company incorporation

MCA has vide its gazetted notification dated 6th March, 2019 amended the Companies (Incorporation) Rules, 2014 as follows:

1) Companies with authorised share capital of upto Rs.15 lakhs will to pay NIL fees to the MCA. This has been upped from Rs.10 lakhs previously.

2) Secondly, in case of shifting of the registered office from one state or union territory to another state, the newspaper advertisement regarding the shifting which is required to be given in form INC-26 need to be given in a vernacular newspaper with wide circulation in the state in which the registered office is situated. Earlier the word used was "widest", so its more of a drafting error which is being corrected.

MCA circular as above can be found at here 

Commencement of Business

MCA has vide the Companies Ordinance 2019 which has been promulgated on 14th January, 2019 introduced a new section 10A in the Companies Act, 2013 which requires that every company incorporated after the above date and having share capital shall not commence business nor exercise its borrowing powers unless it has filed a declaration within 180 days from the date of incorporation and also filed document pertaining to its registered office.

There is the penalty of Rs.50,000 on the company and Rs.1000 per day on each officer in default subject to a maximum of Rs.100,000/-

Where the aforesaid declaration has not been filed within 180 days of the date of incorporation, then the Registrar may, where he is of the opinion, that the company is not carrying on any business or operations, start proceedings to remove the name of the company from its records. Of course the penalty clause will still be applicable.

Form INC-20A is the form which has been introduced by the MCA and the only mandatory documentation required is the proof that the subscriber has paid in his subscription money for the value of shares which he has agreed to subscribe via the memorandum of association. A copy of the cheque issued by the subscriber and a copy of the bank statement showing the credit in the company's bank account should suffice for the purpose. Which also means that the bank account can be opened by the company but actual business like invoicing etc. cannot commence until this declaration has been filed.

Originally this provision was introduced vide Companies Amendment Ordinance 2018 w.e.f  2nd November, 2018 but this 2019 Ordinance replaces the old one.

So one more compliance for a company after its incorporation in India. 

LLP registration

MCA has vide its notification dated 18th September, 2018 streamlined the process of incorporation of Limited Liability Partnerships (LLP) in India. Hitherto, for more than 10 months, the LLP incorporation had come to a standstill as MCA had stopped issuing stand-alone Director Identification Number (DIN) to individuals.

1) Now name reservation for a LLP can be done by a web service called LLP-RUN. Unfortunate part is that this RUN will be governed by their Central Reservation Centre (CRC) which is a retrograde step, in my view. That section is manned by totally incompetent people who have no idea at all about business incorporation.

2) Form 2 for incorporation of LLP will be replaced by FiLLiP which will carry the DIN allotment process also. So this is good move.

3) Similarly minor amendments have been made to Addendum to Form 2 (which will be known as Addendum to Form FiLLiP, form 5 (notice for change of name), form 17 (conversion of general partnership firm into LLP) and form 18 (conversion of a private company/ unlisted public company into LLP) consequent to the above amendments. It would be interesting to note form 18 amendments as with the proposed mandatory demat of securities of unlisted public limited companies from 2nd October onwards, many unlisted public companies will seek to convert themselves into LLPs / private companies to avoid that compliance. They might seek to convert themselves into private companies but there is always a lurking fear the mandatory demat of securities could be extended to private companies as well, in the future.

All these changes will take effect from 2nd October, 2018.  

RUN - two names & 1 resubmission

Ministry of Corporate Affairs is planning to somewhat ease the serious issues in company incorporation in India by allowing two names in their new RUN (Reserve Unique Name) system on their website and also allow one resubmission.

Even then the serious problems remain that MCA is quick to reject the names proposed on totally vague and illogical grounds. Common rejection reasons are that the name is closely resembling to some existing name already registered. But when you compare the name proposed with the name it is supposedly resembling to, there is not even a remote resemblance, forget about close resemblance. Secondly, when the applicants do a name check on the MCA portal, they do not get these names which are supposed to be closely resembling to the names proposed. So MCA is using a different algorithm when they are checking from their side to what the user is able to generate when he is checking from his side. This is not helping matters.  Thirdly the user is clicking the Auto Check option on the RUN system, still it is not throwing up any identical names. So something is seriously wrong with the MCA system. It is not working to the satisfaction of the user.

Then there is another issue, that of TM comparison. When the user does a check on the TM site, he does so normally only for the class of business in which the company is going to be involved in, not all the classes of businesses. Now MCA is rejecting names on the ground that the TM is registered in another class different from what the proposed company is going to do business in. Such general and wide ranging rejections is not helping matters at all. It is not at all Ease of Doing Business as the government is claiming to be. Why is the MCA getting involved in TM matters. Let the companies who are affected by similar trade marks take action under the relevant Trade Marks Act. Secondly it is only an incorporation stage, not the TM stage, there is no logo or trade mark involved at the incorporation stage. This kind of overarching abuse of power is not helping India generate businesses and thereby employment and asset creation of which there is a dire need.  

New system for reserving name

MCA has vide its notification dated 20th January, 2018 introduced a new system of name reservation for new companies as well as existing companies. It is called RUN (Reserve Unique Name) and it is available on the webspace as against a form which was hitherto the norm with MCA. So form INC-1 has been done away with.

RUN does not ask for too many details - just entity type, CIN, proposed name & comments. One needs to feed data into it and see how it works before commenting on the efficacy of the system.

Hitherto the form INC-1 used to run into a wall called the Central Reservation Centre or CRC. The CRC was known mostly for rejecting names rather than approving them and they had a funny, vague and ambiguous internal guidelines which they followed ridiculously. That is if the proposed name matched an existing entity's name by 50% it was automatically rejected. It is so silly and in absence of no further details as to how that system worked, it was a pain in the wrong place.

RUN does not require any digital signature to be uploaded, so hope it is not subject to misuse. People could just apply for several unique names and sit on it thereby preventing those names from being available for genuine entrepreneurs. I hope this is not the case. As i have said elsewhere unless and until we go through the new system, we will be unable to comment on its efficacy.

Also not aware if the RUN has some fees to be paid, which i am sure it has, then people could end up paying multiple times for different names because there is no resubmission process in the RUN system.

I hope RUN has some kind of appeal system in place otherwise what will happen is again some stupid internal guidelines will be followed much to the heartburn of genuine entrepreneurs.


In fact the CRC was so idiotic that they used to reject change name applications of existing companies without giving it any thought whatsoever.

Apparently the form INC-32(SPICe) has also been amended alongwith the digital MOA and AOA in forms INC-33 and INC-34 respectively. One has to look into these forms to find out what changes they have made.

Where the no. of subscribers to a new company are more than 7 or where the documents are being executed outside India, then the digital MOA & AOA is not to be used. Instead the duly signed MOA & AOA needs to be attached to the form INC-32.