271 companies shut operations in Northern region amid pandemic
As many as 271 companies in Punjab, Haryana, and Chandigarh have closed their operations in the past four months of the current fiscal. Further, 1,698 companies are in the process of being struck off from the list of Ministry of Corporate Affairs (MCA) for not filing their annual returns, balance sheets and other violations.
The maximum number of companies that ceased to exist was in Punjab (136), followed by Haryana (70) and Chandigarh (65). As many as 1,002 companies in Haryana are in process of being struck off from the MCA list, followed by Punjab (451) and Chandigarh (245).
According to sources, the pandemic affected all sectors and led to a decline in industrial production, resulting in the closure of many companies. For the month of April and May, the Index of Industrial Production (IIP) witnessed a steep negative growth (year-on-year) of -57.6% and -33.9%, respectively. However, as the industrial activity resumed, the growth for June stood at -16.6% as compared to June 2019. Among the worst-impacted sectors were auto parts, textiles, garments, hand tools and sports goods.
In addition to this, the startups were also hit badly as they had limited cash reserves to meet the fixed expenses. “Lack of working capital and cash flows led to layoffs initially and later closure of units,” said an official associated with a startup.
As on July 31, 116 companies in the region have achieved “dormant” status u/s 455 of the Companies Act.