ISSUE XV : Recent amendments in MCA circulars

Recent Amendments in MCA Circulars

Introduction

The Ministry of Corporate Affairs (“MCA”) initiated the practice of issuing circulars in 1983 with the objective to notify the public on important developments relating to the MCA and to provide an effective regulatory framework to the Indian corporate sector. These circulars are published as and when the MCA sees there is a need for change.

Between April and June 2012, some important developments took place, which resulted in publication of a few circulars by the MCA. This bulletin covers the important circulars that were published during this period.

1.0     Highlights of Name Availability Guidelines 2011

Registration of companies in India is regulated by the Companies Act, 1956 (“Act”) and is administered by the MCA through the Registrar of Companies (“ROC”) in each State. To start the registration process, an application for availability of name is filed in e- form 1A with the ROC.

As per the Name Availability Guidelines 2011,1 a company with an undesirable name should not be registered2. A name is considered to be undesirable if it is identical or too nearly resembling with: (a) existing name of a company already approved by the ROC (b) existing name of a Limited Liability Partnership (LLP) already approved by Registrar of LLP or (c) a registered trade-mark or a trade mark for which an application is filed under the Trade Marks Act, 1999.

Form 1A can be certified by the applicant or by a practicing professional. In case the form is certified by the applicant, a declaration considering the following points has to be furnished: (a) online search to check the resemblance, if any, of the proposed name; (b) ensure that the proposed name is not infringing any registered trademarks or a trademark for which an application is filed; (c) proposed name is not violating the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950; (d) the use of the proposed name is not constituting an offence under any law for the time being in force; (e) the proposed name is not offensive to any section of people.

On the other hand, if the form is certified by a practicing professional, a search report has to be annexed with form 1A certifying that all the search facilities on the MCA portal have been used for verifying the availability of the proposed name, Thereafter, the name will be made available by the system online without back-end processing by the ROCi.e. Straight Through Process (STP) mode. The professional is liable for penal action under provisions of the Act and by the respective professional institutes if, at a later date, it is found that the name should not have been allowed under provisions of section 20 of the Act read with these Guidelines.

ROC has the power to withdraw the name any time before registration of the company. The name lapses if the company is not registered within sixty days from the date of its approval. Central Government has the power3 to direct the company to change the name if later it is discovered that the name resembles the name of any other existing company. The use of words Private, Pvt., (P), Limited, Ltd., LLP, Limited liability partnership, Co., and co., and company, corporation, corp, corpn, plural version of any of the words in the name, type and case of letters, spacing, punctuation marks, joining or separating the words, use of a different tense, spelling differences, addition of any internet designation as .com, .net, .edu, .gov, .org, .in, addition of words like new, modern, nav, shri, shree, sree, om, jai, sai, the etc., different combination of the same words, exact hindi translation of the name , according to the MCA, does not distinguish the name of a company from the name of an existing company. Hence, these uses are prohibited.

Further, the following additional points have to be kept in mind with respect to the proposed name: (a) the name of the company has to be indicative of the main object, if it carries on the business of finance, housing finance, chit fund, leasing, investments, securities or combination thereof; (b) the name should not contain words which indicate a separate type of business constitution or legal person such as co-operative, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.; (c) new company shall not be given the abbreviated names; (d) the proposed name identical to the name of a liquidated company shall not be allowed for a period of 2 years from the date of such liquidation, additionally, the name of a company being struck off4 shall not be allowed for a period of 20 years from the date of publication of such struck off in the Official Gazette; (e) the proposed name shall not be allowed to include words like Insurance, Bank, Stock exchange, Venture capital, Asset management, Nidhi, Mutual fund etc without getting the approval of the respective regulator; (f) ‘State’ word shall be allowed only in case of a government company; (g) the proposed name shall not be allowed to contain only the name of a continent, country, state and city; (h) the proposed name shall not be allowed without the approval of Central government if it is connected with the Central government, State government or any other body constituted under any other law for the time being in force;

(i) a subsidiary company may use the name of its holding company by adding the word India or any Indian state or city, if available; (j) a company shall not be allowed to change its name if it has not filed its annual accounts and has defaulted in repayment of matured deposits, debentures and interest thereon.

