Shifting Registered Office to another state

[The law stated in this post is valid from 27th July 2017 with an update made in this post with effect from 6th March 2019]

On 27^th July 2017, Ministry of Corporate Affairs published a notification in Official Gazette of India amending the rules relating to shifting of registered office of a company from jurisdiction of its present registrar of companies to another registrar of companies. The Companies (Incorporation) Second Amendment Rules, 2017 came into effect from the date of publication. In this post, we will discuss the shifting of registered office of a company to another state or the union territory.

Rule 30 of the companies (Incorporation) Rules, 2014 as amended by the Companies (Incorporation) Third Amendment Rules, 2016 has been discussed earlier here and here. This amendment by substituting present Rule 30 with a new one, have many minor but significant changes.

Application

According to sub-rule (1), an application under sub-section (4) of section 13, for the purpose of seeking approval for alteration of memorandum with regard to the change of place of the registered office from one State Government or Union territory to another, shall be filed with the Central Government in For INC – 23 along with the fee and shall be accompanied by the following documents, namely: —

(a) a copy of Memorandum of Association, with proposed alterations;

(b) a copy of the minutes of the general meeting at which the resolution authorising such alteration was passed, giving details of the number of votes cast in favour or against the resolution;

(c) a copy of Board Resolution or Power of Attorney or the executed Vakalatnama, as the case may be.

Here, we can notice a cut in a long list given in earlier Rule 31(1).

Declarations

According to sub-rule (2), there shall be attached to the application, a list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of an application by not more than one month, setting forth the following details, namely:-

(a) the names and address of every creditor and debenture holder of the company;

(b) the nature and respective amounts due to them in respect of debts, claims or liabilities:

Provided that the list of creditors and debenture holders, accompanied by a declaration signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be a managing director, where there is one, stating that –

(i) they have made a full enquiry into the affairs of the company and, having done so, have concluded that the list of creditors is correct, and that the estimated value as given in the list of the debts or claims payable on a contingency or not ascertained are proper estimates of the values of such debts and claims and that there are no other debts of or claims against the company to their knowledge, and

(ii) no employee shall be retrenched as a consequence of shifting of the registered office from one state to another state and also there shall be an application filed by the company to the Chief Secretary of the concerned State Government or the Union territory.

Significant changes are declarations in place of affidavits given in earlier rule 30(2) and 30(3).

Inspection of List of Creditors

According to sub-rule (3), a duly authenticated copy of the list of creditors shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect and take extracts from the same on payment of a sum not exceeding ten rupees per page to the company.

This is the same as earlier sub-rule 30(4).

Acknowledgement of service

According to sub-rule (4), there shall also be attached to the application a copy of the acknowledgement of service of a copy of the application with complete annexures to the Registrar and Chief Secretary of the State Government or Union territory where the registered office is situated at the time of filing the application.

This is the same as earlier sub-rule 30(5).

Advertisement

According to sub-rule (5), the company shall, not more than thirty days before the date of filing the application in Form No. INC.23 –

(a) advertise in Form No. INC.26 in the vernacular newspaper in the principal vernacular language in the district and in the English language in an English newspaper with the widest circulation in the state in which the registered office of the company is situated:

Provided that a copy of advertisement shall be served on the Central Government immediately on its publication.

(b) serve, by registered post with acknowledgement due, individual notice, to the effect set out in clause (a) on each debenture-holder and creditor of the company; and

(c) serve, by registered post with acknowledgement due, a notice together with the copy of the application to the Registrar and to the Securities and Exchange Board of India, in the case of listed companies and to the regulatory body, if the company is regulated under any special Act or law for the time being in force.

Earlier rule 30(6) requires advertisement at least fourteen days before the date of hearing. Newly inserted rules suggest the advertisement should be not more than thirty days earlier then hearing. This is ease of interpretation.

Strangely, MCA puts a harder requirement in the case of English language advertisement in English language newspaper. Earlier, an advertisement in an English language newspaper circulating in the district of registered office was enough. Now, such advertisement should be in an English newspaper with the widest circulation in the state. This shall create a monopoly of the biggest one for advertisement. In absence of any official figure of widest circulation, a company may find itself amid rival claims regarding circulation.

Attachments

According to sub-rule (6), there shall be attached to the application a duly authenticated copy of the advertisement and notices issued under sub-rule (5), a copy each of the objection received by the applicant, and tabulated details of responses along with the counter-response from the company received either in the electronic mode or in physical mode in response to the advertisements and notices issued under sub-rule (5).

This is a strange requirement. According to advertisement format Form INC – 26, all objections shall be sent to Regional Director. But sub-rule 30(6) talk about objections received by applicants. A company need to respond to all objections received, there are certain mismatches between rule and form.

No objection cases

According to subsection (7), where no objection has been received from any person in response to the advertisement or notice under sub-rule (5) or otherwise, the application may be put up for orders without hearing and the order either approving or rejecting the application shall be passed within fifteen days of the receipt of the application.

New subrule has a mandatory time limit of fifteen days for such applications.

Objection received

According to subsection (8), where an objection has been received,

(i) the Central Government shall hold a hearing or hearings, as required and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Central Government shall pass an order approving the shifting, within sixty days of filing the application.

(ii) where no consensus is reached at the hearings the company shall file an affidavit specifying the manner in which objection is to be resolved within a definite time frame, duly reserving the original jurisdiction to the objector for pursuing its legal remedies, even after the registered office is shifted, upon execution of which the Central Government shall pass an order confirming or rejecting the alteration within sixty days of the filing of application.

There are some new requirements here. New rules ask for an affidavit to record the commitment either with consensus or without consensus with reserving original jurisdiction to the objector.

Order

According to sub-rule (9), the order passed by the Central Government confirming the alteration may be on such terms and conditions, if any, as it thinks fit, and may include such order as to costs as it thinks proper:

Provided that the shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

No shifting

According to sub-rule (10), on completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed”.

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