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Legal Updates: Recent changes in the provisions relating to Incorporation of Companies

By February 3, 2016 December 20th, 2019 No Comments
Ministry of Corporate Affairs
has, vide notification dated January 22, 2016, notified
Companies (Incorporation) Amendment Rules, 2016 (Rules) having effect from
January 26, 2016, with an objective of speedy disposal of incorporation
applications within stipulated time frames.

Further, apart from the
numerous changes notified by the aforesaid Rules, the most significant change
brought in by another notification dated January 22, 2016,
that provides greater “Ease of Doing Business” to corporate, is the
establishment of Central Registration Centres (CRC) having territorial
jurisdiction all over India for speedy disposal of applications for reservation
of names. Establishment of CRC will significantly reduce the time taken to
incorporate a Company in India, for a separate body will now be empowered to
deal with the applications for reservation of names. The CRC shall function
under the administrative control of Registrar of Companies, Delhi (ROC Delhi),
who shall act as the Registrar of the CRC until a separate Registrar is
appointed to the CRC. The CRC shall process applications for reservation of
name i.e. Form No. INC-1. However, the processing and approval of name proposed
in e-Form No. INC-29 shall continue to be done by the respective Registrar of
Companies having jurisdiction over incorporation of companies.

The amendments brought about by
the said notification are enumerated in the table below:

S.
No.
Amendment
Position
before the amendment
Effect
of the amendment
1.
Rule
8(2)(b)(ii) shall be omitted
Name
of the company need not necessarily be indicative of its principle business
activities, but if name has any indication of objects that indication should
be in conformity with the objects of the Company
Now
the name will be considered desirable even if the words used are not in conformity
with the objects mentioned in the memorandum.
2.
Rule
8(2)(b)(x) shall be omitted
Names
that are vague or abbreviated based on the names of promoters, were not
allowed
However
abbreviation of names of existing Companies for formation of a new Company as
subsidiary or JV or as an associate company after following the requirements
of the Act, was allowed.
 
The
recent omission in the amendment notification has removed all restrictions on
abbreviated names and unlocks a good numbers of creative names for companies
3.
Rule
8(2)(b)(xvii) shall be omitted
Earlier,
proposed Companies were not allowed to have names that intended or likely to
produce a misleading impression regarding the scope or scale of its
activities
Now
there is no such restriction and Companies have been given the freedom to have
any name without any presumption of misleading impression
4.
Rule
8 (3) shall be omitted
The
old rules provided that any change in activities must be reflected in the
name of the Company, within 6 months from the change in activity of the
Company
By
virtue of the recent amendment, there is no need now to change the name of
the Company to reflect its new line of activities.
5.
Rule
8 (4) shall be omitted
There
was a requirement of furnishing the proof of relation in case the proposed
name included the names of relatives of promoters, no objection certificate
in case the proposed name included names of persons other than the promoters
or their close blood relatives, along with the application for name
reservation.
The
requirements of furnishing documents like proof of relation or no objection
certificate along with the application for reservation of name, have been
done away with.
6.
Rule
9 shall be substituted with the following:
“An
application for the reservation of a name shall be made in Form No. INC – 1
along with the fee as provided in the Companies (Registration offices and
fees) Rules, 2014 which may be approved or rejected, as the case may be, by
the Registrar, Central Registration Centre.”
Under
the erstwhile rules, an application for the reservation of a name shall be
made in Form No. INC – 1 along with the fee as provided in the Companies
(Registration offices and fees) Rules, 2014
Now
the applications for reservation of name will be dealt with by the Registrar,
Central Registration Centre.
New
rule is in alignment with Notification to establish Central Registration
Centre, as discussed above.
7.
Insertion
of (ba) after Rule 36(12)(b):
(ba)
After the resubmission of the documents and on completion of second
opportunity, if the registrar still finds that the documents are defective or
incomplete, he shall give third opportunity to remove such defects or
deficiencies;’
Provided
that the total period for re-submission of documents shal1 not exceed a total
period of thirty days.
Two
opportunities for removing the defects or deficiencies from the incorporation
application in Form INC-29, were given to the stakeholders, under the erstwhile
Rules.
The
number of opportunities for rectification of defects, have been increased to
three whereas the time remains the same i.e. thirty days from the date of
submission of form.
8
For
the words “two opportunities”, the words “three opportunities” shall be
substituted.
Previously,
two opportunities were given to the stakeholders to rectify the defects in
the incorporation application in Form INC-29.
Now,
the number of opportunities to rectify the defects in the application, have
been extended to three.

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