AMENDMENT IN COMPANIES INCORPORATION RULES

At the time of writing this blog post, I have no information of publication of the Company (Incorporation) Rules, 2015 which seems to come into effect with effect from 1^st May 2015 as Official MCA21 portal has issued all forms prescribed under these forms.

I have no words of advice on enforceability of these rules until copy of publication in official gazette. These Rules come into effect only after publication in official gazette. [Rule 1(1) of the Companies (Incorporation) Amendment Rules 2015]

Penalty:

In original Rule 5 discussed earlier here, penalty in relation to contravention of these rules by One Person Company or its officer was prescribed. Rule 5 of these rules is being deleted.

But penalty is still there. New Rule 7A is introduced for the purpose. I highlight effect in deletion of rule 5 and introduction of rule 7A here:

If One Person Company or any officer of such company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company such company shall be punishable with fine which may extend to ten thousand rupees five thousand rupees and with a further fine which may extend to one thousand rupees five hundred rupees for every day after the first offence during which such contravention continues.

The effect of these changes is reduction of penalty to half from earlier one and insertion of term “offence” to bring more clarity in interpretation of the rule.

One Person Company to convert

Present Amendment, Interestingly proposes an amendment in sub – rule (11) of Rule 6. There is no such sub – rule in this Rule. Readers, please do not suggest amendment to Rule 6(1) as law may not be changed without legal process.

Conversion of private company into One Person Company:

We have discussed Rule 7(1) earlier here. Now, this sub – rule 7(1) read as, “a private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs rupees or less OR AND average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting.”

This amendment made it clear that for conversion of a private company into a One Person Company, both paid up capital and average annual turnover of the company should be less than the prescribed monitory limits.

Undesirable Names:

We have discussed sub – clause (xi) clause (b) of sub – rule (2) of Rule 8 earlier here. Now, these amendment rules insert words, figures and brackets “or under section 560 of the Companies Act 1956 (1 of 1956)”. The amended sub – clause (xi) of clause (b) of sub – rule (2) of Rule 8 shall be:

“the proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years have not elapsed from the date of such dissolution:

Provided that if the proposed name is identical with the name of a company which is struck off in pursuance of action under section 248 of the Act or under section 560 of the Companies Act 1956 (1 of 1956), then the same shall not be allowed before the expiry of twenty years from the publication in the Official Gazette being so struck off;”

Particulars of every subscriber:

As we have discussed earlier here, clause (q) of Rule 16(1) ask for verification of specimen signature and photograph by banker or notary. Now this clause is being substituted as:

“The promoter or first director shall self attest his signature and latest photograph in Form No. INC – 10.”

This gives the effective reading that:

“The following particulars of every subscriber to the memorandum shall be filed with the Registrar – (q) the promoter or first director shall self attest his signature and latest photograph in Form No. INC – 10.”

Self attestation is certainly a welcome step and contributes in ease of doing business in India, but a case of poor drafting. The question is whether all subscribers or all promoters or all first directors need self attestation and who will decise? When all directors has DIN, why such verification is requires form them as director? Net result is NO Ease of business. Yes, most reader may refer me to Form INC – 10, but fact is Forms are part of annexure to the rules and subordinate to the Rule.

Substitution of Forms:

In Annexure following forms is being substituted:

Form No. INC – 7

Form No. INC – 10

Form No. INC – 11

Form No. INC – 22

A new Form INC – 29, INC – 30 and INC – 31 namely integrated Incorporation Form, Memorandum of Association, and Articles of Association respectively is being inserted.

We will discuss all these forms separately.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.