The Ministry of Corporate Affairs has deregistered more than 100,000 companies (constituting around 6% of total registered companies in India) in a move to eradicate tax evasion / money laundering / siphoning off funds and the culture of creating paper / shell / dormant companies just to divert attention of tax authorities and cheating minority shareholders.
More than 54,000 of these companies found to be non-functional and dormant for years were from eight States and two Union territories. The highest number of such companies was from Delhi and NCR (more than 22,000).
The government has been announcing such drives in the past too. This time, however, the scale of clean up has been unprecedented.
The job, is however, far from over. There are still about 200,000 more such companies in respect of which action is being contemplated.
The government is also mooting to reduce the multi-layering of companies as subsidiaries and has moved a draft note for public consultation in this regard.
Such cleaning up is a welcome step in the direction of moving to higher compliance, ethical standards of corporate governance.
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