India Witnessed A Decline In New Companies In FY 15

The increasingly stringent compliance norms seem to have deterred entrepreneurs to come up with their new companies. According to a reply filed by Corporate Affairs Minister Arun Jaitley, there has been a decline in the registration of new companies between April and August of the current financial year.

“The number of companies registered during the first five months of this financial year (2014-15) was 21,260, as against 43,601 companies registered during the corresponding period of the previous year,” stated Corporate Affairs minister Jaitley.

Attributing the decline to stricter rules, union minister Jaitley added that the government had become stricter with its rules in order to protect investors from being duped.

“There is no evidence or feedback suggesting that the decline is in any way attributable to tedious compliance entailed by the new Act. However, it is a fact that the provisions of Companies Act, 2013 have safeguards against floating ‘shell companies’. Further, the decline is also attributable to introduction of new e-forms and the time taken by professionals to become familiar with such forms,” he explained.

It is interesting to note that there has been a steep decline in the registration of new companies on a monthly basis. Less than 1,000 new firms had registered in April 2014-15 as against 9,026 companies in the corresponding period in 2013-14. On the other hand, only 1,789 companies registered in May in FY 15 over 10,546 new enterprises in the same month last fiscal year.

June witnessed almost half of new registrations of what had been recorded in June 2013-14 while July and August saw 7,229 and 6,676 new companies respectively. In July and August 2013-14, the Ministry of Corporate Affairs had recorded 8,784 and 7,181 new registrations respectively.

“An Expert Committee has been constituted by this Ministry recently to (a) review the e-forms notified under the Companies Act, 2013 (b) to suggest changes aimed at simplifications of such forms and (c) removal of difficulties faced by stakeholders,” averred Union Minister Jaitley.

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