12,889 shell companies struck off in FY 2020-21

Last updated: 07 August 2021

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In the financial year 2020-21, a significant number of 12,889 shell companies were struck off the register. These companies are typically defined as those without active business operations or substantial assets, and can sometimes be used for illicit activities like tax evasion or money laundering. The government has been actively identifying and removing such entities through a special drive, utilising 'red flag' indicators to pinpoint potential shell companies.

There is no definition of the term "Shell Company" in the Companies Act. It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

On the identification shell companies, the Minister stated that the Special Task Force set up by the Government to look into the issue of "Shell Companies" has inter-alia recommended the use of certain red flag indicators as alerts for identification of Shell Companies.

12,889 Shell Companies Struck Off in FY 2020-21

Giving more details, the Minister stated that the Government has undertaken a Special Drive for identification and strike off of Companies by invoking the provisions of section 248 (1) of the Act by which the Registrar of Companies (RoC) struck off those companies after following the due process of law from the Register of companies when RoC has reasonable cause to believe that those companies are not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

The Minister listed the total number of companies struck off u/s 248 State/Union Territory-wise as under:

Sate/ UT-wise	2018-19	2019-20	2020-21
Gujarat	6398	2494	257
Andaman	24	15	2
Karnataka	4171	5568	1038
UT of Chandigarh	3514	893	501
Tamil Nadu and Coimbatore	9107	3214	1322
Orissa	2907	719	78
NCT of Delhi and Haryana	30544	12653	2396
Kerala	2801	5339	977
Goa	250	311	36
Madhya Pradesh	3386	1168	111
Himachal Pradesh	481	176	201
Telangana	16364	2686	730
Rajasthan	4038	4466	507
Jammu and Kashmir	255	138	0
Jharkhand	1306	403	139
Uttar Pradesh	7589	5821	1936
West Bengal	8390	6627	5
Maharashtra (Mumbai and Pune)	47575	7824	2298
Bihar	2540	1956	185
UT of Puducherry	37	117	35
Assam, Tripura, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Manipur, and Sikkim	372	796	88
Uttarakhand	476	79	0
Andhra Pradesh	3864	958	0
Chhattisgarh	539	347	47
Grand Total	156928	64768	12889

FAQ :

A shell company is generally understood as a company that has no active business operations or significant assets. In some instances, they are used for illegal purposes such as tax evasion, money laundering, or obscuring ownership.

A Special Task Force recommended using certain 'red flag' indicators as alerts to help identify shell companies.

The government has undertaken a Special Drive to identify and strike off companies. This involves the Registrar of Companies (RoC) removing companies from the register if they have not been carrying on any business or operation for two preceding financial years and have not applied for dormant status.

A total of 12,889 shell companies were struck off in the financial year 2020-21.

Maharashtra (Mumbai and Pune) had the highest number of companies struck off in FY 2020-21, with 2,298.

No, the Companies Act does not provide a specific definition for the term 'shell company'.

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