What is Defunct?
When a company, whether public or private, goes bankrupt and stops existing, it is said to be “defunct” in business terms. Defunct includes not just the extinction of existence, functionality, or use but also applies to various economic entities such as laws, businesses, organizations, currencies, brands, or practices that have become ancient within the market dynamics. It serves as an indicator of the termination of economic viability and operational sustainability, highlighting the cessation of market participants or institutional frameworks due to financial difficulties and structural vulnerabilities.
The Securities and Exchange Board of India (SEBI) states that the stocks of a defunct company can still be traded until the company delists the stocks or the stock’s registration is canceled. However, the company and its shareholders have to comply with the rules and procedures that SEBI has set for delisting.
What Causes a Company to Become Defunct?
The term “Defunct” means the closure of companies triggered by different factors. Bankruptcy is a major cause of a defunct company, resulting from a financial state where the company’s liabilities exceed its assets. Similarly, illicit practices or fraudulent activities within a company can degrade its reputation, prompting customer attrition and a continuous decline in its market standing, eventually leading to its defunct status. Further, companies may cease to exist due to mergers or acquisitions, wherein their operations, workforce, branding, and intellectual property are incorporated into the acquiring entity. This strategic move within the competitive business perspective often culminates in the dissolution of the acquired company as an autonomous entity, reflecting the complex dynamics of market competition and strategic tricks within the current financial sphere.
Examples of Defunct Companies in India
ATLAS CYCLES: Once a leading bicycle manufacturer, ATLAS CYCLES is now a defunct company, having faced financial insolvency and subsequently ceased operations.
Hike Messenger: Formerly a popular messaging app, Hike Messenger is now defunct, having encountered declining user engagement and intense competition within the messaging app market.
Shuttl: Once a prominent tech-based transportation service provider, Shuttl has now become defunct, ceasing its operations due to financial constraints and stiff competition in the transportation sector.
Meesho Superstore: Previously an emerging e-commerce platform, Meesho Superstore is now defunct, having struggled to sustain its market presence amidst intense competition from established e-commerce giants