Names of 58,000 companies can be deducted from ROC records

The entities are being removed as part of a drive before the ministry launches a new compliance portal.

Companies are selected to be removed from the record for not filing annual returns and financial statements for two consecutive years. Removal of dormant and defaulting businesses from the official database is expected to make the new version of the Corporate Affairs Ministry’s compliance infrastructure more efficient.

The data showed that over 2,300 firms achieved ‘dormant status’, allowing a business to remain dormant without defaulting in filing requirements. Such firms can resume operations whenever they want. However, defaulting on statutory filing obligations without ‘inactive’ status exposes the company to possible removal from the register. The data also showed that only two out of three established companies survived, making 1.4 million active companies at the end of February.

Experts said removing shell companies will help improve regulatory oversight and make the ecosystem manageable. “Closing the defaulting companies will help reduce the cost of maintaining the regulatory infrastructure. In addition, it helps in identifying shareholders and directors on the boards of defaulting companies.

Identifying such directors allows executives to find out if they are on the board of an active company, using unique identification numbers, and seek clarification if necessary. In many cases, statutory filing defaults occur when companies become inactive due to economic failure.

The new version of the ministry’s compliance portal – MCA21 – is set to start after the current return filing season. Removing defaulting firms is part of efforts to improve oversight and governance. Over the years, the ministry has increased the disclosure requirements of businesses and made audit reports more detailed.