Over 10,000 companies closed down in FY21, MoS finance Anurag Thakur tells Parliament

Many small businesses struggled to continue during the string of national and regional lockdowns in the wake of the COVID-19 pandemic. (wallpaperflare.com)

Over 10,000 registered companies have closed down in the country till February in the current financial year (FY21), the Ministry of Corporate Affairs (MCA) said on March 8.

While the MCA does not maintain any record of the companies which have gone out of business, a total of 10,113 registered companies have been struck off the official Register of Companies under section 248 (2) of the Companies Act, 2013, Minister of State for Finance and Corporate Affairs Anurag Thakur said in a written reply in the Lok Sabha.

The ministry's official statistics show that 68,463 companies closed down in FY20.

Section 248(2) of the Act provides the Registrar of Companies with powers to remove a company from the records if they fail to start operations within one year of registration or fail to show any operation for the two immediately preceding financial years.

While the MCA has not provided a break up of how many companies fell foul of each of the two particular clauses, many small businesses struggled to continue during the string of national and regional lockdowns in the wake of the COVID-19 pandemic.

However, the number of new companies registered with the MCA also rose in FY21, jumping by 20 percent. Last month, the MCA had informed Parliament that a total of over 1.13 lakh companies were incorporated during April 2020 to December 2020. This was up from the 93,754 companies incorporated during the same period of the FY20.

On March 8, Thakur clarified the ministry has not run any drive to strike off companies on its own during the current financial year.

He also outlined the steps taken by the government to help and support a higher number of companies get incorporated.

He pointed to the Companies (Incorporation) Second Amendment Rules, 2021, which has incentivised the incorporation of One Person Companies (OPCs) from 1 April onwards. It allows OPCs to be converted into a private or public company anytime later on, has removed the limitation of having a fixed paid-up capital and turnover, and lets non-resident Indians form such companies.

He also stressed that the government's decision to amend the definition of micro and small companies will bring more businesses into the formal economy. The government had mandated that the paid-up capital and turnover of a 'small' category company will be up to Rs 2 crore and Rs 20 crore, up from Rs 50 lakh and Rs 2 crore, respectively.

Thakur said a series of offences under the Companies Act has now been decriminalised, for better compliance purposes and to further liberalise the existing regulatory framework for ease of doing business.