UNEASE OF INTEGRATED INCORPORATION


Irrespective of political parties in power, Government of India fails to deliver any substantial ease of doing business or living life. #EaseOfDoingBusiness #EaseOfLivingLife

There is no real delivery except creating some online filing like MCA21 and online payment of fees, taxes and duties in first fifteen years of this 21st century. Switching to online environment from paper environment is just change of mode not a relaxation for ease of doing business or ease of living life from the side of government. This is just a technical advancement without role of government. One can understand it switching from inkpot system to fountain pen or ballpoint pen, which was also resulted in substantial reduction of time. Another example may be paper based tax calculation to calculator based tax calculation.

Presently, government has also come out of another gimmick called integrated incorporation forms. Without digging deep, name just suggests; there is no ease just integration. Instead of less pain, all quantum of pain at one place one time with more possible error of treatment at once. #EaseOfDoingBusiness #EaseOfLivingLife

Now you can apply PAN, TAN, DIN, CIN, ESIC and registration of all related information like list of subscribers, list of directors, registered address, Memorandum of Association, Article of Association, share capital breakups, and a long list of information. My fundamental questions are why PAN based TAN separately required and why PAN based DIN is actually required? What they are doing in Act at all?

One fun I found, replacing notary attested form and photograph by self attested one? Why single signature by a subscriber is not enough just saying “I subscribing this much shares after agreeing to this set of memorandum and articles and submitting my identity.” Whether photograph and address does not exist in PAN record? Whether his face and address will not change further after this submission of documents?

Indian Government is a factory to produce Address proofs and identity documents with latest edition of unique identity, which still has no legal backing by Act of Parliament and has several judicial pronouncements against it. Various experts believe, government of any party shall wait for passing unique identity law by parliament until every resident of India has one (or more) Aadhar cards, so that not passing of such may became joke itself.

Recent Integrated Incorporation Forms has two set actually one is Form INC – 29 which has named as such and another is Form INC – 7 which is simple incorporation form as per rules but integrates PAN, TAN and ESIC.

Because both forms are similar in nature and introduced under same set of amendment rules, I will only Form INC – 29 for sake of ease only along with all related issues.

Notification in Official Gazette:

These amendment Rules come into force from the date of publication in official gazette. These are yet to publish in official gazette. Without any respect to the Constitution, Parliament, the Companies Act 2013 passed by Parliament and these amendment rules itself, Government of India introduced forms amended under these proposed amendment rules with effect from 1st May 2015.

A Rule making body, Ministry of Corporate Affairs in present case, which do not follow its own law, shall never do ease of doing business or ease of living life. This is a breach of trust by the regulator and administrator of the Companies Act 2013 and other corporate laws. EaseOfDoingBusiness #EaseOfLivingLife

Nothing published by MCA in Official Gazette

Nothing published by MCA in Official Gazette

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 this amendment to Rule 6(1) as law may not be changed without proper legal process. #EaseOfDoingBusiness #EaseOfLivingLife

Issues with INC – 10:

Clause (q) of Rule 16(1) before present amendment asks 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 may be 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 decide? 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.

When I refer to Form INC – 10, its heading does not match with wording of the clause under which it is introduced. The heading of this Form is “Form for verification of signature of subscribers” without any reference for directors. More interestingly, First Point in the Form INC – 10 includes first directors.

Fundamentally, why first directors or any other director need such specimen signature? What will procedure if one want to change signature. Sadly, after introduction of signature on PAN card, change of signature is quit tough and faking signature is quite easy. #EaseOfDoingBusiness #EaseOfLivingLife

ADDRESS OF POLICE STATION:

Since long, Form for intimating address of corporate office asks address of the police station which has jurisdiction at place of registered office. I have long time suggestion that there should be some online help from government so that applicant may locate police station.

Fundamentally, why should one office of Government asks address of another office? Whether this office may communicate police station directly? No, one office may communicate to another through proper channel only.

