Tag Archives: The Companies (Incorporation) Rules 2014

LICENSE FOR PROPOSED COMPANIES WITH CHARITABLE OBJECT


With notification of the Companies (Incorporation) 6th Amendment Rules, 2019 on 7th June 2019 to come into force with effect from 15th August 2019, the Government of India further centralized incorporation and registration of new companies to Central Registration Centre, Manesar in Haryana. Let us discuss the law.

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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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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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Naming of a company – Running of RUN


Seemingly, ease of doing business become a childish target for the Government of India. There is a practical gap of only 60 days between the Companies (Incorporation) Amendment Rules, 2018  and the Companies (Incorporation) 2nd Amendment Rules, 2018. The hardship caused by the earlier amendment is not attempted to cure by this amendment. Once again, there is a half-hearted effort lacking full automation of name approval. We discuss Rule 9 of the Companies (Incorporation) Rules, 2014 amended twice in a single calendar quarter.

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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 27th 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.

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Shifting Registered Office to different Jurisdiction in same state


On 27th 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 date of publication. In present post, we will discuss first aspect of such shifting of registered office – shifting within a state but from one registrar of companies to another registrar of companies.

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Double Removal of Difficulties Orders


In a rare gesture, Ministry of Corporate Affairs notified two orders for Removal of Difficulty on same date.  I have no legal understanding for the requirement of two separate orders, except little drafting hurdle of combined order for its statement of reason or preamble.

Now, we will discuss both orders here.

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CENTRALISED PROCESSING OF COMPANY INCORPORATION


One of the biggest concerns among stakeholders related to incorporation of companies in India was diverse practices across Company Registrar Offices related to documentation. There was a joke that Registrar Offices colour of ink using which documents should be signed, which will otherwise be scanned in black. All this was due to different interpretation of relatively simple laws related to incorporation. It was learned that Institute of Company Secretaries of India initiated for discussion across registrar offices and professionals to bring consensus among registrar offices. Many time Registrar transferred from one offices to another bring their local practise to another jurisdiction or adopt new one, keeping aside own interpretation. Without any doubt, majority of visit to Registrar Offices was related to incorporation only.

This year bring a welcome change. New financial year will be new as far as company incorporation is concern. Even though, I still see opportunity for more reform.

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CENTRAL REGISTRATION CENTRE AND AMENDMENT IN COMPANY INCORPORATION RULES


Central Registration of companies is under consideration since long and is being considered on different forums. The Central Government silently launched a pilot project for setting of Central Registry for companies in India. This should initiate more actively by all interest groups to avoid any future concern, as happened in case of companies. In this post, we will discuss notification setting the Central Registration Centre and corresponding amendment in the Companies (Incorporation) Rules 2014.

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Commencement of Business Suspended


Yes, you rightly read. Commencement of business suspended. One of fellow professional colleague told me with exclamation!!

Ministry of Corporate affairs few days ago announced about launch of updated versions of few forms including Form INC – 21 which is a declaration required to be filed before commencement of business or exercising borrowing powers. But suddenly stakeholders found that while updated version of all other forms is there, there was no Form INC – 21 on the portal.

A statement issued just said that due to deletion of Section 11 of the Companies Act, 2013 by relevant section of the Companies (Amendment) Act, 2015, which came into force on or before there is no requirement of Form INC – 21 remain. Earlier, the companies (Incorporation) Second Amendment Rules 2015 were also notified.  The Form was removed from MCA 21 Portal on date 4th June 2015. By virtue of commencement of the Companies (Amendment) Act, 2015, this date legally is 29th May 2015.

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YEAR’S SECOND AMENDMENT IN INCORPORATION RULES


The Ministry of Corporate Affairs placed here on its website a draft of the Companies (Incorporation) Second Amendment Rules, 2015. These amendment Rules will come into force from the date of its publication in Official Gazette.

These amendment rules proposed to amend:

  1. Insert a proviso in Rule 12 of principal Rules,
  2. Omit Rule 24 of the Principal Rules,
  3. Substitute Form INC – 13 and INC – 16 with new Forms, and
  4. Omit form INC – 21.

Application for incorporation of companies:

The Amendment Rules introduce a proviso to Rule 12. After this amendment, Rule 12 of the Companies (Incorporation) Rules 2014 shall read:

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UNEASE OF INTEGRATED INCORPORATION


Irrespective of political parties in power, Government of India fails to deliver any substantial ease of doing business or living life. #EaseOfDoingBusiness #EaseOfLivingLife

There is no real delivery except creating some online filing like MCA21 and online payment of fees, taxes and duties in first fifteen years of this 21st century. Switching to online environment from paper environment is just change of mode not a relaxation for ease of doing business or ease of living life from the side of government. This is just a technical advancement without role of government. One can understand it switching from inkpot system to fountain pen or ballpoint pen, which was also resulted in substantial reduction of time. Another example may be paper based tax calculation to calculator based tax calculation.

