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The Companies Act, 2013 which has replaced 5 decades older Companies Act, 1956. The Companies Act, 2013 received assent of the President of India on August 29, 2013 and immediately on next day i.e. on August 30, 2013, first Section of Companies Act, 2013 notified and more 98 sections of Companies Act, 2013 were notified w.e.f. September 12, 2013. However, major part of the Act was implemented w.e.f. April 01, 2014 along with 29 Rules and 180+ Sections. From the Companies Act, 1956 (1956 Act) to the Companies Act, 2013 (2013 Act) change was evident in terms of new Sections, new Form names, new procedure etc. Summary of Companies Act, 2013 is as under

Total Number of Sections: 470
Total Number of Chapters: 29
Total Number of Schedules: 7

In addition to the above, the Companies Act, 2013 was amended twice vide Companies Amendment Act, 2015 and Companies Amendment Act, 2017, many Notifications, Circulars, Rules, Amendment Rules, Difficulties Removal Orders are issued by the Central Government/ Ministry of Corporate Affairs (MCA) to fine tune the Act with the best industrial practices The earlier process of Incorporation of a Company was time consuming and has resulted in enormous delay in starting a business in India which was fairly represented by the Ease of Doing Business Ranking of India.

However, with the change in Political environment at the Country, the new Government led by Prime Minister Modi has turned its focus on improving the Ease of Doing Business Ranking, the Companies Act has seen various amendments and one of the most important factor in languishing ranking of India was time taken to start a new business. The leader country New Zealand has an average 1 day to start business which as per the World Bank, India had an average 30+ days to start a business. In order to reduce the number of days to start a business, many changes are introduced in the Companies Act, 2013 with respect to incorporation of the Company. Let's look at the journey of major changes introduced in relation to Incorporation of a new Company since April 1, 2014.


Timeline

Major changes introduced

April 01, 2014 to April 30, 2015

New forms for Incorporation Company Introduced i.e.

INC-1 - Seeking Name Availability; (Form 1A in Companies Act, 1956)

INC-7 - Form for Incorporation of Company (Form 1 under Companies Act, 1956)

DIR-12 - Appointment of Directors (Form 32 under Companies Act, 1956)

INC-22 - Notice of situation of Registered Office of Company (Form 18 under Companies Act, 1956)

DIR-3- Director Identification Number (Earlier DIN Form) required in case proposed appointee Director does not have DIN

The Process generally used to take 30 days, which starts with filing of Form INC-1 seeking Name Availability. On getting approval of Name, the applicant was required to file Form INC-7, DIR-12 and INC-22.

Once Company form INC-7 is approved, MCA used to issue certificate of Incorporation, which the Company can use to apply for PAN, TAN and other licences and to open a Bank Account.

May 01, 2015 to September 30, 2016

While the existing process was not altered or changed, a new Integrated Incorporation Process introduced - Form INC-29. This was the first attempt by Government of India to reduce the duplication of information required in incorporation of a Company. The Form INC-29 was introduced as a five in one form.

Applicant could apply Director Identification Number (DIN), Name Availability (Earlier INC-1 was required to be filed before making an application for Incorporation), Appointment of Director (earlier DIR-12 was required to be file separately along with incorporation application), Registered Office (earlier INC22 was required to be filed with Incorporation application) and Incorporation (INC-7) in single form with lesser ROC Fees.

While it was a major change and the first real attempt by Government of India and MCA to reduce the timeline to incorporate a Company, INC-29 was not a perfect alternative and applicant had faced various was issues like DIN could not be applied for all applicant in the INC-29 itself as application is linked to Role Check. Ultimately it proved to be short sighted solution.

Also, in case if applicant has filed INC-1 for reservation of Name, they cannot avail facilities of INC-29.

Note: While Form INC-29 was introduced it has not replaced form INC-7 and at time both the routes were available for incorporation of a new Company.

October 01, 2016 to January 26, 2018

Through Companies (Incorporation) Fourth Amendment Rules, 2016 a new form 'SPICe' i.e. INC-32 (Specified Performa for Incorporation Company electronically).

This form was a step ahead of form INC-29. Later on with SPICe Form, electronic MOA & AOA were introduced as a two separate eforms INC-33 and INC-34 respectively. The Applicant were given an option to either reserve a Name through INC-1 and proceed for incorporation or directly apply for incorporation of a Company through SPICe form. could either apply for reservation of name in SPICe form or through form INC -1. PAN & TAN application became mandatory with SPICe.

Also, in addition to INC-29 services, SPICe has introduced PAN and TAN application and other business license and approval were proposed through SPICe.* While, other services were not active, MCA did manage to issue certificate of incorporation along with PAN and TAN if applied through SPICe Form.

Note: with introduction of SPICe form Government intended to replace the INC-7 route completely. However, for certain period, INC-7 was made available in certain cases categorically.

* Though, in Addition to PAN and TAN, SPICe has integrated a system to issue Export Import License (EIC), various Labour Law licenses while applying for incorporation of a Company. However, considering various legal hurdle it is still not effective.

January 26, 2018 onwards

The 69th Republic Day India was chosen to introduce hitherto biggest change in Incorporation Process aiming towards 'Ease of Doing Business' in India. With effect from January 26, 2018, following changes were introduced:

  1. New Process of Name Approval 'RUN' notified and e-form INC-1 omitted.
  2. INC-7 form omitted. Now all application for incorporation will be processed through SPICe form.
  3. No ROC fees for Incorporation of Company up to 10 lakh of authorized capital.
  4. Updated version of SPICE notified.

Since April 01, 2014

In addition to tinkering with Incorporation Application, MCA has also changed various supplementary requirements in order to Ease of Doing Business in India. For e.g.

Requirement of minimum Paid up share Capital is removed vide Companies Amendment Act, 2015. Earlier Private Company were required a minimum paid up capital of Rs. 1 Lakh and Public Companies Rs. 5 Lakh.

  • With introduction of INC-29 and SPICe Forms, the proposed appointee Director can apply for DIN with Incorporation application instead of making a separate application.
  • Only 1 form for Incorporation of Company, Name Reservation, PAN/TAN application, Appointment of Directors, DIN application etc.
  • eMOA & eAOA via SPICe forms.

While the process in improving ease of doing business ranking is still work in progress, India has definitely seen major changes in the process in starting a new business and it has definitely reduced the time required to start a new business. However, still India is far from its target and while the process may be painful, there is a hope that end result will be better and real ease in doing business and not just mechanical changes.

Bibliography:

1) www.mca.gov.in
2) http://www.doingbusiness.org/rankings

The article is contributed by Ms. Bhavana Vyas, Management Trainee at JMJA & Associates LLP.

Disclaimer: This material and the information contained herein are prepared by the Author is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). None of Author or website and the Firm, its associate firms, or its members/ employees is, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. JMJA & Associates LLP shall not be responsible for any loss whatsoever sustained by any person who relies on this material.

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