Lok Sabha Question No. 3729 (UNSTARRED), answered on 2025-03-24
Subject: Crackdown on Non-Functional Companies and Shell Companies
Ministry: CORPORATE AFFAIRS
Asked by: Dr. Prashant Yadaorao Padole

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 3729

## ANSWERED ON MONDAY, 24 th March 2025

Crackdown on Non-Functional Companies and Shell Companies 3729. Dr. Prashant YadaoraoPadole:

## Will the Minister of Corporate Affairs be pleased to state:

- (a) Whether  the  Government  is  planning  to introduce a formal definition  of  shell  Companies under  the  Companies Act, 2013 to improve clarity and enforcement;
- (b) the status of the latest action taken on non-functional companies including  the  number  of  entities  identified  and  struck  off  under section 248 of Companies Act, 2013 in the year 2024;
- (c) the steps being taken to strengthen the monitoring and compliance mechanism to prevent misuse of non-functional firms for illegal financial activities; and
- (d) the  number  of  shell  companies  identified  and  the  action  taken against  them  under  section  248  of  the  Companies  Act,  2013  in Saharanpur district?

## ANSWER

THE MINISTER OF STATE OF THE MINISTRY OF CORPORATE AFFAIRSAND MINISTRY OF ROAD TRANSPORT AND HIGHWAYS.

(HARSH MALHOTRA)

(a) to (b) :There is no proposal before the Central Government to define Shell Company. However , 'Dormant Company' is defined under Section 455 of the Companies Act, 2013 (the Act) as (i) any company formed for a future project or to hold an asset or intellectual property and  has  no  significant  accounting  transaction  or  (ii)  any  inactive company which has not been carrying business or operation, or has not made significant accounting transactions during the last two financial years, or has not filed financial statements and annual returns during last two financial years and such company or inactive company, as the case  may  be,  has  obtained  'dormant  status'  from  the  Registrar  of Companies (ROC) with due compliance of Companies (Miscellaneous) Rules, 2014. Further,  in  terms  of  Section  248of  the  Act  read  with  the  Companies (Removal  of  Names  of  Companies  from  the  Register  of  Companies) Rules, 2016, Registrar of Companies have powers to remove the name of  Company  from  Register  of  such  companies  which  have  failed  to commence business within one year of its incorporation or not carrying on any business or operation for a period of two immediately preceding financial years and has not made an application for status of dormant company;  or  such  companies  which  may  voluntarily  seek  removal  of their  name from the Registrar of Companies after extinguishing all its liabilities by following due process in the prescribed manner. From  time  to  time,  this  Ministry  carries  out  Strike-Off  drive  under section  248(1)  for  striking  off  such  companieswhich  have  failed  to commence business within one year of its incorporation or not carrying on any business or operation for a period of two immediately preceding financial  years.  However  in  the  year  2024,  no  such  drive  has  taken place. In the year 2024, a total of 16,798 companies has been struck off under section 248 (2) of the Companies Act, 2013, ie, based on application for strike off filed by the Company. (c)  :  Under section 206(4) , 206(5) and 210 of the Companies Act, 2013, the  Central  Government  orders  Inquiries  ,  Inspections,  Investigations respectively based on complaints, references and information regarding non-compliances including those under section 248 (1) of the Companies  Act,  2013.  Based  on  findings  thereof,  instructions  are issued  fortaking  action  for  non-compliances,  including  striking  off  of companies  under  section  248(1)  of  the  Companies  Act,  2013.  This  is monitored on a regular basis. (d)  :  As  the  term  Shell  Company  has  not  been  defined  under  the Companies Act, 2013 thus requisite information is not maintained.

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