Tag Archives: Registered Office

Physical verification of the Registered Office of a Company


“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.

“Fun Fact: Distance between two latitudes is about 111 KM. Distance between two Longitude at the equator is 111 KM while at Poles it is Zero.”

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)

Photo by Ahmet Polat on Pexels.com

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

  1. The Registrar shall form a reasoned opinion that the company is not carrying on any business or operations;
  2. The Registrar shall issue an authorisation letter for physical verification;
  3. The Registrar shall visit at the address of the registered office of the company;
  4. The Registrar shall ensure the presence of two witnesses of the locality in which the registered office is situated;
  5. If required, the Registrar may also seek the assistance of the local police for the verification;
  6. The Registrar shall carry the documents filed in support of the address of the registered office of the company;
  7. The Registrar shall collect supporting documents of the address duly authenticated from the occupant of the property (self-attested);
  8. The Registrar shall check the authenticity of the documents filed on MCA21 by cross verification with documents so collected;
  9. 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);
  10. 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
  11. 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.

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The Active Extension


Among practitioners and followers of corporate law in India, the year 2019 brought a surprise in the form of Form INC – 22A. This was claimed to be a form to identify active companies and checking inactive companies. Unlike earlier attempt aim to boost the image of the country and government, this form lost its shine within few hours of its introduction. Unlike earlier, this form had no mention in government communications of success.

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Drone delivery of Active Company Codes


Recently Ministry of Corporate Affairs has introduced a Form Active technically called Form INC – 22A. Noticeable features of this form are – (1) One time Form; (2) Requirement of latitude and longitude of Registered Office and (3) photograph of at least one director of the company. In this post, we will discuss the logic of this one time exercise and its logical future developments.

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An amendment with Wide Circulation


The recent amendment to the Companies (Incorporation) Rules, 2014 is of wide importance. The Companies (Incorporation) Second Amendment Rules, 2019 amended the Clause (a) of sub-rule (5) of Rule 30 of the Companies (Incorporation) Rules, 2014 on popular demand which certainly result in ease of doing business in India. (It may not affect the ease of doing business rating due to the structure of the rating procedure). We also earlier demanded such amendment in our earlier post, Shifting Registered Office to another state, here.

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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 25th February 2019. In this post, we will discuss Rule 25A and Form ACTIVE which technically is Form INC – 22A.

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REGISTERED OFFICE OF THE COMPANY


The government of India promulgated a temporary law called the Companies (Amendment) ordinance 2018 on 2nd November 2018 to by parachute landing of few more reform measure. To continue the law government later promulgated the Company(Amendment) Ordinance, 2019

Readers may read this post as a law applicable with effect from 2nd November 2018 till passing the law by the Parliament. These provisions may continue in force after parliamentary approval. In this post we will discuss, the laws related to registered office in brief post the companies (Amendment) Ordinance 2018 and 2019.

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COMMENCEMENT OF BUSINESS


The Government of India promulgated a temporary law called the Companies (Amendment) ordinance 2018 on 2nd November 2018 to by parachute landing of few more reform measure. Constitution of India mandate that Government needs to get it approved by Parliament within 6 months.

Readers may read this post as a law applicable with effect from 2nd November 2018 till passing a law by the Parliament, a bill for which was introduced before Loksabha on 20th December 2018. These provisions may continue in force after parliamentary approval. In this post, we will discuss, the reintroduction of Commencement of Business.

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Display of Registered Office Address and Information


Sub-section (3) of Section 12 of the Companies Act, 2013 is one of the most non-compliant sub-sections of section 12 if not of the Companies Act, 2013. It may be noticed that most medium and small size companies do not comply with this important provision.

A company shall display its name and other information in accordance with this subsection. This non-compliance may attract penalty up to one lakh rupees.

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Option for Verification of Registered Office


What kind of lease deed should I make for a new private limited company before incorporation?

This is one of the practical question, promoters and professionals facing at the time of incorporation.

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City in Companies Act, 2013


Companies Act, 2013 uses city 3 times (without taking subordinate legislations into account):

  • In section 12(5)(a) with reference to registered office;
  • In Section 27(1) for advertisement in news paper in the city of registered office;
  • In Section 96(2) for place of Annual General Meeting in city of registered office.

The Companies Act, 1956 also used this term in similar reference.

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SHIFTING OF REGISTERED OFFICE OUTSIDE STATE


Sub – Section (4) and (5) of Section deals with shifting of registered office from one state to another. We have discussed these provisions earlier here.

Any alteration relating to place i.e. state of registered office shall take effect only after approval by the Central Government. The Central Government shall dispose of the application for approval of shifting of registered office from one state to another within sixty days. This alteration should have consent of the creditors, debentures – holders, and other persons concerned with the company. The company should have made sufficient provision for the discharge of all its debts and obligations or adequate security should have been provided for such discharge. This is duty of Central Government, before giving approval of the application to satisfied itself about such consent and such sufficient provision to discharge debts and obligations.

