A third of the companies registered with the Ministry of Corporate Affairs (MCA) have shut down, with nearly half of them folding up in the past year. Data from the MCA reveals that as of January 31, 2018, about 1.7 million companies were registered with the government. Of these, 538,000, or about 32 per cent, had shut shop. About 238,000 or 15 per cent of the total, had folded up in the past year. This means one in seven firms shut down in the year. On January 31, 2017, there were about 300,000 companies that had folded up, according to the MCA’s data. Most of these companies had gone defunct under Section 248 of the Companies Act 2013. This law allows the Registrar of Of the about 538,000 companies that had shut shop till the end of January this year, nearly 495,000 were in this category. A crackdown on shell companies, increased regulatory compliance and failure of companies to avail bank credit, and defaulting on loans are some of the reasons cited by accounting professionals for the closure of such a large number of companies in the span of a year. “These companies are mostly defunct as they have not complied with regulations for the last three or four years. With the new companies law the compliance norms have been made stringent.
Often the companies also do not want to disclose a lot of information,” said Mamta Binanai, a resolution professional and company secretary.