There is no definition of the term ‘Shell Company’ in the Companies Act. It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

On the identification shell companies, the Minister stated that the Special Task Force set up by the Government to look into the issue of ‘Shell Companies’ has inter-alia recommended the use of certain red flag indicators as alerts for identification of Shell Companies.

Giving more details, the Minister stated that the Government has undertaken a Special Drive for identification and strike off of Companies by invoking the provisions of section 248 (1) of the Act by which the Registrar of Companies (RoC) struck off those companies after following the due process of law from the Register of companies when RoC has reasonable cause to believe that those companies are not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

The Minister listed the total number of companies struck off u/s 248 State/Union Territory-wise as under:

Sate/ UT-wise 2018-19 2019-20 2020-21
Gujarat 6398 2494 257
Andaman 24 15 2
Karnataka 4171 5568 1038
UT of Chandigarh 3514 893 501
Tamil Nadu and Coimbatore 9107 3214 1322
Orissa 2907 719 78
NCT of Delhi and Haryana 30544 12653 2396
Kerala 2801 5339 977
Goa 250 311 36
Madhya Pradesh 3386 1168 111
Himachal Pradesh 481 176 201
Telangana 16364 2686 730
Rajasthan 4038 4466 507
Jammu and Kashmir 255 138 0
Jharkhand 1306 403 139
Uttar Pradesh 7589 5821 1936
West Bengal 8390 6627 5
Maharashtra (Mumbai and Pune) 47575 7824 2298
Bihar 2540 1956 185
UT of Puducherry 37 117 35
Assam, Tripura, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Manipur, and Sikkim 372 796 88
Uttarakhand 476 79 0
Andhra Pradesh 3864 958 0
Chhattisgarh 539 347 47
Grand Total 156928 64768 12889

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