Proposed Amendments in COMPANIES (INCORPORATION) RULES, 2014

INC-29

2.1 The Committee felt that the option to use the integrated incorporation E-Form INC-29 in case name approval is separately obtained using INC-1 should be allowed, the option of giving more than one name as alternatives be permitted, and the number of allowed re-submissions should be increased from two to three times.

2.2 The Committee felt that certain improvements in e-form INC-29 may be implemented.

•  In point no. 6(e), wherein registration number of a company incorporated outside India is required to be specified, alpha-numeric registration numbers may be accepted.
•  In point no. 6(e), wherein the particulars of the authorized person of the company incorporated outside India are required to be specified, PAN or Passport number of the authorized person may be accepted. Also, the form may be enabled to accept the foreign address of the said authorized person in the field ‘present address of the authorized person’.
•  In point nos. 9 and 10 in relation to PAN, TAN and ESIC applications, it is mentioned that “this facility is available at the e-Biz portal only as per separate procedure prescribed by e-Biz portal”. The facility for PAN, TAN and ESIC should be enabled as part of the integrated application form, and incorporation form INC-7, available on the MCA21 portal.

2.3 It was suggested that two chances may be given for resubmission/clarification for submitting any form to ROC as it was alleged that in case forms are marked as ‘Invalid and not to be taken on record’, the refund process is lengthy. The Committee did not agree with the above proposal to increase the number of resubmissions as provided in Rule 10(6) of the Companies (Registration Offices and Fees) Rules, 2014 as the earlier experience with this has not been very encouraging, and it also encourages slackness on the part of the professionals involved in filing of forms.

Rule 16: Removal of references to the word ‘partnership firm’

2.4 Rule 16 requires specified particulars of every subscriber to the memorandum to be filed with the Registrar. It was pointed out that a reference to partnership firm as provided under Rule 16(2)(g), when the subscriber is a body corporate, is inappropriate. The Committee agreed with the view and suggested for removal of references to the word ‘partnership firm’ in Rule no.16 (2)(g).

Rule 16: Authentication of documents

2.5 Rule 16(2)(f) mandates only an authorized person/officer of body corporate subscriber to subscribe to the memorandum, based on the resolution passed by the body corporate conferring authority to sign the memorandum. The Committee did not agree to expand the scope to allow outsiders such as legal counsel to represent the company, as it would be necessary and prudent to be able to clearly know and to track the original subscribers.

Removal of duplication of information in forms

2.6 It was pointed out that various incorporation related forms like INC-7 and DIR-12 require information such as address proof, PAN Card, Utility Bill, Electricity Bill etc. whereas the system had already captured these particulars in the DIN of a director and the same ought not to be asked again. The suggestion was agreed to. Changes in the MCA21 system/E-Forms may be made to ensure that in case of a person holding DIN, the form requiring such information should get prefilled and additional documentation would not be required.

2.7 Similarly, it was also suggested to remove the requirement of Form INC-10 altogether (i.e. verification of signature of subscribers). The Committee observed that the subscriber sheet of the MOA has the photographs of the subscribers and further, there is an attestation by a witness to the effect that the subscriber/first director has signed in his presence. In the light of the same, Rule 16(1)(q) be omitted along with Form INC-10.

Formation of one person company (Section 3(1) read with Rule 3(2))

2.8 It was pointed out that the wordings in Rule 3(2) gives an impression that a natural person can incorporate only one OPC or be a nominee of one OPC in his lifetime while the spirit of the provision is that a person can be a member of only one OPC at any point of time and that the person can also be a nominee of another OPC. The Committee recommended to suitably rephrase Rule 3(2), especially in view of Rule 3(3) which entails an obligation on a member holding membership in one OPC and a nominee-ship in another OPC, to opt for one of the OPCs in case he becomes a member of another OPC due to operation of the law.

Registered office of company

2.9 In view of the fact that the place of businesses of a large number of companies is also on the web/internet, the Committee felt that companies that have a website, for conducting online business or otherwise, should be required to provide the registered office and other details as required in section 12(3) on the landing/home page of the website(s). The Rule may be accordingly amended. Similar changes may also be carried out for foreign companies in Rule 6 of Companies (Registration of foreign companies) Rules, 2014.