Presently, government has also come out of another gimmick called integrated incorporation forms. Without digging deep, name just suggests; there is no ease just integration. Instead of less pain, all quantum of pain at one place one time with more possible error of treatment at once. #EaseOfDoingBusiness #EaseOfLivingLife

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Amended Form INC – 7 (W.E.F. 1 May 2015)


Form INC-7 is required to be filed pursuant to Section 7 (1) of the Companies Act, 2013 and pursuant to Rule 10, 12, 14 and 15 of Companies (Incorporation) Rules, 2014. New version of this form came into force from 1st May 2015 by the Companies (Incorporation) Amendment Rules 2015. This replaced earlier version of Form INC – 7 discussed earlier here.

Form INC-7 deals with incorporation of a new company (other than OPC). This form is accompanied by supporting documents such as details of Directors/subscribers, the Memorandum of Association (MoA) and Articles of Association (AoA) and evidence of payment of stamp duty. Once the Form is processed and found complete, a company is registered and CIN is allocated.

The Form INC – 7 is not required where Integrated Incorporation Form INC – 29 was opted by applicant.

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Amended Form INC – 22 (W.E.F. 1 May 2015)


Form INC – 22 is required to be filed pursuant to Section 12 (2) & 12 (4) of the Companies Act, 2013 and Rule 25 and 27 of the Companies (Incorporation) Rules, 2014.

New version of this form came into force from 1st May 2015 by the Companies (Incorporation) Amendment Rules 2015. This replaced earlier version of Form INC – 22 discussed earlier here.

The company is required to furnish to the Registrar verification of its registered office in Form INC – 22 within a period of thirty days from the date of its incorporation. The company can also specify the address of registered office at the time of filing incorporation Forms. For this, the applicant shall upload Form INC-22 as linked form to Form INC-7. In case of One Person Company, the particulars of the registered office address can be filed in Form INC-2 only.  Any change in situation of the registered office thereafter, the company is required to notify to Registrar in Form INC-22 within fifteen days of such change.

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INTEGRATED INCORPORATION FORM INC – 29


Form INC-29 deals with the single application for reservation of name, incorporation of a new company and/or application for allotment of DIN. This Form is accompanied by supporting documents including details of Directors & subscribers, MoA and AoA etc. Once the Form is processed and found complete, company would registered and CIN would be allocated. Also DINs gets issued to the proposed Directors who do not have a valid DIN. Maximum three Directors are allowed for using this integrated form for allotment of DIN while incorporating a company.

Select the type of proposed company under drop-down provided. Producer Company should be selected only in case company complies with the provisions of Part IXA of the Companies Act, 1956. Incorporation of a charitable company under section 8 and company defined under chapter XXI of the Companies Act, 2013 are not facilitated under this integrated incorporation form.

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AMENDMENT IN COMPANIES INCORPORATION RULES


At the time of writing this blog post, I have no information of publication of the Company (Incorporation) Rules, 2015 which seems to come into effect with effect from 1st May 2015 as Official MCA21 portal has issued all forms prescribed under these forms.

I have no words of advice on enforceability of these rules until copy of publication in official gazette. These Rules come into effect only after publication in official gazette. [Rule 1(1) of the Companies (Incorporation) Amendment Rules 2015]

Penalty:

In original Rule 5 discussed earlier here, penalty in relation to contravention of these rules by One Person Company or its officer was prescribed. Rule 5 of these rules is being deleted.

But penalty is still there. New Rule 7A is introduced for the purpose. I highlight effect in deletion of rule 5 and introduction of rule 7A here:

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CONVERSION OF PRIVATE COMPANY INTO ONE PERSON COMPANY


Section 18 of the Companies Act 2013 discussed earlier here talk about conversion of companies. In Rule 7 of the Companies (Incorporation) Rules 2014 list out formalities for conversion of a private company into a one person company.

A private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs rupees or less or average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting. [Rule 7(1)]

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CONVERSION OF NON – PROFITS TO FOR PROFIT COMPANY


We have discussed incorporation of Companies including non – profits under Section 8 of the Companies Act 2013 earlier here. But these companies may require to convert in a for profit company due to various region. There is a provision of conversion of non – profit company to a for profit company under the Rules 21 and 22 of the Companies (incorporation) Rules 2014.

A company registered under section 8 which intends to convert itself into a company of any other kind shall pass a special resolution at a general meeting for approving such conversion. [Rule 21(1)]

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