1.85 lakh new companies incorporated in FY24, the highest ever

Reflecting a sharp rise in economic momentum and activity, the number of new company incorporations in the country rose to the highest ever level of 1.85 lakh in 202324. This represented a 16.35 per cent jump to the number of companies incorporated at 1.59 lakh in 202223, official data showed.

The number of limited liability partnerships (LLPs) registered also surged in 202324 to touch 58,990, up 39 percent over 36,249 LLPs registered in previous fiscal.

“MCA records the highest number of incorporations during 202324, surpassing any of the previous financial years,” said an

MCA post in platform ‘X’, formerly Twitter, on Tuesday.

Commenting on the MCA data on new incorporations, G Ramaswamy, former CA Institute President and Member of the MCAappointed Company Law Committee, told businessline: “More companies are getting incorporated now because of reforms started by the government such as decriminalisation of provisions in the Companies Act, ease of doing business, ease of compliance, and reduction in corporate tax rate. This has encouraged more company incorporations in the country. This is also fuelling foreign direct investments into India.”

He said several young entrepreneurs and startups are keen to run their businesses in a corporate structure.

Noorul, Partner at Lakshmikumaran & Sridharan Attorneys, said, “Increasing number of incorporations undoubtedly reveals the overall trust by the promoters and investors in the growth story of India, despite many marketoriented weaknesses.”

A plethora of factors contributed to the increase in incorporations.

“Foreign entities cannot ignore India as it has largest consumer base coupled with the fact that there is a growing number of internet/smart phone users.

“Schemes such as Startup India aiding in seed funding and incubation support from the DPIIT along with legislative benefits under the Companies

Act and Income Tax Act were one of the factors for the increase in companies and LLPs in India,” he said.

Noorul also said that FDI policy has relaxed sectoral restrictions in insurance, space, and other sectors to boost investments.

PLI SCHEME

“Further, the productionlinked incentive (PLI) scheme has revolutionised the manufacturing sector in India and the ‘China Plus One’ strategy leading the global corporates to shift manufacturing bases in India is another significant step for more and more companies to grow,” he added.

An LLP is quintessentially a hybrid between a limited liability company and a partnership.

It has the advantage of being a body corporate, but at the same time internal governance and inter se relations among partners and LLP are regulated by the LLP Agreement and not by any statutory provisions.

Over the last few years, there has been increased preference to set up LLPs due to several advantages including lower compliance for such structures.