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From P to E: Smidgeons of Digitization on Companies (Incorporation) Fourth Amendment Rules, 2016

November 21, 2016
VOL I
ISSUE No. 04
November 21, 2016

From P to E: Smidgeons of Digitization on Companies (Incorporation) Fourth Amendment Rules, 2016

The Ministry of corporate affairs in its courageous bearing notified on October 1, 2016 the Companies (Incorporation) Fourth Amendment Rules, 2016[1] amending the Companies (Incorporation) Rules, 2014 with effect from October 1, 2016. The amending rules introduced the Simplified Proforma for Incorporating a company Electronically (SPICe)[2] as a part of the initiative in Government Process Re-engineering (GPR) on October 2, 2016. SPICe provides for a digital and a considerably simplified substitute of Form INC 29[3] newly packaged to incorporate a company in India with much ease. The notification declares Form INC 32[4] as the digital auxiliary of Form INC 29. Under the SPICe program a pre drafted Memorandum of Association and Articles of Association can be filed much economically and effectively with ease of doing business.

Key Highlights

  • Due to the introduced change the entire process of incorporation of Part I companies, producer company, Section 8 company, new companies (that includes public companies, private companies, and one person companies) is simplified into one single form that would take about 48 hours for approval.
  • Form INC 32 facilitates much more than INC 29 as it enables filing of Memorandum of Association electronically.
  • Form INC 32 can be filed even after filing INC 1[5] which is used for obtaining name of a company. This facility was not provided by INC 29, one can now also obtain the name of the proposed company by filing INC 32.
  • The memorandum of Association and the Articles of Association of the company to be incorporated can be filed electronically through forms INC 33[6] and INC 34[7] respectively under SPICe. Further, pre drafted clauses of AoA can be submitted and witnesses to the Memorandum and the Articles of Association can affix their Digital Signatures[8] on the e-documents.
  • MCA has also provided a procedure for conversion of a company limited by guarantee into a company limited by shares.
  • The inclination to file for compliances and meeting regulatory requirements is being revamped and there is a paradigm shift from manual to digital media today, it does not come as surprise that INC 29 and INC 7[9] will eventually be phased out in future and any company including private limited company, public limited company, section 8 company, one person company will have to resort to incorporation compliances using SPICe. Furthermore, it is important to note that directors of the concern will have to apply for digital signature certificates and DIN.

Earlier the incorporation procedure was facilitated by the filing of forms such as INC 7, DIR 12[10] , and INC 22[11] manually. The same was substituted by the melting pot Form INC 29. The only and probably the most significant difference in the digital process of filing for incorporation through Form INC 32 is the resultant efficiency in the process. However, it does not make any relaxation in terms of attachment of necessary documents. All the forms are required to be filed with requisite attachments such as Address proof, identity proof, affidavits and declarations by subscribers and directors, along with required NOCs and approval certificates as enumerated in the respective form. If found complete and correct, the forms are verified, the company gets incorporated and a Corporate Identification Number (CIN) is issued along with the DIN to the proposed directors.

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[1] G.S.R. 936(E)
https://www.mca.gov.in/Ministry/pdf/CompaniesIncorporation FourthAmendmentRules_01102016.pdf

[2]
http://www.mca.gov.in/Ministry/pdf/SPICEPress%20Release_03102016.pdf on October 2, 2016.

[3] The INC 29 is a five in one form for company registration which combines the application for DIN allotment, name reservation, incorporation and even PAN and TAN.

[4] Form INC 32 deals with a single form for the reservation of name, incorporation of a new company or for allotment of DIN. It is supported by documents such as details of directors and subscribers, MoA and AoA etc.

[5] Form INC 1 is an application form for incorporating a new company or changing the name of an existing company.

[6] eForm INC 33 is newly introduced under the rules notified under the Companies Act, 2013 pursuant to Schedule I (sections 4, and Section 5) to the Act.

[7] Form INC-34 or SPICe AoA is an eAoA or Electronic Articles of Association that is newly introduced by the MCA to simplify Company Registration in India.

[8] The date of signing the MoA and AoA will be the date of affixing the Digital Signature Certificate.

[9] Form INC 7 is an application form for incorporation of a company other than a one person company.

[10] Form DIR 12 calls for the particulars of appointment of directors and the key managerial personnel and the changes among them.

[11] Form INC 22 calls for Notice of situation or change of address of the registered office of the company.

