“Inspector Raj”, in its whatsoever name and whichever form, is a necessary evil in India.
The Companies (Amendment) Ordinance, 2018, with its 2019 version and final avatar, the Companies (Amendment) Act, 2019, inserted Section 12(9) with effect from 2 November 2018, sown the seed of Physical verification of the Registered Office of a Company.
Despite the Legislative Powers, the Ministry of Corporate Affairs thankfully restrained itself for a long time and tried a self-certification mode. Ministry of Corporate Affairs (MCA) initially notified Rule 25A by way of the Company (Incorporation) Amendment Rules 2019 with effect from 25 February 2019. Surprisingly, this was a one-time exercise in Form INC-22A (Active). The Form Active captured two-dimensional data of the registered office with documents and a photo of one of the directors showing Latitude and Longitude. However, the form might not satisfy the intended purpose of the government. No day-to-day technology presently captures the third dimension of the office – the floor of the building or vertical location of the office from sea level.
While writing on Rule 25A and Form INC-22A (Active) here, I hoped and still wish Form INC-22A (Active) to be an annual exercise as it solves other issues like a failure on the part of management to update the Registered Office Address on Record.
Now, the Ministry of Corporate Affairs, with effect from 20 August 2022 (issued on 18 August 2022) notified the Companies (Incorporation) Third Amendment Rules, 2022 and inserted Rule 25B. (Notification at the official site here)
For physical verification, under Section 12(9), the Registrar of Companies should have reasonable cause to believe that the company is not carrying on any business or operations; he may cause a physical verification of the registered office of the company. The belief that the company is not carrying on any business or operation from the Registered office does not form a cause for physical verification. This belief should base upon the information or documents made available on MCA 21. His opinion shall not be based on any complaint, media report or other information.
The newly inserted Rule has a vital reference to Section 248, “Power of Registrar to Remove Name of Company from Register of Companies”. We expect notification of a supplementary rule in the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016. [Note: it is notified and published on 26 August 2022].
Process of Verification
- The Registrar shall form a reasoned opinion that the company is not carrying on any business or operations;
- The Registrar shall issue an authorisation letter for physical verification;
- The Registrar shall visit at the address of the registered office of the company;
- The Registrar shall ensure the presence of two witnesses of the locality in which the registered office is situated;
- If required, the Registrar may also seek the assistance of the local police for the verification;
- The Registrar shall carry the documents filed in support of the address of the registered office of the company;
- The Registrar shall collect supporting documents of the address duly authenticated from the occupant of the property (self-attested);
- The Registrar shall check the authenticity of the documents filed on MCA21 by cross verification with documents so collected;
- The Registrar shall take a photograph of the Registered office while causing the verification (it is not clear if he will collect geo-coordinates also);
- The Registrar shall note the date and time of the visit and collect self-attested identity proof of the person available at the property; and
- The Registrar shall prepare a physical verification report in the given format.
The consequence of the Physical Verification Report
On the basis of the report of the physical verification, the Registrar shall form an opinion on whether the office is capable of receiving and acknowledging all communications and notices. If the Registrar finds the office incapable of receiving and acknowledging all communications and notices, it will send a notice to the company and all the directors:
- of his intention to remove the name of the company from the register of companies; and
- requesting them to send their representations along with copies of relevant documents, if any, within thirty days from the date of the notice.
The Registrar may take action under Section 248 of the Act based on the physical verification report and the representations made by the company and its directors.