Amendment in Incorporation Rules

Ministry of Corporate Affairs notified by notification G.S.R. 936(E) on 1^st October 2016 the Companies (Incorporation) Fourth Amendment Rules, 2016 amending the Companies (Incorporation) Rules, 2014 with effect from date of publication in official gazette means 1^st October 2016. New rule 39 is being inserted with effect from 1^st November 2016.

In present blog post, we will discuss amendment which are effective form 1^st October 2016.

Please do not get confused with official press release dated 3^rd October 2016 suggesting that new Form SPICe is launched on Gandhi Jayanti 2016. This press release is nothing to do with law. Further, relevant forms related to newly inserted rule 38 was made available on 3rd October 2016. Readers who are not supporters of ruling party are free to consider this press release as politically motivated.

Present amendment is fourth amendment of the year to these incorporation rules this year and 6^th from notification of original rules.

Alteration of Articles

Before present amendment, rule 33 of the Companies (Incorporation) Rules, 2014 as discussed earlier here read as under –

“(1) For effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No – INC – 27 with fee.

(2) A copy of order of the competent authority approving the alteration, shall be filed with the Registrar in Form No – INC – 27 with fee together with the printed copy of the altered articles within fifteen days of the receipt of the order from the Central Government.

Explanation – For the purposes of this sub-rule, the term “competent authority” means, the Central Government.”

These amendment rules substitutes sub – rules (2) along with its explanation with a new sub – rule (2). Substituted sub – rule (2) of rule 33 reads as under –

“(2) subject to the provision of sub-rule (1), for effecting the conversion of a public company into a private company, a copy of order of the Tribunal approving the alteration, shall be filed with the Registrar in Form No – INC – 27 with fee together with the printed copy of altered articles within fifteen days from the date of receipt of the order from the Tribunal.”

This substituted sub – rule (2) is in compliance with second proviso to sub – section (1) of section 14 of the Companies Act, 2013 which mandate that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit. Section 14 was discussed earlier here. Until recently, the National Companies Law Tribunal was not working and therefore power of National Companies Law Tribunal under this proviso was being exercised by the Central Government.

Simplified Proforma for Incorporating Company Electronically (SPICE)

Newly inserted rule 38 talk about newly inserted simplified proforma for incorporating companies electronically. The notification public in official gazette mentioned it SPICE (All capital) while press release say it SPICe (All capital except e). According to press release SPICe’s Unique Selling Point (USP) is –

• Simplified and completely Digital form for Company Incorporation
• Standard format of  e – Memorandum of Association  as per Companies Act, 2013
• Standard format of e – Articles of Association as per Companies Act, 2013
• Memorandum and Articles will now be filed as linked e – forms (except for Section 8 companies)
• Provision to apply for Company Incorporation with a pre – approved Company Name
• Mandatory DSCs of Subscribers and Witnesses (max 7+1) in SPICe MOA and SPICe AOA
• Back Office productivity gains due to faster review of e-MOA and e-AOA by approving authorities.
• Existing INC-29 and INC-7 will be phased-out and SPICe will be the Sole, Simplified & Versatile form available for incorporation of a company in India

According to sub – rule (1) of rule 38, the simplified integrated process for incorporation of a company in Form No INC – 32 along with e – Memorandum of Association in Form No INC – 33 and e – Articles of Association in Form No INC – 34.

Presently like normal Form INC – 7 and integrated form INC – 29, SPICE Form INC – 32 shall also be a form for incorporation. This form INC – 32 may be treated as direct replacement for Form INC – 7 as this allow name approval under Form INC – 1.

Form INC – 32 shall have following linked forms –

• Form INC – 33 e – Memorandum of Association
• Form INC – 34 e – Articles of Association

The Memorandum and Articles now need not be signed under the hands of subscribers and witness but shall be digitally signed by subscribers and witness.

According to sub – rule (2) of rule 38, the provisions of sub-rule (2) to sub-rule (13) of rule 36 shall apply mutatis mutandis for incorporation under this rule. According to proviso to sub – rule (2) of rule 38, for the purposes of references to form numbers INC – 29, INC – 30 and INC – 31 in rule 36 with Form No INC – 32, Form no INC – 33 and Form No INC – 34 shall be substituted respectively.

We will discuss Form INC – 32, Form INC – 33 and Form INC – 34 in next post this week. We will discuss newly inserted rules 39 and Form INC – 11B in another post later.