MCA Announces Zero Fees For The Incorporation Of A Company

In an attempt to ease procedures for new as well as existing companies, the Ministry of Corporate Affairs (MCA) has introduced a slew of changes to the procedures for the incorporation of a company.

On the occasion of 69th Republic Day, MCA introduced three Government Process Re-engineering (GPR) initiatives to increase the pace of a company’s incorporation while making the process easier, convenient and digital.

1. Incorporation of Company at Zero Fees

The Ministry of Corporate Affairs (MCA) has announced that there will be no fees for incorporation of a company for Simplified Proforma for Incorporating Company Electronically (SPICe) forms, e-Memorandum of Association (e-MoA) and e-Articles of Association (e-AoA).

These redundancies will save the company a few thousand rupees, which will, in turn, encourage startups to formally register their businesses. However, the company will have to pay the necessary Stamp Duty, which is applicable at a rate depending on the state of incorporation.

2. Reserve Unique Name (RUN) Form

The Ministry has also introduced Reserve Unique Name (RUN) forms to simplify the name reservation process of a company.

The rules earlier required a company to reserve a name either in advance through the Name Reservation — INC-1 form or directly through the incorporation application (SPICe Form).

Now, the RUN form has replaced the INC-1 form.

Other features include:

• RUN form gives the option for only one name for the company, unlike INC-1 which had a provision of six options for the company’s name.
• RUN form doesn’t require any Director Identification Number (DIN) or a Digital Signature Certificate (DSC)
• The fees for RUN form is $15.7 (INR 1000), irrespective of whether the name is approved or not
• The approved name is valid for up to 20 days and 60 days from the date of approval for a new company and an existing company, respectively.

The proposed companies can apply for the reservation of name using the RUN form and they will be intimated of the approval by the MCA through email. However, it has been suggested that RUN form be used when there is an ambiguity about the name because of its similarity to existing companies or Limited Liability Partnerships (LLPs).

If the name is unique, a company can apply for the name directly with the SPICe form. This would save time and money for the applying company.

3. Director Identification Number (DIN)

The new rules of MCA specify that a new company can apply for DIN only through SPICe forms. The details of the directors need to be filled in the SPICe forms with the relevant proof of identity and address.

For an existing company, MCA specifies the use of form DIR-3 to add a new director. This form has a provision for furnishing the Corporate Identity Number (CIN) of the company and a declaration that the DIN is being obtained for adding the aforementioned person as a director of the company.

These reforms come amid the continued efforts of the Indian government towards enhancing ease of doing business. The government’s efforts seem to have fructified since India recently jumped over 30 positions in the World Bank’s ease of doing business rankings report.

In recent times, the Indian government has introduced a number of measures like improving the online application system, strengthening the availability of credit facilities, protecting the interests of minority investors, easier payment of taxes, new insolvency and bankruptcy codes, amongst others.

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