As per the latest circular5 issued by MCA, form 1A despite being signed by professional, will be now put to online check by the system and in case of any resemblance with existing trademark or exact match of any of the two words except for the words private limited/limited, the proposed name will be processed in non-STP mode.

Now, MCA has decided to provide the facility for verification of the name approved in STP mode by concerned ROC as per the below timeline: (a) if the name is approved on any working day before 11 am, the incorporation documents shall not be filed before 7 pm of the same working day; (b) if the name is approved on any working day after 11 am or at any time on non-working day, the incorporation documents shall not be filed before 7 pm of the next working day.

2.0 Filing of event based e-forms by defaulting companies

Recently, MCA has issued a circular regarding filing of ROC forms by defaulting companies under the Act through electronic mode. Earlier,6 MCA had decided that no forms for recording any event based information shall be accepted by ROC from defaulting companies unless they file their updated accounts and annual return with ROC but the exemption was granted for filing of form 32, 20B, 21A, DIN-3, 21, 23AC, 23ACA, 1INV, 23B and 66. Forms specified above are meant for the purpose such as particulars of appointment of managing director, directors, manager and secretary and the changes among them (form 32), annual return by a company having a share capital (form 20 B), annual return for the company not having share capital (form 21A), intimation of DIN by the company (DIN-3), notice of the court or the company law board order (form 21), balance sheet (form 23AC), profit and loss account (23ACA), form for deposit of money in investor education and protection fund (form 1INV), information by auditor (form 23B), compliance certificate (form 66).

Later on,7 few more forms were added to this list such as: (i) form 2, 3, 5, 23 and 61 to be filed by directors of the defaulting companies; (ii) form 61, DIN-3, 32 21 and FTE to be filed by the directors of defaulting companies having ‘dormant’ status; (iii) form DIN-3, 32, 2, 3, 5, 21, 23, 61, 23AC, 23ACA, 20B, 21A, 66, 23B and FTE to be filed by the directors of defaulting companies having ‘active in progress’ status. Here, the above mentioned forms are filed for the purpose such as return of allotment (form 2), particulars of contract relating to shares allotted otherwise than in cash (form 3), consolidation, division, etc. or increase in share capital or increase in number of members (form 5), registration of resolutions and agreements (form 23), application with ROC (form 61), notice of the court or the company law board order (form 21) and application for striking off the name of company under the Fast Track Exit (FTE) mode (form FTE).

Now, on the request received from various corporates and professionals, MCA added form 8 for creation or modification of charge, form 10 for registration of charges for debentures and form 17 for satisfaction of charge in addition to the above mentioned forms vide its latest circular,8 which came into effect from May 20, 2012.

3.0 Increase in the ambit of payment of filing fee

In order to widen the ambit of the fee structure, MCA has imposed fee on certain e- forms vide its new circular9 with effect from July 22, 2012. Applicability of fee is based on the following two categories:

  • Category I (fee imposed as per schedule X of the Act): consists of form 1 of Investor Education Protection Fund Rule, form 23B for information by statutory auditor to ROC u/s 224(1)(a), form 36 for receiver’s or manager’s abstract of receipts and payments (charge related form) and form 62 for submission of miscellaneous documents under the companies court rules, 1959 (with form 154, 157 and 158).
  • Category II (fee imposed as per Companies (fee on application) Rules, 1999): consists of form 24A for application to RD, form 61 for application to ROC and form 65 for application to central government except for form 65 to be filed for information and explanation on reservations and qualification contained in cost audit report by a company.

Conclusion

The companies have derived lot of benefits from the initiatives of MCA. The above mentioned initiatives have been taken in order to simplify the procedure by amending the name availability guidelines, to widen the ambit of filings to be done by defaulting companies and to increase the revenue by imposition of fee on various e-forms.

Authored by:
Jaya Moorjani

1 General circular no. 45/2011 dated July 8, 2011
2 Section 20 of the Act
3 Section 22 of the Act
4 Section 560 of the Act
5 General circular no. 7/2012 dated April 25, 2012
6 Vide General circular no. 33/2011 dated June 1, 2011
7 Vide General circular no. 63/2011 dated September 6, 2011
8 General circular no. 9/2012 dated May 15, 2012

 

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