The Government has undertaken a Special Drive for identification and strike off Shell Companies. Based on non-filing of Financial Statements (FS) consecutively for two years or more, companies were identified and after following due process of law as provided under Section 248 of the Companies Act, 2013 read with the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, there are 3,82,581 number of Companies were struck off during the last three years. This was stated by Shri Anurag Singh Thakur, Union Minister of State for Finance & Corporate Affairs in a written reply to a question in Rajya Sabha.

The term “Shell Company” is not defined under 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. 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.

Strike off of inactive companies enforces compliance by removing entities identified through non filing and red flag indicators. A government Special Drive used the Companies Act removal framework to identify and strike off companies principally for non-filing of financial statements for two consecutive years, completing statutory notice and removal steps; a Special Task Force recommended specific red flag indicators to identify entities described as shell companies-entities lacking active operations or significant assets and potentially used for illicit purposes.