Lok Sabha Question No. 2397 (UNSTARRED), answered on 2019-07-08
Subject: De-registered She
Ministry: CORPORATE AFFAIRS
Asked by: N.K. Premachandran

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO.  2397

ANSWERED ON MONDAY, THE 8 th  JULY, 2019/ ASHAD H A 17 , 194 1 (SAKA)

## DE- REGISTERED SHELL COMPANIES QUESTION

2397: SHRI N. K. PREMACHANDRAN

Will the Minister of CORPORATE AFFAIRS be pleased to state:

कॉर्पोरे ट कार्य मंत्री

- (a)  the  total  number  of  shell  companies  de-  registered  during  the  last three years, State-wise;
- (b)  the  details  of  the  criteria  adopted  by  the  Government  for  the  deregistration of the companies;
- (c)  whether  the  Government  issued  notices  and  complied  with  the principle of natural justice before initiating action for the deregistration;
- (d) if so, the details of the procedure adopted by the Government;
- (e) whether the Ministry of Corporate Affairs constituted a task force for identifying such companies;
- (f) if so, the details of the target achieved by the task force;
- (g)  whether  any  functional  companies  also  were  de-registered  during
- this process; and
- (h)  if  so,  the  details  thereof  along  with  the  action  taken  by  the Government to cancel de-registration?

## ANSWER

THE MINISTER OF STATE FOR FINANCE

AND CORPORATE AFFAIRS

वित्त एिं कॉर्पोरे ट कार्य मंत्रालर् में राज्य मंत्री

SHRI ANURAG SINGH THAKUR ) ( )

श्री अनुराग व ंह ठाक ु र

(a) to (h): The term 'Shell Companies' is not defined in the Companies Act,  2013.  The  Special  Task  Force  set  up  to  look  into  the  issues  of 'Shell  Companies  has  constituted    the  working  group  which  has recommended  inter-alia  the  use  of  red  flag  indicators  as  alerts  for identification and strike off of 'Shell companies' viz defaulting in filling

(

of statutory returns, reported zero turnover, majority of share capital of company  held by Private Limited Companies, high reserves and surpluses,  share  premium  but  insignificant  turnover,  investment  in shares/ mutual funds is disproportionate to the business of the company and such investments constitutes majority of the portion of the asset side of the Financial Statement  , high  loans  and  advances  but insignificant  business  or  loans  and  advances  constitute  majority  of current assets of the company, debtors disproportionate to the business  activities  of  the  company,  disproportionate  cash  and  cash equivalents,  non-maintenance  of  registered  office  of  the  company, disproportionate unsecured loans/Inter Corporate deposits, companies having same registered office address, total income shown in Income Tax Returns of directors.

Accordingly, Government undertook Special Drive for identification and Strike off of such unlisted companies u/s 248(1) of the Companies Act,  2013  read  with  the  Companies  (Removal of  Names of Companies from  the  Register  of  Companies)  Rules,  2016  (amended  Rules  2019), which had not filed their Financial Statements and/or Annual Returns for a continuous period of two immediate preceding financial years.

During the financial year 2016-17, 2017-18 and 2018-19, Registrars of Companies have removed the names of 1986 companies,  2, 26,166 companies  and  1,12,797  companies  respectively  from  the  Register  of companies.

The ROCs followed the procedure as laid down under the relevant provisions  of  the  Companies  Act,  2013  read  with  the  Companies (Removal  of  Names  of  Companies  from  the  Register  of  Companies) Rules, 2016 (amended Rules 2019).

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