Over 2 lakh private companies shut in last 5 years; no proposal for employee rehabilitation: Govt

More than 2.04 lakh private companies have closed down in the past five years, the government informed Parliament on Monday.

Minister of State for Corporate Affairs Harsh Malhotra, in a written reply to Lok Sabha, said these companies ceased operations due to amalgamation, conversion, dissolution and strike-off under various provisions of the Companies Act, 2013.

According to data provided to Lok Sabha, 20,365 private companies were closed down in 2024-25, while the count was at 21,181 and 83,452 in 2023-24 and 2022-23, respectively.

The number of shuttered private companies stood at 64,054 in 2021-22 and 15,216 in 2020-21.

On whether employees of these firms had been rehabilitated or if the government planned any special scheme for their rehabilitation, Malhotra said “there is no proposal before the Government”.

Responding to a query on shell companies, the minister said the term is not defined under the Companies Act.

However, the Ministry of Corporate Affairs routinely strikes off entities if they have not carried out business for two consecutive financial years and have not applied for dormant status, or if subscribers have not paid their promised share capital within 180 days of incorporation.

Providing details in another written reply, the minister said a total of 1,85,350 companies have been struck off during the period from 2021-22 to the current financial year till July 16.

Malhotra also said it is the stated policy of the government to gradually phase out exemptions and deductions while rationalising tax rates to create a simple, transparent, and equitable tax regime instead of providing region-specific tax incentives.

"Moreover, the government has undertaken several reforms to promote investment and ease of doing business, including substantial reductions in corporate tax rates for both existing and new domestic companies," he said.

The minister was responding to a question on whether the government proposes to formulate any policy to provide tax exemption or incentives to companies for setting up industries in backward and rural areas.