Voluntary closure of companies, LLPs drops in FY26, signals fewer business failures

Fewer companies and limited liability partnerships (LLPs) shut operations voluntarily in the first seven months of this fiscal year from a year before, while fresh registrations scaled a new peak, showed data from the corporate affairs ministry.

The improvement suggests a decline in business failures so far in FY26, reinforcing the notion of economic resilience despite external headwinds, said a senior government official. Fewer closures during times of record company incorporations also expanded the base of corporate India.


Between April and October, the number of companies struck off from the Registrar of Companies (RoC) after opting for closure following due processes stood at 10,417, improving from 11,359 a year earlier, the data showed. Similarly, 3,758 LLPs were removed during this period, against 4,556 a year earlier.

Meanwhile, fresh incorporations of companies and LLPs between April and October hit a record 137,393 and 51,461, respectively.

Easier closure of failed businesses encourages entrepreneurs to invest resources in more productive ventures, boosting economic activity and employment, experts said.

Ease of exit

The government has stepped up focus on the “ease of exit” of businesses in recent years by setting up a centralised electronic system or C-PACE in 2023.

This system, which focusses on faster processes and timely disposal of exit applications, and closer official monitoring have expedited voluntary winding up of companies. It doesn’t require physical interactions with stakeholders.

Consequently, voluntary closure of companies, which used to take more than two years before the pandemic, is currently done in just about two months, said the official cited above.

Legal framework

Names of the companies were removed according to Section 248(2) of the Companies Act. It allows a company to voluntarily apply to the registrar for the removal of its name after extinguishing all liabilities and gathering consent from members accounting for at least 75% of its paid-up share capital through a special resolution.

Similarly, the RoC, under section 75 of the LLP Act, 2008, read with rule 37 of the LLP Rules, 2009 is empowered to remove the name of any entity that is not operational for over two years, but after giving it a reasonable hearing.

An LLP can also approach the RoC for voluntary closure under rule 37(1) on satisfying conditions, including obtaining consent from all its partners and settling entire liabilities.

As for record incorporations, officials have cited strong economic growth, sustained government focus on lowering the compliance burden, and making it easier for businesses to set up units.

Economic growth hit a five-quarter high of 7.8% in the April-June period, despite uncertainties caused by high US tariffs. This prompted the International Monetary Fund (IMF) to raise its FY26 growth projection for India to 6.6% from 6.4%.

The IMF also expects India to remain the world’s fastest-growing major economy for at least two years.