Over 5 lakh companies run out of business in 6 years

New Delhi: More than five lakh companies went out of business, while over 7 lakh new companies were set up in the last nearly six years, according to official data. The data for the period starting from April 1, 2016, till date showed that a total of 5,00,506 companies were shut down. During the same time, 7,17,049 new companies were registered under the Companies Act, 2013. Sharing the data as part of a written reply to the Lok Sabha on Monday, Minister of State for Corporate Affairs Rao Inderjit Singh also said the ministry does not 'maintain data on event base'.

The response was to a query on the state-wise number of companies closed down after the demonetisation, GST and Covid pandemic. So far this financial year starting from April 1, 2021, a total of 22,557 companies have been deregistered, whereas 1,09,098 new companies have been set up. In the last nearly six years, the maximum number of companies were shuttered in 2017-18 at 2,36,262 and the count stood at 1,43,233 companies in 2018-19. As many as 12,808 companies were closed down in 2016-17, 70,972 companies in 2019-20 and 14,674 in the last fiscal, the data showed.

As per the data, 1,55,377 new companies were registered in the last financial year and the number stood at 1,22,721 companies in 2019-20. The count of such companies was 97,840 in 2016-17 and 1,08,075 companies in 2017-18. The total number of new companies registered was 1,23,938 in 2018-19.

Singh also said the term 'closed company' is not defined under the Act and that companies would be struck off after following the due process of law under certain provisions of the Act. The Corporate Affairs Ministry administers the provisions of the Companies Act, 2013, The Limited Liability Partnership Act, 2008 and The Insolvency and Bankruptcy Code, 2016.

When asked whether activities carried out by firms outside India will also be permitted as a CSR project, the minister replied in the negative.

"As per Rule 2(1)(d) of the Companies (CSR Policy) Rules, 2014, any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level is not permitted as an eligible CSR activity," he said in another written reply.

Under the Companies Law, a certain class of profitable entities is required to shell out at least two per cent of their three-year average annual net profit. The minister said the CSR (Corporate Social Responsibility) architecture is disclosure-based and that in the CSR legal framework, the word 'Non-governmental Organisations (NGO)' has nowhere been defined.

However, boards of companies are empowered to undertake CSR activities either by themselves or through implementing agencies. The registration of such agencies with the government was made mandatory from April 1 this year. Till October 31, a total of 17,130 implementing agencies were registered with the ministry's MCA21 registry.

"On the basis of filings made by the companies in the MCA21 registry, companies have spent a cumulative amount of Rs 20,150.27 crore in FY 2018-19, Rs 24,688.66 crore in FY 2019-20 and Rs 8,828.11 crore in FY 2020-21 respectively," Singh said.

An analysis of CSR filings made by the companies showed that out of the total CSR spent, around 60 per cent of the expenditure was done through implementing agencies, he said. To another query, the minister, in a separate written reply, said the government has taken necessary steps for carrying out amendments to the Competition Act, 2002 as and when necessary. "The Competition Commission of India also has taken action to amend the Regulations issued by it from time to time as and when necessary to do so," he said.