Over 2 lakh private companies shut in five years: Minister

More than 2.04 lakh private companies have shut shop in India in the past five financial years, said Harsh Malhotra, Minister of State in the Ministry of Corporate Affairs, and Minister of State in the Ministry of Road Transport and Highways. 

Answering a question on Monday, December 1, he said, as many as 2.04 lakh private companies formally shut down between FY21 and FY25 due to amalgamation, conversion, dissolution, or strike-off under various provisions of the Companies Act, 2013.

However, the data reveals a significant year-on-year fluctuation, with 15,216 companies shutting down between 2020–21, surging to 64,054 in 2021–22 and further to 83,452 companies in 2022-23. The trend then reversed, dropping to 21,181 companies in 2023-24 and 20,365 companies closing down in 2024-25. 

The steep rise in closures during FY22 and FY23, together accounting for more than 1.47 lakh shutdowns, marks the highest two-year spike in the five-year period. 

In response to questions about employee rehabilitation schemes for workers affected by company closures, the government stated that there are no such proposals before the government.

While the government did not provide reasons for the year-on-year fluctuations, it clarified that the closures result from standard legal processes such as voluntary winding up, dissolution due to amalgamation, and regulatory strike-offs for non-compliance or inactivity.

Regarding employees rehabilitation, the minister stated there is no proposal before the government to implement any such scheme. The ministry also confirmed that no special programmes are currently under consideration for workers affected by company shutdowns.

Clarifying a query regarding ‘shell companies,’ that is, companies that are legally-formed without any active business operations or significant assets, the ministry informed that the term is not defined under the Companies Act, 2013. 

However, it emphasised that the government regularly undertakes strike-off action under Section 248(1) against companies that have failed to carry out business for two consecutive financial years or have not met statutory requirements such as paying initial subscription amounts or filing the mandated declaration within 180 days of incorporation.

The government also addressed questions on offering tax exemptions or incentives to corporates setting up industries in rural or backward regions. It assured its broader policy stance of phasing out exemptions and deductions in favour of a simplified, transparent tax regime. Current reforms focus on improving ease of doing business, including reductions in corporate tax rates for domestic companies, rather than region-specific incentives.

“The government has undertaken several reforms to promote investment and ease of doing business, including substantial reduction in corporate tax rates for both costing and new domestic companies,” the statement read.