In every two years the Company incorporation process undergoes a change and Government with its ease of doing business agenda is perceived enough to keep on implementing new tools and procedure for incorporation. Whether introduction of these new procedures for incorporation result in ease of doing business where the actual machinery of the government is moving backwards towards the license raaj or discretionary practices is an important issue to ponder. Moving attention to new incorporation process, SPICe+ will be the new eform for incorporation replacing SPICe, which as per the Government will now allow incorporating a company through web based platform instead of an electronic eform.
Immediately on Companies Act, 2013 came into effect there were 3 eforms which was required to be filed for incorporation i.e. INC 7, DIR 12 and INC 22 or INC – 29 (an optional single integrated eform) this was substituted in 2017 by mandatory filing of Spice eform for incorporation with less than seven subscribers and with additional features of eMOA, eAOA and getting PAN / Tan along with incorporation certificate. The name application was made web based through RUN, where two names can be applied with one resubmission allowed to be approved or rejected at the discretion of Central Registry Office, Delhi.
Now we have SPICe+ which will be implemented w.e.f 15th February, 2020 and name reservation alongwith other features of incorporation will be mandatorily to be done through SPICe+. RUN Service for applying name will only be limited to existing companies for change of name cases.
Features of SPICe+ form are:
SPICe+ is divided into two parts PART A and PART B. PART A for name application and PART B for incorporation details. Stakeholders can file PART A and PART B together also but Ministry of Corporate Affairs (‘MCA’) has not clarified what will happen if the name is not as per the likings of the authority at CRC. As per MCA the details submitted in PART A and PART B of SPICe+ would be automatically prefilled in all linked forms i.e. AGILE-PRO, eMOA, eAOA, URC-1, INC-9 (as applicable)
Earlier in AGILE form it was not mandatory to apply for GSTIN, EPFO and ESIC it was discretionary on promoters whether to apply or not for GSTIN, EPFO and ESIC and the existing process of registration through common portal was available. However through AGILE PRO MCA has made mandatory for Company to register for EPFO and ESIC Registration, Profession Tax Registration in the state of Maharashtra and mandatorily open bank account with MCA partnered banks.
Government should have paid attention to the present requirement of labour law registration where EPFO registration is applicable to an entity where the number of employees reaches 20 or more and for ESIC registration it is 10 or 20 employees (varies from State to State) drawing wage of 21,000/- or less. Mandatory EPFO / ESIC registration irrespective of applicability under the relevant Labour Law is an added burden of compliance on the Company.
Applying for mandatory bank account through SPICe+ with the MCA partnered bank is a discretionary move by MCA which may not go down well if Promoter wishes to open a bank account with a bank which is not partnered with MCA. In longer run how it will be implemented and how stakeholders will respond will be interesting to see.
Profession tax is applicable in the state of Karnataka and Maharashtra but it is unclear about mandatory registration of profession tax only to the companies incorporating in the state of Maharashtra. Further Profession Tax registration is of two types i.e. PTRC for deducting profession tax from employee salary and PTEC for paying profession tax by Company and its Directors. How this will be implemented and will be linked with State Government system needs to be look into once the incorporation process starts through new system.
It looks that on one hand Government initiates ease of doing business but in practicality things are getting complicated, introduction of SPICe+ looks as if the + sign demonstrates additional compliance and registration with incorporation which may not have been required at all. Instead of unprecedented move of easing incorporation process, Government should get internal departments align and remove discretionary propaganda of the authorities. Some of the issues faced by stakeholders which really needs to be address are:
1. The name approval discretion of authorities at CRC should be done away with and clear guidelines to be provided for professional to certify for name or web based AI system should be developed which itself approves the name without any personal intervention. This would save lot of hardship for stakeholders.
2. PAN/TAN is issued with Incorporation Certificate but bankers, GST authorities and other authorities wherever Company requires registration asks for original copy or photocopy of PAN Card, which takes almost 45-60 days to receive post incorporation. If we are moving towards digitization then physical PAN card requirement should be completely done away with.
3. Startups should not be made to get all these mandatory registrations at incorporation level, most of the times these startups are only at an ideation stage.
4. Strike off procedure should be simplified. The focus is always on incorporation but there is equal number of companies which has to be wound up or to be struck off. Strike off fees is increased from Rs. 5,000 to 10,000. It takes around four to six months to get Company struck off in MCA system even if the Company does not have any assets or liabilities. Post struck off there is no modus operandi for surrender of all other statutory registrations which probably should have got cancelled simultaneously with struck off of the Company as similar to how registrations are made available while incorporation.