 


Companies To Transfer Shares To IEPF Suspense Account

Pursuant to the power conferred upon the Central Government under Section 125 of the Companies Act, 2013 (hereinafter referred to as “the Act”), an Investor Education and Protection Fund (hereinafter referred to as “IEPF”) has been established. The Ministry of Corporate Affairs recently notified the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (hereinafter referred to as “the IEPF Rules”) which have come into effect from September 7, 2016 for promotion and protection of the interests of investors.

Now, vide the IEPF Rules, the Companies registered under the Act are required to transfer all unclaimed/unpaid shares in respect of the dividends which have remained unclaimed for the last seven years continuously to the IEPF suspense account.

Highlights of the notification:

1. Scope:

It is notable that along with the Companies registered under the Act, these rules also apply to ‘corresponding new bank’ as defined in sub-section (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

2. Transfer of amount to the IEPF:

Rule 3 describes what comprises of “Fund” and provides details as to which of the amounts are to be credited to the Fund. This inter alia also includes accounts to be remitted as prescribed under Section 125(2) of the Act.
Such amounts shall be transferred within a period of thirty days of becoming due to the Fund along with challan to the specified Bank Branches of any of the authorized banks under the MCA-21 system. The amount may also be remitted through Electronic Fund Transfer.

3. Companies to identify unclaimed shares:

Every company is required to, within a period of ninety days, after holding its Annual General Meeting or the date on which it should have been and every year thereafter, till the completion of seven years’ period, identify the unclaimed amounts, as on the date of the AGM and separately furnish and upload on its own website and also on the website of the IEPF Authority or any other website as may be specified by the Government, a statement or information through the relevant Forms.

Rule 6 provides a step-wise procedure to be followed by companies to ensure the transfer of amount to the Fund. It enlists the duties of the Company Secretary in this regard. It is pertinent to note that according to Rule 6, no shares can be transferred unless notice of the same is deemed to be provided, three months in advance, to the shareholders by the following channels:

  • inform at the latest available address, the shareholder concerned regarding transfer of shares three months before the due date of transfer of shares;
  • publish a notice in the leading newspaper in English and regional language having wide circulation; and
  • on their website giving details of such shareholders and shares due for transfer.

Rule 6 also establishes a detailed procedure for effecting the transfer of physical shares and where the shares are dealt with in a depository.

5. Penalties:

prescribe for a detailed procedure for Companies to be followed while transferring amounts to the Fund and strict compliance has to be adhered to as noncompliance would attract penalty under Section 124(7) of the Act, wherein a company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees. Also, every officer of the company who is in default shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

6. Dematerialization of physical shares:

Once the physical shares are transferred in the name of the Authority, the Authority shall dematerialise these shares and it shall keep only those shares in physical form, where dematerialisation of shares is not possible.

Can shareholders claim their shares from the Fund at a later date?  

Yes. Any person, whose shares, unclaimed dividend, matured deposits, matured debentures, application money due for refund, or interest thereon, sale proceeds of fractional shares, redemption proceeds of preference shares, etc. has been transferred to the Fund, may claim the said shares by making an application in the prescribed Form IEPF- 5 available online on website along with prescribed fee, under his own signature. These applications will be verified by the concerned Company and thereby the shares will be disbursed or transferred to the demat account, in accordance with the applicant’s request.

Another important aspect to be noted from the shareholder’s point of view is that the voting rights on shares transferred to the Fund shall remain frozen until the rightful owner claims the shares. However, it is pertinent to note that for the purpose of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the shares which have been transferred to the Authority shall not be excluded while calculating the total voting rights.

 


Airtel Delhi Half Marathon – Keshav Raj creates Firm’s half marathon record by completing the race in 1:48 hours

S.S. Rana & Co., participated in yet another successful ‘Airtel Delhi Half Marathon’ held on November 20, 2016
with 14 persons running the half marathon and 55 people
registering for the 6 Kms Great Delhi Run.

Mr. Keshav Raj, an employee of S.S. Rana & Co., finished the 21 Km in 1 hour and 48 minutes creating a record for the firm.

Our Firm in its continuous effort to promote a healthy way of life encourages all its members to participate in sports events like running, football, cricket, bowling, etc.

The Founding Partners as well as the employees of S.S. Rana & Co., have participated in the Airtel Delhi Half Marathon since the last 6 years and contributed to charity as part of the firm’s CSR policy & program.

For more information please contact us at : info@ssrana.com