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SHIFTING OF REGISTERED OFFICE


In this post we will discuss, shifting of Registered office –

  1. Within same city, town or village, or
  2. Out side same city, town or village but within same state.

Notice and verification of change of situation of the registered office

In case of change in registered a notice of change duly verified shall be given to Registrar within fifteen days of such change. [Section 12(4)]

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VERIFICATION OF REGISTERED OFFICE


In an earlier post here, we have discussed that according to Section 12 of the Companies Act 2013, the company shall have on and from the fifteenth day of its incorporation and all time a registered office for all communication purpose. The company shall furnish verification of its registered office within a period of thirty days of its incorporation.

According to Rule 25 of the Companies (incorporation) Rules 2014,

The verification of the registered office shall be filed in Form INC – 22 along with the fee.

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BOOKS OF ACCOUNTS


The Financial Statements of a company is most important document until recent past, when non – financial reporting started to gain its momentum. This is a reporting of growth in business in monetary units.

BOOK OF ACCOUNTS (SECTION 128):

Every company shall prepare and keep at its registered office books of accounts and other relevant books and papers and financial statement for every financial year. These books must give a true and fair view of the state of affairs of the company and its branch offices. These books must explain the transactions effected both at the registered office and its branches.  These books shall be kept on actual basis and double entry system of accounting.

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ALTERATION OF MEMORANDUM AND ARTICLES


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

In last blog post, commencement of business and registered office, I discussed Section 11 and 12 of the Companies Bill, 2012 Act 2013. In this post, I will discuss, Alteration of Memorandum and Articles of the company and relevant issues.

ALTERATION OF MEMORANDUM (SECTION 13):

A Company can alter its memorandum by a special resolution, and after complying requirement of Section 13.

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REGISTERED OFFICE


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

In last Blog Post, I discussed formation and incorporation of company and its effects. What next? Business, but comply certain legal provisions. Here, we will discuss provision related to present companies Bill, 2012 Act, 2013.

COMMENCEMENT OF BUSINESS (SECTION 11):

[Update: Section 11 is no longer relevant after the Companies (Amendment) Act, 2015]

Before starting any business or borrow any money, every company having share capital, shall have to comply two requirements.

Firstly, A Director of company shall file a declaration with Registrar of companies, that:

(i)           Every subscriber to the memorandum has paid the value of shares agreed to be taken by him,

(ii)          The paid up capital of company is not less than one lakh in case of private company or five lakh in case of public company on date of declaration.

Any commencement of business or borrowing before complying above requirement, the company shall liable five thousand rupees (one time) and every officer who is in default shall be punishable with fine up to rupees one thousand for every day during which the default continues.

If no declaration has filed within one hundred and eighty day of the date of incorporation, the registrar may initiate action for removal of name of company from register of companies.

This simply means company should receive from their subscribers all the money value of shares subscribed by them before commencing the business. The company should take that money value into its book of accounts.  After receiving all this money value from subscribers and other shareholders, the paid up capital of the company should be in conformity of minimum paid up share capital requirement. At this point, please, recall Section 10 (2), all monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company. That Section 10 (2) may not help company to commence its business but act against subscriber only. Effectively, all subscribers must pay their subscription money in total within one hundred and eighty days from the date of incorporation.

REGISTERED OFFICE OF COMPANY (SECTION 12):

The company shall have on and from fifteenth day of its incorporation and all time thereafter a registered office for all communication purpose. When we read all other provision under Companied Bill, 2012 the registered office is office of company is a hub connecting the company and outside world.

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INCORPORATION OF COMPANY


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Section 7, 8 of Companies Bill 2012 Act, 2013

In my last blog post “Formation of Company”, I discussed the formation of company and its foundation documents; Memorandum, Articles and proposed/changed Name.  In This post we will discuss, Incorporation of Company including incorporation of non- profit company.

INCORPORATION OF COMPANY (SECTION 7):

All document related to incorporation shall be filed be filed before the registrar, in whose jurisdiction registered office of a company is proposed to be situated. A Registrar may have jurisdiction over several states or only a part of a state. Following documents are to be submitted:

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FORMATION OF A COMPANY


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Section 3, 4 and 5 of the Companies Bill, 2012 Act 2013

In my last post, I discussed definition of companies and classes.

FORMATION OF COMPANY (SECTION 3):

A company may be formed for any lawful purpose by:

(a)    Seven or more persons as public company;

(b)   Two or more persons as private company;

(c)    One person as One Person Company

By subscribing names to a memorandum and complying other requirements.

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