Over the past 5 years, more than a hundred thousand companies have shuttered in the country. Many of these businesses have voluntarily surrendered under company laws. According to the Central Government, during this period, numerous companies initiated the process of insolvency. Minister of State for Finance, Rao Indrajit Singh, disclosed in the Lok Sabha that from the financial year 2018-19 until 2023-24, a staggering 106,561 companies ceased operations for various reasons, utilizing the Companies Act of 2013.
Out of these, 1168 companies declared insolvency. Minister Rao Indrajit Singh mentioned that in the last five years, 633 of these have been declared insolvent, while the process is ongoing for the remaining cases. Most closures took between 6 to 8 months, with some extending up to 12 to 18 months. Efforts are underway to expedite the process of company formation and closure.
In the same timeframe, 7946 foreign companies established their subsidiaries in India, indicating an increase in business opportunities in the country, driving foreign investors’ enthusiasm for investments.
The aftermath of COVID-19 witnessed a surge in closures globally, causing companies to incur substantial financial losses. As a consequence, many had to cease operations. In 2021, the Ministry of Corporate Affairs reported the closure of 16,527 companies between April 2020 and June 2021. Tamil Nadu saw the highest number of closures, impacting companies operating across various states. Additionally, 19 government-owned companies faced closure due to financial downturns.
Companies are typically delisted from official records due to non-compliance with regulations. If a company refrains from business operations for 2 years without reapplying to start operations, the Registrar of Companies can initiate its closure.
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