CENTRAL REGISTRATION CENTRE AND AMENDMENT IN COMPANY INCORPORATION RULES

Central Registration of companies is under consideration since long and is being considered on different forums. The Central Government silently launched a pilot project for setting of Central Registry for companies in India. This should initiate more actively by all interest groups to avoid any future concern, as happened in case of companies. In this post, we will discuss notification setting the Central Registration Centre and corresponding amendment in the Companies (Incorporation) Rules 2014.

Legal Background

Section 396(1) empower Central Government with power to establish such number of registration offices at such places as it think fit, specifying their jurisdiction. Under Section 396(2) the Central Government may appoint such Registrars, Additional, Joint, Deputy and Assistant Registrars as it considers necessary for the registration of companies and discharge of various functions under this Act, and the powers and duties that may be exercisable by such officers shall be such as may be prescribed. We have already discussed this section earlier here.

Central Registration Centre

Central government vide notification S.O. 218(E) dated 22^nd January 2016 with effect from 26^th January 2016 (i.e. National Holiday called Republic Day) established a Central Registration Centre (CRC) having territorial jurisdiction all over India, for discharging or carrying out the function of processing and disposal of applications for reservation of names under the provisions of the said Act.

The CRC shall process applications for reservation of name i.e., e-Form No. INC-1 filed along with the prescribed fee as provided in the Companies (Registration of Offices and Fees) Rules, 2014. Processing and approval of name or names proposed in e-Form No. INC-29 shall continue to be done by the respective Registrar of Companies having jurisdiction over incorporation of companies under the Companies Act, 2013 as per the provisions of the Act and the rules made thereunder.

Against the nomenclature, this office for this CRC that it will not register any company but just reserve name for a fraction of companies to be incorporate in India. This is just a centralised reservation counter. Registration of Companies shall continue be handled by the registrar of companies having jurisdiction at the place of registered office of the company.

The CRC shall be located at Indian Institute of Corporate Affairs (IICA), Plot No. 6,7, 8, Sector 5, IMT Manesar, District Gurgaon (Haryana), Pin Code-122050. The CRC shall function under the administrative control of Registrar of Companies, Delhi (ROC Delhi), who shall act as the Registrar of the CRC until a separate Registrar is appointed to the CRC.

Amendment in Incorporation Rules

A draft notification for the amendment of the Companies (Incorporation) Rules 2013 pending publication in the Gazette of India is placed on the website of the Ministry of Corporate Affairs. This will come into force with effect from 26^th January 2016 (National Holiday – Indian Republic Day). We will here discuss changes proposed by the Companies (Incorporation) Amendment Rules, 2016.

Name Availability

Rule 8 of the Companies (Incorporation) Rules, 2014 earlier amended by the Companies (Incorporation) (first) Amendment Rules, 2015 is proposed to be amended by these draft Rules.

Rule 8(2)(b)(ii) omitted

This clause, now omitted read, “the name shall also be considered undesirable, if it is not in consonance with the principal objects of the company as set out in the memorandum of association; Provided that every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objects mentioned in the memorandum”.

Before this amendment, name of the company need not to have an indication of its principle business activities, but if name has any indication of objects that indication should be in conformity of with the objects. Now, this relation with objects related word in name and real objects of the company is being broken. After this amendment, middle name of companies, i.e. objects need not really be related to its principle objects.

This may satisfy “ease of doing business” mindset of our bureaucracy and think – tanks but may create practical problem. At ease side, when company in due course change its objects clause, shall not require to change its name to indicate its objects. At other side, this may lead layperson investors in risk, as now lay investors may not identify objects of a company by its name. Though, it may not create any issue in genuine promoters and companies but may give fraudsters undesired loophole.

Rule 8(2)(b)(x) omitted

This clause, now omitted read, “the proposed name is vague or an abbreviated name such as ‘ABC limited’ or ‘23K limited’ or ‘DJMO’ Ltd: abbreviated name based on the name of the promoters will not be allowed. For example:- BMCD Limited representing first alphabet of the name of the promoter like Bharat, Mahesh, Chandan and David.

Existing company may use its abbreviated name as part of the name for formation of a new company as subsidiary or joint venture or associate company but such joint venture or associated company shall not have an abbreviated name only e.g. Delhi Paper Mills Limited can get a joint venture or associated company as DPM Papers Limited and not as DPM Limited.

The companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name after following the requirements of the Act.”

Now, Name of company may be an abbreviated name. Like abbreviation of first name of promoters, abbreviation of place of birth of promoters or just a fancy abbreviation likes XQYZ.  This removes all restrictions on abbreviated names and unlocks a good numbers of creative names for companies.

Rule 8(2)(b)(xvii) omitted

This clause, now omitted read, “it is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal”.

This gives freedom to company to have any name without any presumption of misleading impression. Now, a company may have word corporation, India limited, Asia limited in its name.

 Rule 8(3) omitted

This clause, now omitted read, “if any company has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of six months from the change of activities after complying with all the provisions as applicable to change of name”.

There is no need now to change name to reflect its line of activities.

This omission of Rule 8(2)(b)(ii), 8(2)(b)(xvii), and Rule 8(3) may satisfy “ease of doing business” mindset of our bureaucracy and think – tanks but may create practical problem. At ease side, when company in due course change its objects clause, shall not require to change its name to indicate its objects. At other side, this may lead layperson investors in risk, as now lay investors may not identify objects of a company by its name. Though, it may not create any issue in genuine promoters and companies but may give fraudsters undesired loophole.

Rule 8(4) omitted

This clause, now omitted read, “In case the key word used in the name proposed is the name of a person other than the name(s) of the promoters or their close blood relatives, No objection from such other person(s) shall be attached with the application for name. In case the name includes the name of relatives, the proof of relation shall be attached and it shall be mandatory to furnish the significance and proof thereof for use of coined words made out of the name of the promoters or their relatives”.

Keyword used in the name of the company may relate any name without any relation with name of promoters, their close relatives or any other persons. Consequently, there is no requirement to give any proof of relation or no objection.

Reservation of Name

These amendment Rules proposed to be substituted by new rule. Earlier Rule 9 read as under:

“An application for the reservation of a name shall be made in Form No. INC – 1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014”.

Now, new Rule 9 shall be:

“An application for the reservation of a name shall be made in Form No. INC – 1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Centre.”

New rule is in alignment with Notification to establish Central Registration Centre, as discussed above.

Re – submission in Integrated Process of Incorporation

The Companies (Incorporation) Amendment Rules, 2015 introduced Integrated Process of Incorporation by introducing Rule 36 to the Companies (Incorporation) Rules, 2014. Presently, Clause (b) of Sub – rule (12) of Rule 36 of gives single opportunity of resubmission of form. New, Clause (ba) is being inserted to give a third opportunity:

“After the resubmission of the documents and on completion of second opportunity, if the registrar still finds that the documents are defective or incomplete, he shall give third opportunity to remove such defects or deficiencies. The total period for re-submission of documents shall not exceed a total period of thirty days.”

Accordingly, Clause (c) of the sub Rule be amended to the following:

“In case, the Registrar is of the Opinion that the document is defective or incomplete in any respect after giving such two opportunities three opportunities, the e – form 29 of the proposed company shall be rejected.”

These Rules also substitutes Form no. INC – 1 with new Form.

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