PREFACE: The Premise Of Form INC 22A!
The Indian economy has never been able to achieve its optimum due to reasons like black money, money laundering, shadow economy, hoarding, economic frauds, etc.
In the past few years, the government has drawn a road map to clean the financial sphere of such rampant and blatant wrongdoings. In this process, the first step taken was demonetization in 2016, followed by strike off of non-compliant companies in 2017 by MCA.
Both these steps paid remarkable dividends as lakhs of companies were identified and struck off as they were either shell or fake or dormant or fraudulent companies. This also resulted in over 3 lakhs directors’ disqualification of such companies, as mandated by the Companies Act, 2013.
In its continued endeavor to rein in fraudulent, shell companies MCA has been introducing various compliances and the latest to be introduced in it is Form INC 22A.
“Introduction of e-Form INC 22A is another step by Ministry of Corporate Affairs to usher in a regime of fair business in India!”
– Kritika Chabbra (Market Analyst, MUDS Management Pvt. Ltd.
Introduction To Form INC 22A:
The new e-Form INC 22A- Active Company Tagging Identities and Verification (ACTIVE) has been initiated by MCA based on Rule 25A of Companies (Incorporation) Amendment Rules, 2019.
Notification Date: MCA notified Form INC 22A on 21 February 2019, which mandates every company that has been incorporated on or before 31 December 2017, has to file it.
Effective Notification Date: 25 February 2019.
Due Date Of Filing: 25 April 2019.
Form Filing Fees: Nil.
Last Date Of Filing With Late Fine: 15 June 2019.
Late Fine: Rs. 10,000.
Applicability Of Form INC 22A:
Every company incorporated on or before 31 December 2017, shall mandatorily file e-Form INC 22A by 25 April 2019. A failure in doing so will lead to it be labeled as ‘ACTIVE non-compliant’ as the status of the company on the official website.
Companies Exempt From Filing Form INC 22A:
Companies which are-
Prerequisites For Filing Form INC 22A:
Directors Disqualification Shall Result In A Roadblock!
As is mentioned above, a major requirement of filing Form INC 22A is that the DIN of all the Director/s should be active, referring inevitably to the fact that the directors should have filed their DIR-3 KYC. Overcoming this hurdle at the earliest will be crucial as non-compliance will lead to grave consequences.
Restrictions On Filing Of Form INC 22A:
Under below-mentioned conditions, a company shall not be able to file Form INC 22A:
1. If DIN of the director is deactivated due to non-filing of DIR-3KYC.
2. If the Director is disqualified under Section 167.
3. If annual filing for the financial year 2017-18 is not done.
4. If the company has paid up capital is 5 crore or more, but not appointed Company Secretary.
5. If KMP (Key Managerial Personnel) not appointed as per the requirement of the company.
6. If auditor not appointed as per requirement.
Outcome Of Having A Disqualified Director:
In case the director disqualification has occurred due to non-filing of DIR- 3 KYC or has been disqualified under Section 167, the filing of Form INC 22A will be stalled.
The consequences of non-compliance shall be far reaching for the company! The company shall be marked as ‘ACTIVE non-compliant’ in the official records.
Additionally, as a result of non-compliance, the company will have to face restrictions under the fourth proviso of Rule 25A and most importantly, the company will not be able to undertake event-based filing of these forms-
1. Change in Authorized Capital (SH-07)
2. Change in Paid-up Capital (PAS-03)
3. Change in Director (except for cessation) (DIR-12)
4. Change in the Registered office (INC-22)
5. Amalgamation, de-merger (INC-28)
Additional Consequence Of Non-Compliance:
Non-filing of e-Form INC 22A will lead to another grave consequence for a company as action Under Section 12 (9) of the Act can be taken up. According to the provisions of this Section, the Registrar can initiate action against the erring company if has valid reasons to do so. He can seek physical verification of the registered office of the company and can go ahead for the removal of its name from the register of companies if discrepancies found.
What Is The Remedy If A Disqualified Director Is The Hurdle?
As the date for late filing has been extended to 15 June 2019, the company should urgently look to resolve the deterrent factors due to which it is incapable of complying.
Hence, if a director’s disqualification is the hurdle, get it removed at the earliest as there are ways and means to do so.
Deactivated DIN Due To Non-filing Of DIR-3 KYC By a Director:
Any director who has been allotted DIN on or before 31 March 2018, needs to furnish his KYC details to the MCA by filing the e-form DIR-3 KYC. He will have to provide-
The completed e-form has to be certified by a practicing-chartered accountant or company secretary or C&M accountant.
Director’s Disqualification Arising Out Of Section 167 Of The Companies Act, 2013:
If the DIN has been deactivated due to non-compliance of the company then the director needs to restore it by seeking legal recourse at the earliest. A writ petition in the concerned High Court will lead to relief from it as has happened in several cases.
