Active Company Tagging Identities and Verification (ACTIVE)

According to old Indian saying – Daroga (Inspector) is the Supreme Sovereign. We, professionals, have a similar experience with Indian corporate law. Ministry of Corporate Affairs (MCA) notified a new rule 25A by way of the Company (Incorporation) Amendment Rules 2019 with effect from 25^th February 2019. In this post, we will discuss Rule 25A and Form ACTIVE which technically is Form INC – 22A.

Physical Verification

According to the Companies (Incorporation) Amendment Rules, 2019, newly inserted Rule 25A of Companies (Incorporation) Rules, 2014 has its origin in newly inserted subsection (9) of Section 12 of the Companies Act, 2013. There is no direct relation except preamble of these amendment rules, but we will share a clue later in this post.

Interestingly, the Form INC – 22A issued under Rule 25A does not refer Section 12(9) of the Act.

As we discussed earlier here, if the registrar has reasonable cause to believe that the company is not carrying any business or operation, he may cause physical verification of the registered office of the company. If any default is found in compliance of the requirement of section 12(1), the registrar may initiate action for the removal of the name of the company from the register of companies. {Section 12(9)}

A careful reading of this subsection (9) and rule 25A suggest that Form INC-22A may have its origin in two words “reasonable cause”. However, the manner of physical verification is still waiting to have a relevant Rule unless there is an intention to use practising professionals as extended arms of the Registrar.

The Active Rule

Every company incorporated on or before the 31st December 2017 shall file the particulars of the company and its registered office, in e-Form ACTIVE (Active Company Tagging Identities and Verification) on or before 25.04.2019. {Rule 25A(1)}

The intention of Form is to capture all companies completed at least one financial year for whom filing is required under the Companies Act, 2013.

The language of the Rule suggests it is a one-time exercise. Unlike recently inserted Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014 for Form DIR-3-KYC, this rule do not suggest it an annual affair.

We may see an amendment in these Rules for making it annual exercise.

Preconditions for being Active

Any company which has not filed its

• due financial statements under section 137, or
• due annual returns under section 92, or
• both with the Registrar shall be restricted from filing e-Form-ACTIVE. {first Proviso to Rule 25A(1)}

Where such company is under management dispute and the Registrar has recorded the same on the register, these companies may file Form 22A – Active. {first Proviso to Rule 25A(1)}

This is quite interesting to presume that companies with management dispute may have consensus to file Form Active where their management does not agree on Annual Accounts and Annual Returns.

Exemptions

Following companies shall not require filing Form INC-22A (Active) –

• companies which have been struck off; or
• companies which are under a process of striking off; or
• companies which under liquidation; or
• companies which are amalgamated as recorded in the register; or
• companies which dissolved as recorded in the register. {Second Proviso to Rule 25A(1)}

Due Date

Due date of filing Form INC – 22A (Active) is 25th April 2019. [Rule 25A(1)}

In case a company does not intimate said particulars by filing Form INC-22A (Active), the Company shall be marked as “ACTIVE-non-compliant” on or after 26th April 2019. {Third Proviso to Rule 25A(1)}

However, a company may file “e-Form ACTIVE”, on or after 26th April 2019 on payment of a fee of ten thousand rupees”. {Rule 25A(2)}

Consequence of Non-filing

There are two consequences of non-filing of Form INC-22A  –

• An action under Section 12(9), and
• Restriction under the fourth proviso of Rule 25A.

The action under Section 12(9)

In case a company does not intimate said particulars by filing Form INC-22A (Active), the Company shall be liable for action under sub-section (9) of section 12 of the Act.

According to Section 12(9) The Registrar may cause physical verification of the registered office of the company. If any default is found in compliance of the requirement of section 12(1), the registrar may initiate action for the removal of the name of the company from the register of companies.

Restriction under the fourth proviso of Rule 25A

No request for recording the following event-based information or changes shall be accepted by the Registrar from such companies marked as “ACTIVE-non-compliant”, unless “ e-Form ACTIVE” is filed –

(i) SH-07 (Change in Authorized Capital);

(ii) PAS-03 (Change in Paid-up Capital);

(iii)DIR-12 (Changes in Director except for cessation);

(iv) INC-22 (Change in Registered Office); and

(v) INC-28 (Amalgamation, de-merger)

Avoiding Consequence at last

Where a company files “e-Form ACTIVE”, on or after 26th April 2019, the company shall be marked as “ACTIVE Compliant”, on payment of a fee of ten thousand rupees”. {Rule 25A(2)}

Form Active is Sovereign

In the opening paragraph of this post, I talked about the ultimate sovereignty of the inspector. This form INC – 22A (Active) is sovereign in that sense. It has many important inbuilt checks –

• All due Annual financial statements and Annual Returns must have been filed as mentioned in the First proviso to Rule 25A(1). In case AOC-4/AOC-4 XBRL and MGT-7 are not filed for FY 17-18, ensure to file these forms before filing INC-22A.
• There must be a minimum number of directors in the company to file this form;
• Any director of the company should not be disqualified on the date of filing Form INC-22A (Active).
• Form ADT – 1 should have been filed in respect of the appointment of auditor. The appointment of such auditor must be valid as on 31^st March 2019.
• In case, cost auditor is required to be appointed, Form CRA-2 should have been filed in respect of the appointment of cost auditor. The appointment of such cost auditor must be valid as on 31st March 2019.
• In case the company is listed company or public company having a paid-up share capital of ten crore rupees or more, the company must have a managing director, or Chief Executive Officer or manager and in their absence, a whole-time director. Therefore, check all Form DIR – 12 carefully.
• In case the company is listed or public company having a paid-up share capital of ten crore rupees or more or company having paid up share capital of five crore rupees or more, the company must whole time company secretary. Please ensure filling of Form DIR – 12 for such appointment before filing Form INC – 22A
• In case the company is listed company or public company having a paid-up share capital of ten crore rupees or more, the company must have a Chief Financial Officer. Please ensure filling of Form DIR – 12 for such appointment before filing Form INC – 22A.
• As we know already, Directors signing must have Active DIN and Digital Signature and KMP signing the form must have Valid PAN and Digital Signature.

Mandatory information

The form INC – 22A requires the filling of Latitude and Longitude of the registered Office. Be careful, these details may change from one room to another room of your Registered Office. I will prefer the chair of Managing Director if possible.

Thankfully, it is not hard to get these details with smartphones and these details are just a click away. Please have a good and fully functional smartphone.

Attachment to the Form INC – 22A (Active)

A Photograph of Registered Office

• showing external building,
• showing inside office also showing therein at least one director/KMP.

The director or KMP signing the form digitally must present in the photograph showing inside the office.

Declaration and Verification

The first person signing the Form shall be a director. The second person signing the Form may be a director or any other KMP.

Certification by Professional

The professional shall firstly certify that he has been duly engaged for the purpose of certification and verification of the Form. In such a case, the company shall engage him by passing a board resolution.

The Professional has satisfied himself about the identity of the company and its address based on the perusal of the original of the attached document. There is no requirement of physical verification as such but without visiting the place, it may not be possible to verify of Latitude and Longitude of the registered Office.

The Professional shall verify the email id of the company. However, OTP verification may be sufficient for the purpose.

The Professional shall keep and certify that he has kept copies of all documents including the form signed by him for the record.

Professional shall certify and verify that he has have gone through the provisions of The Companies Act, 2013 and rules thereunder for the subject matter of this form and matters incidental thereto and I have verified the above particulars (including attachment(s)) from the original records maintained by the Company/applicant which is subject matter of this form and found them to be true, correct and complete and no information material to this form has been suppressed.