Under the Special Drives taken by Registrar of Companies, 3,82,875 number of companies ware struck off u/s 248 (1) of the Companies Act till the financial year 2020-21. 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.

Explaining further, the Minister stated that there is no definition of the term “Shell Company” in the Companies Act, 2013 (the 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 suspected Shell Companies.

The Minister stated that the Government has undertaken Special Drives for identification and strike off Companies by invoking the provisions of section 248 (1) of the Companies Act.

Giving more details, the Minister stated that 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. The RoC also verifies that such company has not made any application within such period for obtaining the status of a dormant company under Section 455 of the Act.

Company strike-off under section 248 enforces removal of inactive companies from the register after due process. Registrar-driven strike-off actions under the Companies Act use section 248(1) to remove companies believed inactive for the two immediately preceding financial years after due process and confirmation that no application for dormant company status under section 455 was filed. The term Shell Company is not defined in the Act; red flag indicators recommended by a Special Task Force are used to identify suspected shell companies.