Ministry of Corporate Affairs vide its Circular No. 49/2011 dated 23.07.2011 has decided to simplify the procedures of incorporation to enable promoters to get their companies incorporated within 24 hours. Pursuant to this initiative , in case the incorporation forms viz e-Forms 1, 18 and 32 have been certified by the practicing professional regarding the correctness of the information and declaration given by the subscribers, the application shall be processed electronically and the digital certificate of incorporation shall be issued online immediately by the Registrar of Companies.

To ensure and safeguard the interest of Stakeholders, the subscribers/professionals are subjected to penal actions in case of wrong, false or illegal declarations/certifications made by them. It is further notified that in case it is found that a company registered online on such basis of declarations made by the subscribers and certification given by, professionals ought not have been registered under the provisions of the Companies Act, the Registrar of Companies shall take the necessary action to put the company in state of suspended animation and initiate process of revocation of the registration of the company after giving a reasonable opportunity of being heard. The legal procedure and powers of ROC with regard to revocation of registration has not yet been clarified.

This initiative while on one hand would enable completion of the process of incorporation of a company (including approval of DIN and availability of name) within a short time span of 24 hours and improve India’s position in granting ease of Business on a Global Front, on the other hand bring forth greater trust, reliability and responsibility on the professionals certifying the application for incorporation.

The above simplified process of online incorporation of companies is likely to be implemented with effect from 11th August, 2011

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In order to reduce the timelines, Government of India vide Circular No. 50/2011 dated July 25, 2011 has decided to transfer the powers of Company Law Board for the work relating to the shifting of registered office and consequent alteration to the MOA to the respective Registrar of Companies. The petitions filed with the Company Law Board for such purpose and pending as on the effective date of notification shall be transferred to respective Registrar of Companies. Discharging of such functions by the respective Registrar of Companies on implementation of simplified procedures shall on a positive side of the amendment will reduce the cost and the time to get such confirmation and alteration to Memorandum of Association under section 17 of the Companies Ac t, 1956.

The above simplified process is likely to be implemented with effect from 24th September, 2011

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To cater to the much awaited demand of various stakeholders regarding simplification of the procedure of Section 297 of the Companies Act, 1956, the Ministry has come out with Circular No. 52/2011 dated July 25, 2011 wherein Ministry has decided to simplify the procedures for obtaining approval under Section 297.

As specified, the application u/s 297 will now be processed online and approval of Central Government shall also be made available to the applicant company online on the basis of declarations made by the company and certifications by the professionals given in the e-form.

Moreover, the company while seeking approval of the directors and shareholders in their meetings shall specifically take approval to the effect that: —

1. Proposed contract is competitive, at an arm’s length, without conflict of interest and is not less advantageous to it as compared to similar contracts with other parties
2. The company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon and has filed its upto date Balance Sheets and Annual Returns with the Registrar of Companies;
3. The proposed contract is falling within the provisions of section 297 of the Act and provisions of sections 198, 269, 309, 314 and 295 are not applicable in the proposed contract.
4. The company and its Directors have complied with the provisions of sections 173, 287, 299, 300, 301 and other applicable provisions of the Companies Act, 1956 with regard to the proposed contract

Here again greater trust is laid on the certification provided by the Practicing Professional who along with the Company and Directors is supposed to be equally held liable and subject to penal actions in case of any wrongful certification.

The process of online approval of Central Government under section 297 of the Companies Act, 1956 is likely to be implemented with effect from 24th September, 2011

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Simplified procedure for rectification of register of charges under section 141 of the Companies Act, 1956

Ministry vide Circular No. 51/2011 dated July 25, 2011 has decided to notify section 20 of the Companies (Second Amendment) Act, 2002 (1) of 2003 thereby the work relating to rectification of register of charges under section 141 of the Companies Act, 1956 shall be shifted from the jurisdiction of Company Law Board to the Central Government.

It has further been decided to delegate this work to the respective Registrar of Companies under whose jurisdiction the registered office of the company is situated. Moreover, the petitions filed with the Company Law Board and pending as on the effective date of notification shall be transferred to respective Registrar of Companies.

