Process of incorporation of Companies and establishment of principal place of business in India by Foreign Companies simplified and e-payment of MCA fee made compulsory

In continuation with their endeavour to help the Corporate sector in India operate with maximum ease in a regulated environment, the Ministry of Corporate Affairs (MCA) has issued two General Circulars (the circulars) in last week in relation to simplifying the process of incorporating a Company in India (General Circular No. 6/2011 dated 8 March 2011) and making compulsory e-payment of fee to the MCA General Circular dated 9 March 2011.

Existing Process

a) Approval process followed by Registrar of Companies for Incorporation of Companies:

• Name reservation application (in Form 1A) generally takes 6-7 working days.
• Incorporation documents (in Form 1, 18 & 32) along with constitutional documents/ charter (Memorandum & Articles of Association) takes 10-12 working days
• Re-submission of revised documents, if any takes 3-4 working days

The whole approval process followed by Registrar of Companies (ROC) for incorporation generally takes 25-30 working days which involves a lot of time and also results in unnecessary administrative hassle for the individuals! corporations intending to set up their operations in India.

b) Payment of MCA fee:

•        The different modes of payment available are:

-        Credit card ! Debit Card (Pay online)

-        Net Banking (Pay online)

-        Challan (Generate the Challan online, fill it and deposit it off-line at an authorized bank branch)

•        Selected branches of the following five banks have been authorized for accepting MCA Payments (Challan):

-        Punjab National bank

-        State Bank of India

-        ICICI Bank

-        HDFC Bank

-        Indian Bank

As per the observations made by MCA, payment confirmation is found to be a major bottleneck in delivery of services in respect of offline payment made by physical challans as there are delays in confirmation of payments by banks, which generally work on the reporting time of ‘T’+3 days.

Recommendations

The following are the key recommendations made in the Circulars:

a) Approval process followed by Registrar of Companies for Incorporation of Companies:

Only the application and declaration for incorporation of a company in Form 1 will be approved by the ROC office and other incorporation forms such as notice of situation of registered office (Form 18) and particulars of appointment of directors (Form 32), which were approved by ROC now will be processed by the system online.

Further, following incorporation forms will be considered by ROC under the category of ‘highest priority’ while processing:

•        Form 1A (Application form for availability or change of a name);

•        Form 37 (Application by an existing joint stock company or by an existing company for registration);

•        Form 39 (Registration of an existing company as a limited company);

•        Form 44 (Documents delivered for registration by a foreign company); and

•        Form 68 (Application for rectification of mistakes apparent on record)

A separate notification is expected, notifying the changes in forms 18 and 32 to enable them to be taken on record through system online.

With simplification of the approval process, MCA expects that the average time taken for incorporation of company shall reduce to one (1) day only.

b) Payment of MCA fee:

The payments of value up to INR 50,000, for various services provided through its online portal shall be accepted only in electronic mode from 27 March 2011. For the payments of value above INR 50,000, it will be optional till 30 September 2011 to pay online which will become mandatory with effect from 1 October 2011.

Comments -In line with its ambitious e-Governance project, MCA has taken a number of initiatives to transform its mode of working from traditional paper to paperless format. Filing of Corporate documents online and introduction of e-stamping being examples of the transformation. The above recommendations mentioned in the Circulars are being welcomed as a step towards significantly reducing the time and effort. It is important to note here that at the time the Ministry of Corporate Affairs introduced e-filing of documents, it took a while for the proposals to get implemented and in the interim there was significant confusion on compliance matters. While this initiative from the Government is a welcome move, it is imperative that the office of Registrar of Companies is geared up for a smooth and efficient implementation of the proposals.

Related posts:

1. MCA simplified procedure of company incorporation and establishment of principal place of business in India by Foreign Companies
2. Incorporation in India Must For Foreign Banks
3. Storage and Supply of goods in India through an independent third party gives rise to fixed place permanent establishment in India
4. Regarding Incorporation of a new provision as paragraph 4.7A in the HBP. v1 to allow access to duty free inputs based on actuals, for pharmaceutical products manufactured through Non-Infringing process
5. Demarcated space made available in the warehouse by logistics service provider constitutes fixed place of business