PAN, TAN, ESIC:

Applicant may apply PAN, TAN and ESIC for company being incorporate while filing Form INC – 7 or much talk about Form INC 29. But this is part true only. Form being eligible, such form shall be filled through recently launched E- Biz portal. This portal shall act as just another single window system in India and add one more window for ease of doing business in India. Form filed through normal MCA21 system shall not be eligible for integrated services. On E- biz portal applicant shall ensure that Form for PAN, TAN and ESIC picked correct values from Form INC – 7 or Form INC – 29. This is actually filling three forms with single keystroke and checking four forms as there is no ease of business in India.

DIN:

Integrating DIN application is not for all proposed directors but only three directors. There is no explanation for this arbitrary limit.

As I have asked earlier, why a need for DIN, when DIN is derivative of PAN only? Does DIN add value in ease of doing business in India?

NEWLY INCORPORATED RULE 36:

Date of coming into effect:

Rule 36(1) says, for the purpose of simplifying the filing of forms for incorporation of a company, the integrated process shall apply with effect from 01/05/2015.

This sub – rule has two fundamental issues. There is no date in words and there is no clarity on date as there conflicting systems to read a date. Now, I presume date in popular Indian system DD/MM/YYYY format.

But, when these amendment rules have not come into force and when rule 36(1) have not came into force how this non- enforceable sub – rule may declare a date for new forms prior to date of its own enforceability. This sub – rule is void, unless amendment rules 2015 had been notified on or before 1st May 2015 in official gazette.

Additional Fee:

Sub – rule (2) of newly incorporated Rule 36, authorise charge of the fee of rupees two thousand in addition to the registration fee as specified in Companies (Registration of Offices and Fees) Rules, 2014. So, initial cost of ease of doing business is Rs. 2000 without any substantial ease, authenticity and acceleration.

Only one proposed name:

Without any satisfactory reason, ministry has arbitrarily reduced option of proposed name from six to one. This is to facilitate more filing by way of rejection of proposed name. While Ministry charging more money they are giving less facility.

Suspending a provision of Act by a subordinate legislation:

When integrate incorporation under this rule, name supposed to be reserved by the applicant immediately used by applicant by virtue of this Form INC – 29 and company is incorporated. Similarly when an applicant opts for normal process and File Form INC – 1 for reservation of name and then very second day may opt for incorporation. Practically, in both case, reservation of name become permanent for the company.

Sub – rule (8) of Rule 36 mandate, for an application filed using the integrated process of incorporation as provided this rule, the provisions of sub – section (i) of sub – section (5) of Section 4 of the Act and Rule 9 of these rules shall not apply.

How a subordinate legislation like these rules may change, amend, exempt application of a provision of Act passed by Parliament of India? There was no need of this rule and without this sub – rule position is perfectly clear.

Similarly, there is no need of saying anything about Rule 9 of these rules.

Notice of Order of the Court or any other competent authority:

In another ease, sub – rule (11) of these Rules dispense with requirement of filing of Form INC – 28, which is a notice of order of the court or any other competent authority. However, language suggests this rule may be referring some other form not Form INC – 28. This may be Form INC – 22 which is a notice of situation or change of situation of registered office. Even reading of Form Inc – 29 indicate my guess is correct but I cannot read a change in a rule at my own.

Unless this sub – rule have amended, a company should file Form INC – 22 without reading anything suggested by Form INC – 29.

CONCLUSION:

Recent amendment just suggests that government is not serious about ease of doing business and ease of living life. Government just came before us with a publicity stunt. Intentionally poor drafting, wrong process and delay in notification are some tools to fool stakeholders and to make of fun of government itself.

Before talking about ease of doing business and ease of living life, position and opposition of the government must come together to handle half hearted machinery at government establishments. Unless, government machinery is ready to abandon its procedural powers and systems, we may not find proper law.

Governments across India have choice among Kheej of doing business, Ease of doing business and Tease of doing Business.

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One response to “UNEASE OF INTEGRATED INCORPORATION

  1. Pingback: Index of Companies Law Posts | AishMGhrana

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