“A disqualified director is a major stumbling block for the company; thus, removal of disqualification should be of utmost urgency, not only for the individual but also for the company!”
-Isha Malik (Company Secretary, MUDS Management Pvt. Ltd.)
Once the Director’s disqualification is removed and Din restored, the company shall be eligible to file e-Form INC 22A along with a late fee of Rs 10,000.
It is all-important to file Form INC 22A at the earliest and get the tag of ACTIVE non- compliant changed to ACTIVE compliant.
Particulars To Be Provided In e-Form INC 22A:
1. Name of the Company & CIN
2. Registered Address of the Company
3. Two photographs of the registered office of the Company
4. Location of registered office on Map defining Latitude / Longitude
5. Email for OTP verification
6. Details Of-
7. Details of the MD or CEO
8. To be digitally signed by the Director
9. Once again it is seen that the Director’s DIN and its status is crucial for filing the form and working beyond it.
Remove Directors Disqualification Occurring Due To Section 167:
If a director’s DIN has been deactivated for 5 years, due to non-compliance of one of the companies in which he was a director, he is barred from all the companies too, as per provisions of Section 167.
All such companies will be adversely affected by the clause of disqualified director and unable to file INC 22A until the disqualification of the director is removed.
AS the disqualification has not occurred due to any personal wrongdoing of the director but has triggered because of the company defaulting on compliances, therefore, if the struck off company gets restored, then the director’s disqualification can be removed.
Some companies took respite by applying to Condonation of Delay Scheme, others applied to NCLT for relief but there are many who have not been able to remove their strike off status. Companies Act, 2013, does not have any provision for such disqualified directors to seek relief.
Then what can a disqualified director do? Should he patiently wait for five years to pass? And the companies thus get struck off for non-compliances in future?
No, there is a very effective way, a legal recourse, which is not only open to such directors but also has been successfully availed by many disqualified directors all over India. Article 226 of the Indian Constitution provides that such disqualified directors can file a writ petition in the concerned High Courts to seek relief.
Positive News Delivered By Various High Courts For Seekers Of Relief From Directors Disqualification:
In the case of Bhagavan Das Dhananjaya Das Vs. Union of India, the Madras High Court has not only quashed the order of the ROC but also called its action as illegal, arbitrary and devoid of merit.
In a similar petition, the Gujarat High Court, last December, shot down MCA’s list of September 2017, leading to the restoration of DINs.
In another case, Srinivasan Sandilya & Others Vs. Union of India, the Delhi High Court in October 2017, has ordered stay on the matter.
Factors That Come In Favour Of Aggrieved Directors:
What’s important to understand is that since 2017, there have been numerous cases, and most of the High Courts are of the opinion that the related provisions in the Companies Act, 2013, are ambiguous and lack clarity.
Legal luminaries and learned professionals have pointed out certain loopholes in the Companies Act, 2013, that has resulted in such a situation.
Principle of Natural Justice Blatantly Flouted: In most cases, no notice was served and hence, no chance given to defend themselves. This the Courts stated, amounted to be acting against the principle of natural justice, which has been declared a basic structure of the Indian Constitution by the Supreme Court.
Retrospective Implementation of Non-Compliance Clause: The financial non-compliance under Section 248, which led the companies to be struck-off, has been implemented retrospectively.
In Contradiction with Companies Act, 1956: As the Companies Act, 1956, did not have any such regulations for private companies, hence, it was not justified in disqualifying the directors.
Remove Directors’ Disqualification And Save Your Company From Extinction!
If you are a company that was not able to file e-Form INC 22A by 25 April 2019, due to a disqualified director, all you need to do is act swiftly. A director’s disqualification can be removed depending on the rule under which he was disqualified.
For example, if a director’s DIN was deregistered under Section167 of the Act, then the best possible way out is taking professional help and filing a writ petition in the concerned High Court. There are numerous directors who have got their DIN restored through this legal recourse.
Once the company has been marked as ACTIVE non-compliant, the company will gradually come to a standstill, as it shall be restricted from undertaking event-based filing of many forms.
Moreover, beyond 15 June the registrar shall start investigating the non-compliant companies in full earnestness and will eventually strike them off.
A Stitch In Time Saves Nine!
Ever heard this idiom? Want to know what it means?
It simply means that it is better to deal with any problem instantly, because, otherwise if you wait to deal will them afterward, it is likely that things will get worse, and it will take longer to deal with it.
Hence, if factors like disqualified director or non-filing of financial statement or any such perquisite have been ignored by a company, then it is sure to land in great trouble. It is advisable for such companies to cross check all the requirements and get set working on them as quickly as possible.
There is still a lot of time to work successfully towards filing e-Form INC 22A, but first and foremost it is essential to fulfilling all the prerequisites.
“The motive of the Ministry of Corporate Affairs is to tighten the regulatory system and, in the process, track and weed out the shell companies!”
-Shweta Gupta, Founder, and CEO, MUDS