CS Rahul Harsh

CS Rahul Harsh‘Central Registration Center’ for Reservation of Name – Explained

♣ Notified By & On: Ministry of Corporate Affairs (MCA) vide its Circular dated 22.01.2016.

♣ Rule Notified: The Companies (Incorporation) Amendment Rules 2016 dated 22.01.2016 by amending The Companies (Incorporation) Rules, 2014 (the principle rule).

♣ Effective From: The Companies (Incorporation) Amendment Rules, 2016 are effective from 26.01.2016.

Introduction: In an attempt to simplify and streamline the process for incorporation of companies, the Ministry of Corporate Affairs (MCA) introduced the formation of the Central Registration Center (CRC) by issuing a notification on January 22, 2016 (CRC Notification). The CRC has been established to facilitate smoother functioning and fastening the processing of incorporation applications, it is expected to look into the applications for name availability (INC-1 e-forms) submitted online across the country and to process the same by the end of the very next working day. Thus, CRC not only promotes uniformity in application of incorporation rules but also encourages incorporation of companies and is a step towards Ease of Doing Business.

However, for the time being, the Central Registration Center shall function under the control of the Registrar of Companies, Delhi (ROC Delhi), who shall act as the Registrar of Central Registration Center until a separate Registrar is appointed.

Legal Background:

Section 396(1) of the Companies Act, 2013 Provides that, For the purposes of exercising such powers and discharging such functions as are conferred on the Central Government by or under this Act or under the rules made there under and for the purposes of registration of companies under this Act, the Central Government shall, by notification, establish such number of offices at such places as it thinks fit, specifying their jurisdiction.

Jurisdiction: The Central Registration Center shall have territorial jurisdiction all over India, for carrying out the function of processing and disposal of applications for reservation of Names [e-form (INC-1)] under the provisions of the Companies Act, 2013.

Functions: 

1. The Central Registration Center shall process applications for reservation of Name i.e e-form INC-1 (Application for reservation of name) filed along with the prescribed fees as provided in Companies (Registration of offices and fees) Rules, 2014.

2. This is just a centralized reservation counter. Registration of Companies shall continue be handled by the registrar of companies having jurisdiction at the place of registered office of the company.

Location: The Central Registration Center shall be located at Indian Institute of Corporate  Affairs (IICA), plot no. 6, 7, 8, Sector-5, IMT, Manesar, District: Gurgaon, Haryana – 122050.

Further Amendments to The Companies (Incorporation) Rules are as Follows:

1. The proposed name sent for approval will no longer be required to be in agreement with or indicative of the primary objects of the company as set out in the memorandum of association. Consequently, the proposed name of the company shall be considered desirable even if it is not in harmony or compatible with the principal objects of the Company. For Example: if a company wants to opt its name as ‘XYZ Builders Pvt. Ltd.’ then it is not necessary that its principal object should be related to construction and development only. Thus, now company is free to choose such name which is not in consonance with principal object.

♣ Effect: This may satisfy “ease of doing business” mindset of our bureaucracy but may create practical problems. When a company in due course changes its objects clause, and is not required to change its name to indicate its objects. it may lead layperson investors in risk, as now lay investors may not identify objects of a company by its name. Though, it may not create any issue in genuine promoters and companies but may give fraudsters undesired loophole.

2. The restrictions on the use of abbreviated name based on promoters are done away with so, promoters can now apply abbreviated names based on their names or initials. This removes all restrictions on abbreviated names and unlocks a good numbers of creative names for companies.

For Example, How many of us know about ANI Technologies Pvt. Ltd but if someone say ‘OLA’ then most us might have heard of it and even enjoyed its first free ride. ‘OLA’ could have registered its name containing ‘OLA’ if there was no such restriction on usage of abbreviated name. Or, same is the case with One97 Communication Limited it could have registered its name containing PayTm, if the restrictions were not present. Thus, the Amended rules do away with restriction on usage of vague and abbreviated name. Now a company can use either vague or an abbreviated names such as ‘XYZ limited’.

3. Rule 8(2)(b)(xvii) omitted: This clause, now omitted read, “it is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal”.

Effect: This gives freedom to company to have any name without any presumption of misleading impression. Now, a company may have word corporation, India limited, Asia limited in its name.

4. The requirement of submitting the No Objection Certificate (NOC) in case where the proposed name is of a person other than the name(s) of the promoters or their close blood and  proof of relationship, where the name includes the name of relatives, have been quashed . Therefore, such documents are not needed to be submitted with the ROC any more.

5. Now a third opportunity will also be provided by the Registrar, if he finds some deficiency after the 2nd opportunity, which will help the applicant to increase the scope of furnishing the documents as required by the Registrar.

6. Though the opportunities for re-submitting the documents have been increased, the total time period to remove such deficiency shall not exceed 30 days (earlier it was 15 days).

Conclusion: The establishment of the CRC will reduce the burden on ROC’s handling voluminous applications for incorporation of companies. Further, relaxations in relation to various restrictions on name of the company which were earlier considered undesirable will ease the process of incorporation of companies in India.

Author: CS Rahul Harsh – Associate Member of the ICSI & A Commerce graduate from Kolkata, and can be contacted on csrahulharsh@gmail.com

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