The Ministry of Corporate Affairs (MCA) has removed 40,949 inactive companies from the corporate registry under the Companies Act, 2013, over the past three financial years. These removals targeted non-operational and shell entities to ensure a cleaner and more compliant corporate ecosystem.
Action Against Non-Compliant Firms
In response to an unstarred question in Lok Sabha on July 21, 2025, Minister of State Harsh Malhotra explained that these companies were struck off after being inactive for two consecutive financial years and failing to fulfill statutory requirements like filing declarations or subscribing to capital at the time of incorporation. The most recent strike-off activity took place in FY 2022–23.
State-Wise Data Highlights Major Impact
The crackdown was significant across major states, with Maharashtra (8,329), Delhi (5,873), Karnataka (4,803), Tamil Nadu (2,771), and Uttar Pradesh (2,838) witnessing the highest number of removals. Notably, in Saharanpur district of Uttar Pradesh, 23 companies were struck off between 2023 and mid-2025, showing targeted local enforcement as well.
Safeguards to Protect Genuine Companies
To prevent the wrongful deregistration of active companies, MCA follows the procedure laid out in Section 248(1) of the Companies Act. If any company believes it has been mistakenly struck off, it can appeal to the National Company Law Tribunal (NCLT) for restoration, ensuring due process is maintained.
No Legal Definition for ‘Shell Company’ Yet
Currently, the Companies Act does not define what constitutes a “shell company.” Despite its relevance in financial fraud investigations, the government has stated that it has no immediate plans to formally define the term.
Steps to Simplify Corporate Governance
Several regulatory improvements have been introduced to strengthen compliance:
- Enhanced roles for key managerial personnel and board members.
- Mandatory audits by independent chartered accountants.
- Centralized Registrar of Companies (CRC) for uniform incorporation processes.
- Redefined small company and small LLP categories with relaxed rules and fees.
- Launch of the Centre for Processing Accelerated Corporate Exit (C-PACE) in May 2023 for faster voluntary company closures, extended in August 2024 to include LLPs.
Use of Technology in Financial Oversight
The Serious Fraud Investigation Office (SFIO), equipped with multidisciplinary expertise and tech-driven tools, investigates suspected financial irregularities. The MCA21 Version 3 platform, launched in July 2025, and an e-adjudication system introduced in September 2024, have improved compliance monitoring and case resolution timelines.
Ensuring Corporate Transparency and Investor Confidence
This large-scale clean-up of dormant firms highlights the government’s push to create a transparent, credible, and investor-friendly corporate environment. Through procedural safeguards, digital platforms, and regulatory reforms, the MCA continues to reinforce corporate accountability across India.