Rule 29: Alteration of memorandum

2.10 The present Rule 29 does not allow change in the memorandum even after default in filing of statutory returns or payment of deposits, etc. is made good. Change in memorandum should be allowed after defaults are made good.

Rule 28 and Rule 30: Shifting of registered office

2.11 Rule 28 read with Section 12 provides that shifting of registered office within the same State is not to be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending and rule 30(10) (proviso) also prescribes similar conditions in case of shifting of registered office from one State or Union Territory to another. The Committee felt, with a view to provide a finite timeframe for such restriction, that an explanatory note should be provided in both rules to the effect that ‘further provided that 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’. Further, it may be provided that in case of a pending prosecution, on submission of an undertaking that the company would not seek any change in jurisdiction on account of shift in office, such shifting may be allowed.

2.12 It was suggested that the requirements in Section 13(5) for the satisfaction of the Regional Director (RD), who is the delegated authority, that the alteration of situation of the registered office has the consent of the creditors and other persons concerned with the company be done away with as Rules already provide for a newspaper publication of proposed shifting and calling for objections within a specified time period to expedite the process. Hence, the RD should not ask NOCs from creditors and other connected persons. The Committee felt that the suggestion does not merit consideration since the shifting of registered office from one state to another may jeopardise the creditors’ interest vis-à-vis the applicant company. On the contrary, the Committee agreed with the suggestion that in the case of relocation of registered NBFCs, a NoC from RBI may be made necessary. Also, as requested by SEBI, requirement of serving a copy of the notice to SEBI (Rule 30(6)(c) may be dispensed with. Moreover, the company should not have difficulty in getting NOCs from major creditors to enable RDs to form an opinion on the bonafides of the company on the proposed shifting, if it is having proper business relations with the creditors. Further, suggestions to allow shifting based on special resolutions for private limited companies and providing deemed approval in case of non-disposal of the petition by the RD within 60 days were also considered undesirable.

Rule 8: Undesirable names

2.13 Rule 8 (2) (a) (ii) provides that ‘it includes the name of a registered trade mark or a trade mark which is subject of an application for registration, unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters’. The Committee recommends that this requirement should be changed and Rule should be modified to read as ‘it includes the name of a ‘trade mark registered or a trade mark which is subject of an application for registration under the Trade Marks Act, 1999 and the rules framed thereunder’, unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters.

2.14 Rule 8(5) provides that ‘The applicant shall declare in affirmative or negative (to affirm or deny ) whether they are using or have been using in the last five years the name applied for incorporation of company or LLP in any other business constitution like Sole proprietor or Partnership or any other incorporated or unincorporated entity and if, yes, details thereof and No Objection Certificate from other partners and associates for use of such name by the proposed Company or LLP, as the case may be, and also a declaration as to whether such other business shall be taken over by the proposed company or LLP or not’. The Committee felt that the said rule is prescribed to prevent disputes on availing names, which were already being used in other forms of business organizations and hence, does not recommend any change.

2.15 Suggestions were received from stakeholders that the name availability process should be automated and centralized. The Committee noted that this step had already been initiated.

2.16 Rule 13(1) and 13(2) prescribes that the subscriber sheet of a MOA and AOA shall be handwritten by the respective subscribers. Suggestions were received to allow even typewritten subscriber sheets as the subscriber is signing the same by hand in the presence of a witness. The Committee recommended that this Rule should be suitably modified to allow typewritten subscriber sheets as the signing subscribers could not go back on the contents of the subscriber sheets after affixing their signatures. Similar modifications be carried out in Rule 13(2) with respect to entering of particulars of an illiterate subscriber electronically.

2.17 Rule 13(4) prescribes that where a subscriber is a body corporate, the MOA and the director shall sign the AOA, officer or employee of the said body corporate duly authorised in that behalf by a resolution of the directors of the body corporate. However, this sub-rule does not envisage the eventuality of an LLP being a subscriber. Accordingly, this sub-rule should be redrafted keeping in view that an LLP can also be a subscriber to the MOA.