 and 2024-25. These closures occurred due to reasons including amalgamation with other firms, conversion into different business structures, voluntary dissolution, or being struck off the official register under the provisions of the Companies Act, 2013.
When questioned about the fate of employees who lost their jobs due to these closures, the minister stated that there is currently no proposal before the government for their rehabilitation. This information was shared via a PTI report, highlighting a gap in policy for affected workers.
Drive Against Inactive and Shell Companies
Delving deeper into the numbers, the minister clarified that within the same five-year period, 1,85,350 companies were officially removed from the government's records. This removal process, known as being "struck off," includes 8,648 entities that were de-registered up to July 16 of the current fiscal year. Companies are typically removed if they have been inactive for prolonged periods or after they complete all regulatory formalities for voluntary closure.
A particularly intense phase of this clean-up occurred in 2022-23, when a major strike-off drive by the Ministry of Corporate Affairs led to 82,125 companies being removed from the register in a single year.
Addressing concerns about shell companies and their potential misuse for illicit activities like money laundering, Malhotra noted that the term "shell company" is not formally defined under the Companies Act, 2013. However, he assured that whenever any suspicious activity is reported, the information is promptly shared with relevant investigative agencies such as the Enforcement Directorate (ED) and the Income Tax Department for further scrutiny and monitoring.
Policy Focus on Simplification and Ease of Business
Alongside the clean-up of defunct entities, the minister outlined the government's broader economic policy direction. He emphasized a commitment to tax system reform, stating, "It is the stated policy of the government to gradually phase out exemptions and deductions while rationalising tax rates to create a simple, transparent, and equitable tax regime."
He also pointed to several other reforms aimed at improving the business environment. These include substantial reductions in corporate tax rates for both existing and new domestic manufacturing companies, which are intended to boost investment and enhance the ease of doing business in India.
The data presented paints a picture of a dynamic corporate landscape where the government is actively working to maintain an accurate and clean registry of active businesses while simultaneously implementing policies to foster a more straightforward and investment-friendly economic ecosystem.
