The government has notified Parliament that during the past five fiscal years, over 2.04 lakh private companies have closed in India. The information, which covers closures between FY 2020–21 and FY 2024–25, was provided by Minister of State for Corporate Affairs Harsh Malhotra in a written response to the Lok Sabha. It shows a variety of mergers, conversions, dissolutions, and strike-offs under the Companies Act, 2013. Officials highlighted that many of these firms were inactive or part of a broader clean-up of the corporate registration rather than plain economic failures.
According to the figures, 15,216 private enterprises shut in 2020-21, 64,054 in 2021-22, a high peak of 83,452 in 2022-23, followed by 21,181 closures in 2023-24 and 20,365 in 2024-25. The 2022-23 surge coincided with a targeted strike-off drive by the Ministry of Corporate Affairs (MCA) to cull out long-dormant corporations and non-compliant entities. In parallel, 1,85,350 corporations were struck off from official records from 2021-22 till July 16, 2024-25, including 82,125 in 2022-23 alone.
Closures Driven by Strike-Offs, Amalgamations and Conversions:
The government explained that corporations have been shut on account of amalgamation, conversion, dissolution and being struck off, per terms of the corporations Act, 2013. According to the law, organizations may be deleted from the registrar’s records if they don’t start or continue operations for a long time or if they voluntarily request removal after meeting all legal requirements. This legal structure and underlying commercial stresses are reflected in the high incidence of strike-offs.
Malhotra’s reply also noted that 1,85,350 companies were removed from official records in the five financial years starting 2021-22, with 8,648 struck off till July 16 of the current fiscal. The maximum removals occurred in 2022-23, when an MCA special drive targeted non-operational and shell-like entities. Officials have framed this as a “corporate clean-up” exercise aimed at improving the quality of the registry and aiding enforcement against possible misuse of dormant companies.
Shell Company Concerns and Enforcement Linkages:
Answering inquiries on shell firms and potential money-laundering hazards, the government pointed out that the phrase “shell company” is not defined in the firms Act, 2013. However, Malhotra added that anytime suspect entities or transactions are identified such as corporations with no genuine activity but large financial flows, the information is shared with enforcement agencies such the Enforcement Directorate (ED) and the Income Tax Department. The goal of this collaboration between agencies is to prevent business formations from being abused for illegal financial transfers or tax evasion.
The large-scale strike-off effort in 2022-23 was partly justified on this argument, with the MCA trying to eliminate “deadwood” and restrict the opportunity for benami or layering operations through inactive corporations. While no aggregate data on action against such situations was offered in the reply, officials pointed out constant surveillance and data-sharing tools to detect and investigate suspect corporate behaviour.
No Rehabilitation Plan for Affected Employees:
When asked in Lok Sabha whether employees of the closed private companies had been rehabilitated, the minister responded that there is currently no proposal before the government for a dedicated rehabilitation scheme. This means any job losses tied to these closures are being handled under existing labour and social security frameworks rather than through a specific package.
On the broader policy front, Malhotra highlighted that the government is focused on simplifying and rationalising the tax regime instead of granting region-specific incentives. He underlined efforts to gradually phase out exemptions and deductions, reduce corporate tax rates and push structural reforms to improve ease of doing business and attract investment. These steps, the government argues, are intended to strengthen a healthier, more transparent corporate ecosystem even as non-compliant or inactive firms are removed from the registry. Overall, the closure of almost 2 lakh private enterprises in five years reveals a picture of simultaneous volatility and clean-up in India’s corporate sector, driven by both market realities and regulatory housekeeping under the enterprises Act.
