Alok Patnia founded Taxmantra.com, an expert in tax advisory & compliance. He is a Chartered Accountant having prior exposure with Ernst & Young & KPMG.
This article would tell you whether the process of Registering a Company in India under new Companies Act 2013 has gone from bad to worse . There was a time when companies used to get registered in a week. Hell…we have also done it in a record-breaking time of 72 days, yes you read it right!!
Two months after implementation of the Act…and we are still unraveling the knots and ties. The new Act is bold, versatile and twisted in the right places in ways that we cannot help but wondering whether it is a boon or good rule gone bad ? We, at Taxmantra, dedicate this article to all such start-ups and professionals who are wary of these rules relating to registering their start-ups in India.
We will highlight the major changes in company registration that has come up as per the Companies Act, 2013.
How different is Registering a Company in India under new Companies Act 2013. What exactly has changed after the implementation of the new Act? Let us explore the factors one by one:
1st Thing – Digital Signature Certificate for Director Identification Number
Previously, the DIN forms were filed by professionals after certifying the forms with their DSCs. The new Act, however, has made it mandatory to obtain the DSC for obtaining the DIN. Hence, any person wishing to obtain a DIN has to apply for a DSC first.
Our view – Being director has become pricey. The increment in DIN charges backed by the compulsory acquisition of DSC is indeed a severe hurdle in registration of a start-up. Often a group of people come together with a bunch of aspirations of building a unit. Imagine telling them to differentiate among themselves between directors (read “controllers”) of the business and shareholders (theoretically owners)!! Yes…that is the very dilemma that the start-ups and their professionals are facing. The increase in DIN fees is acceptable but the requirement of their DSC Certification is more on the stringent side.
Related Article: How To Choose Best Business Structure For Your Company
2nd Things – Even more stringent Name Approval Norms
There have been no such major changes in the Naming Guidelines which were originally issued in 2011. However, the implementation and execution of these guidelines have been made tougher by the Ministry officials. For e.g.: for carrying out any business related to construction of buildings, you might need to submit a No Objection Certificate from the Indian Council of Architecture.
Our View: The name approval of an entity was in itself a hugely accountable task. With the norms being made even more stringent, the task has become herculean. However, this, in tandem with the Trade Mark and Patent alignment aims to make the entire system more structured and systematic.
3rd Thing – Revised Formats of MOA and AOA
The Formats of the MOA and AOA is embedded in the Act. These formats needs to be executed as specified in the NCA Incorporation Rules, 2014.
Our view – The problem, here is, these rules are practically a theory. You cannot learn swimming by just reading “Swimming for Dummies”. You need to actually dive in and taste the waters to learn the exact technique.
Very similarly, the implementation of these incorporation rules is currently under test and trial. This is the very reason that most of the forms are being sent for resubmissions with varied requirements from varied ROCs. We believe it will take some time before we can actually go back to the “one-week incorporation” regime.
4th Thing – Increase in documentation
Previously under Companies Act, 1956, there were only three to four documents that were to be submitted to the ROC along with the incorporation forms. The number now stands at 14-15. Starting from the address proof of directors to statement from certified professionals, everything has to submit to the ROC.
Our View: This extensive documentation somewhere becomes superficial. For example: we are already submitting the address proof for directors in the DIN forms. Then what is the point of making their submission compulsory in the incorporation forms as well? Also, where the forms are being certified by the practicing professional by his DSC, then obtaining an affidavit from him bears no significance. These declarations, on the other hand, could have been incorporated in the forms itself as check-points.
5th Thing – Extensive requirements of Notary and Stamping
Almost every document has to be notarized to incorporate a company. The affidavits from promoters, consent of directors, declaration from promoters, and declaration from professionals have to be notarized and submitted along with the incorporation forms.
Our view: This has, by far, been one of the most agonizing factors for startups and professionals. Apart from the increase in the total cost of registering the start-ups, it has also added to the hassles of visiting the notary, queue up and then get it done. Also, in remote areas, availability of a notary public is also difficult. For a layman, it really gets cumbersome. In this era, where almost everything is online, these processes tend to slow us down and make us dependent on local availability of facilities and legal norms.
6th Thing: Non Straight Through Process ( STP) mode of processing
Under Companies Act, 1956, a unique name in tandem with the guidelines (if certified by a practicing professional) ensured its instant approval by the virtue of STP mode. This has been discontinued now. The provision for certification by a professional has been discontinued in Name Approval forms.
Our view: This is bound to cause certain unnecessary delays and add up to the time line for company registration.
Thus, we see that in almost every stage of company registration in India, time constraint and cost hassle has become an integral part for now. However, we believe these mechanisms have been brought in place with a positive intention. Any new structure is prone to initial hiccups and bottlenecks. These rules need and deserve some time. Only after that it will be possible to tell with a certainty that it emerges a winner or joins the race with the existing (may be now changing) beauracratic red-tape culture.
We would continue to make company registration hassle free. Check here to know more on our company registration service.