Critical aspect on Company formation in RUN

Recently Ministry of Corporate Affairs has amended Companies Incorporation Rules so as to facilitate name of Companies using the new web portal RUN  (Reserve Unique Name) Service and Zero Fee Incorporation.

It was supposed to be a welcome move by Ministry to introduce certain changes in the name of 'ease of doing business' and to promote 'startup company' as it introduced zero fee Incorporation.

Now let's analyze these two important changes and its impact in real terms.

1: RUN - A WELCOME MOVE OR FLOP SHOW?

NAME is a precious matter for all individuals, entities and corporate, ease of doing business can only come if an applicant of Company gets his desired NAME based upon apparent availability of record of Ministry.  

Ministry has  introduced  this service in place of 'Form INC-1'  in pursuance of Rule 9 of Companies Incorporation Amendment Rules, 2018 in relation to reservation of name of the Company, it will be easier to apply and reserve the name without taking DIN (Director Identification Number) and Digital Signature which was mandatory in Form INC-1, cost of DSC is reduced only for the time being up to the level of name application and approval and cost of DIN a is definitely reduced although there is no change in cost of Form INC-1 and RUN Service as ministry charges  Rupees one thousand and to be incurred by an Applicant.

In RUN Service, one can't get the  name of the Company which is apparently available, it is to be checked in line with so called rules and regulations,  Ministry has played a very smart move to remove an opportunity of 'One Resubmission' which was earlier allowed in 'Form INC-1', meaning thereby applicant is not granted an opportunity to explain and present his case for the second time although name may be genuinely applied and becomes eligible to get approved after pure compliance of name guidelines and companies incorporation as well as  trademark rules, it indirectly gives supreme power to CRC (Central Registration Centre) officials to approve or reject particular name in the way they may deem fit.

Companies Incorporation  as well as Trademark Rules are framed in such a complex way that process of applying and approving Company names becomes like court cases where justice can finally be given after giving reasonable opportunity of being heard by both the parties, in the present scenario, an applicant is not given an opportunity of being heard even after spending a cost of one thousand rupees behind name, in short an applicant is completely prejudiced by the Ministry, so even 'One Resubmission' opportunity which was given earlier was not enough and Ministry was expected to work on it for the sake of 'ease of doing business', however it again turned out in complete favor of Ministry, rules  of  RUN Service also seems to violate Article No. 14 of the Constitution  of India which is Right of Equality before law, equal protection of law should be given to an applicant of name and CRC (Ministry).

Time has indeed come to make the Companies Incorporation Rules and Trademark Rules more flexible, especially a complex term of 'Resemblance of Name', so that process can't be like Court Cases and name becomes easily approved if apparently available on record, otherwise an equal opportunity of protection of law must be given to both the parties.

2: ZERO FEE INCORPORATION

Incorporation of Company starts from taking Digital Signature to the level of printing of MOA and AOA and may be many more so zero Fee Incorporation as envisaged by the Ministry is not actually a zero fee, it may reduce or enhance your earlier incorporation cost subject to proper name application and its availability.

Cost of Company Formation after Name Approval will be reduced to great extent and will be limited to paying of relevant stamp duties, PAN, TAN and Professional Fees, however, cost of applying a name of the Company may increase as No Resubmission opportunity is granted, rigid or particular name of an applicant may also change or vanish plan, idea and motive to form a Company.