Wednesday, 3 February 2016

Legal Updates: Recent changes in the provisions relating to Incorporation of Companies

Ministry of Corporate Affairs has, vide notification dated January 22, 2016, notified Companies (Incorporation) Amendment Rules, 2016 (Rules) having effect from January 26, 2016, with an objective of speedy disposal of incorporation applications within stipulated time frames.

Further, apart from the numerous changes notified by the aforesaid Rules, the most significant change brought in by another notification dated January 22, 2016, that provides greater “Ease of Doing Business” to corporate, is the establishment of Central Registration Centres (CRC) having territorial jurisdiction all over India for speedy disposal of applications for reservation of names. Establishment of CRC will significantly reduce the time taken to incorporate a Company in India, for a separate body will now be empowered to deal with the applications for reservation of names. The CRC shall function under the administrative control of Registrar of Companies, Delhi (ROC Delhi), who shall act as the Registrar of the CRC until a separate Registrar is appointed to the CRC. The CRC shall process applications for reservation of name i.e. Form No. INC-1. However, the processing and approval of name proposed in e-Form No. INC-29 shall continue to be done by the respective Registrar of Companies having jurisdiction over incorporation of companies.

The amendments brought about by the said notification are enumerated in the table below:


S. No.
Amendment
Position before the amendment
Effect of the amendment

1.

Rule 8(2)(b)(ii) shall be omitted

Name of the company need not necessarily be indicative of its principle business activities, but if name has any indication of objects that indication should be in conformity with the objects of the Company

Now the name will be considered desirable even if the words used are not in conformity with the objects mentioned in the memorandum.

2.

Rule 8(2)(b)(x) shall be omitted

Names that are vague or abbreviated based on the names of promoters, were not allowed

However abbreviation of names of existing Companies for formation of a new Company as subsidiary or JV or as an associate company after following the requirements of the Act, was allowed. 

The recent omission in the amendment notification has removed all restrictions on abbreviated names and unlocks a good numbers of creative names for companies

3.

Rule 8(2)(b)(xvii) shall be omitted

Earlier, proposed Companies were not allowed to have names that intended or likely to produce a misleading impression regarding the scope or scale of its activities

Now there is no such restriction and Companies have been given the freedom to have any name without any presumption of misleading impression

4.

Rule 8 (3) shall be omitted

The old rules provided that any change in activities must be reflected in the name of the Company, within 6 months from the change in activity of the Company

By virtue of the recent amendment, there is no need now to change the name of the Company to reflect its new line of activities.

5.

Rule 8 (4) shall be omitted

There was a requirement of furnishing the proof of relation in case the proposed name included the names of relatives of promoters, no objection certificate in case the proposed name included names of persons other than the promoters or their close blood relatives, along with the application for name reservation.


The requirements of furnishing documents like proof of relation or no objection certificate along with the application for reservation of name, have been done away with.

6.

Rule 9 shall be substituted with the following:

“An application for the reservation of a name shall be made in Form No. INC – 1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Centre.”

Under the erstwhile rules, an application for the reservation of a name shall be made in Form No. INC – 1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014

Now the applications for reservation of name will be dealt with by the Registrar, Central Registration Centre.

New rule is in alignment with Notification to establish Central Registration Centre, as discussed above.

7.

Insertion of (ba) after Rule 36(12)(b):

(ba) After the resubmission of the documents and on completion of second opportunity, if the registrar still finds that the documents are defective or incomplete, he shall give third opportunity to remove such defects or deficiencies;'

Provided that the total period for re-submission of documents shal1 not exceed a total period of thirty days.


Two opportunities for removing the defects or deficiencies from the incorporation application in Form INC-29, were given to the stakeholders, under the erstwhile Rules.

The number of opportunities for rectification of defects, have been increased to three whereas the time remains the same i.e. thirty days from the date of submission of form.

8

For the words “two opportunities”, the words “three opportunities” shall be substituted.


Previously, two opportunities were given to the stakeholders to rectify the defects in the incorporation application in Form INC-29.

Now, the number of opportunities to rectify the defects in the application, have been extended to three.




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