“MCA’s Commitment to Business-Friendly Regulations: Rule Amendments and NSWS” - MMJC

“MCA’s Commitment to Business-Friendly Regulations: Rule Amendments and NSWS”

Introduction:

The honorable finance minister of India has been time and again emphasizing on the efforts taken by the Ministry of Corporate Affairs (MCA) towards the ease of doing business. The MCA has simplified thousands of compliances and has also de-criminalized several of them. In its constant endeavor to ensure ease of doing business to India INC MCA has brought 2 important amendments to Companies Incorporation Rules 2014.

Background:

Rule 30 of the Companies Incorporation Rules 2014 prescribes the process for shifting of registered office of the companies from one state or union territory to another state or union territory. As per sub-rule 9 of this rule, Central Government/Regional Director (RD) can approve the application and may also pass order as to cost if required. Further, the proviso to sub-rule 9 of rule 30, provides a condition that the shifting of registered office outside state or union territory cannot be allowed if any enquiry, inspection, investigation, or prosecution against the company is pending. MCA through the Companies Incorporation Third Amendments Rules 2023, has amended rule 30(9) and has inserted an additional proviso thereto.

Amendment to Rule 30 (9):

MCA through the said amendment, has made two changes to sub-rule 9 of rule 30 of Companies’ incorporation Rules. Let’s look at them one by one.

1. Omission of words from 30 (9):

Through the said amendment, MCA has deleted some words from sub-rule 9. The deleted words read as, “and may include such orders as to cost as it thinks proper,”. Prior to amendment, due to presence of these words, the Central Government/RD had powers to impose any cost upon the company at the time of approving the shifting of registered office outside the state or union territory if so, thought necessary by RD. However, due to removal of the said words now the RD shall not be authorized to impose any cost on the company. This shall reduce the compliance cost incurred by the company in shifting the registered office outside the state or union territory.

2. Insertion of new proviso:

Wide the same amendment, the MCA has inserted a second proviso to Sub-rule 9 of Rule 30. The first proviso to the sub-rule says that if any prosecution is going on against the company, then the application for shifting of registered office outside the state or union territory cannot be approved. However, the newly inserted proviso provides an exception to this condition by providing that, a company who is undergoing CIRP and whose management has changed after the resolution plan being approved, can be allowed to shift its registered office outside the state or union territory if there is no appeal pending against the resolution plan and no enquiry, inspection or investigation is initiated after approval of such resolution plan. This amendment is expected to be beneficial to the new promoters of the company, as they shall be able to shift the registered office of the company to the area where their existing businesses are located.

Effective date of amendment:

The effective date of Amendment is 21 October, 2023. That means, if the company whose resolution plan is approved, makes an application for shifting of registered office outside the state or union territory after 21^st October 2023, its application shall be approved if all other provisions are complied with.

Update regarding incorporation forms from MCA:

On 23 October 2023, MCA announced that the Companies and limited liability partnerships (LLPs) can now be incorporated through National Single Window System (NSWS) operated and maintained by Department of Promotion of Industry and Internal Trade (DPIIT). This implies that the application for incorporation of company or LLP can be made through MCA as well as through NSWS portal. In other words, MCA now allows the making of application for incorporation through an alternative portal of NSWS.

What is NSWS:

NSWS is a portal maintained by DPIIT under the Ministry of Commerce. This portal provides a single window for filing applications for obtaining multiple approvals under various central and state ministries. The portal also provides guidance to the businesses as to which approvals will be required based on the nature of their business. The portal is also instrumental in providing guidance with respect to matters such as documentation, investments, and government schemes beneficial for businesses.

Conclusion:

In line with the Finance Minister’s emphasis on ease of doing business in India, the MCA has taken significant steps to simplify processes for companies. These regulatory changes demonstrate the government’s commitment to fostering a more business-friendly environment in India, making it easier for companies to operate, expand, and contribute to the country’s economic growth. In an era where ease of doing business is a top priority, these amendments and the increased importance given to technology initiatives like NSWS provide a positive outlook for businesses in India.