The above simplified process is likely to be implemented with effect from 24th September, 2011.

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Guidelines for RDs/ROCs in the matter of scheme of arrangement / amalgamation under section 391-394

Ministry of Corporate Affairs vide its Circular No. 53/2011 dated 26.07.2011 has decided to streamline the procedure in respect of scheme of arrangement/amalgamation u/s 391-394 of the Companies Act. The intention behind such guidelines is the urge for strict compliance on the matter. These guidelines supersede all previous guidelines on the matter. The procedure laid down is as follows:

1. On receipt of notice from the court u/s 394A regarding the scheme, the Regional Director should make an entry in a register or in electronic form. If the petition has already been filed with ROC in Form 61 in the system, the same can be monitored directly from the system.
2. Thereafter within three days of receipt, Regional Director shall send a mail to ROC concerned for the report.
3. ROC should furnish his report online to RD within 7 days from receipt of Form 61 without waiting for RD’s communication.
4. Within seven days of receipt of notice RD should send a letter to local branch of Law Ministry / Assistant Solicitor General appointed for the state by Law Ministry as the case may be (furnishing copy of the notices received u/s 394A) requesting for nomination of an advocate.
5. Regional Director should send a letter within five days of receipt of notice to company / its Advocate to provide material of valuation report, Chairman’s report regarding creditors / members meeting and on receipt of the information; the matter should be processed and finalized within a week’s time.
6. The finalized affidavit should be sent to designated Standing Counsel for the particular case for signature and then to Law Ministry (local branch) for identification. This exercise should not take more than five days after which the affidavit should be filed in Court Registry.

Specific issues to be considered by the Registrar of Companies and Regional Director before finalization of their comments are specified therein. 

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Pro-active action in case of winding up petitions

With an aim to adopt the fair and speedy international practices for winding up business setups, Government of India vide its circular 54/2011 dated 26.07.2011 has come up with the following actions that shall be undertaken by the concerned official liquidator (‘OL’):

1. OLs shall post one of the staff members to the Company Court to keep track of all cases where applications have been filed for winding up, but orders for winding up are yet to be issued by the Court.
2. For all cases pending till date and in future as well, information shall be obtained by OL from “institution register” maintained in High Court and action as below must be taken in all cases
3. In each case the OL will file an application praying to the Court to direct the management of the company to submit following information duly verified by a chartered accountant:-
   1. The current addresses of the Directors, Company Secretary and Statutory Auditor of the company
   2. Location and physical details of each immovable asset of the company along with its current valuation;
   3. The details of all the debtors and creditors with their complete addresses and occupations
   4. The details of each movable asset of the company along with value;
   5. The details of workmen/employees and any amount outstanding to them;
   6. The details of all movable and immovable assets held in the personal names of director by providing its location, value, dates of acquisition and nature of right, title and interest therein;
   7. Copies of last three years audited balance sheet of the company; and
   8. The details of location of the registered office of the company.

Regional Director shall moreover be responsible to ensure that with respect to all pending cases, the applications are moved by OL before the court before the next date of hearing and in all new cases, these are filed before the Hon’ble Court before the second hearing of the case.

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Scrutiny inspection and investigation in all winding up cases

With the practice of filing winding up petition being followed by companies having committed major violations under Companies Act, 1956 and misappropriation of funds, Ministry of Corporate Affairs vide its latest circular no. 55/2011 dated 26.07.2011 has introduced a new procedure to curb such malpractices:

1. The moment winding up petition is filed before the Court, Official Liquidator (OL) will obtain a copy of petition and forward the same to the Registrar of Companies (ROC) concerned.
2. ROC will have a scrutiny of the details/documents available in respect of the company in MCA21 registry and will submit a preliminary report to the Ministry within a week time for inspection or investigation, if so required, containing following information for the past five years of the date of filing of petition:-
   1. History of the company, viz incorporation, maintenance of registered office, main object and present business activities;
   2. Management pattern, including details of directors/nominee directors and their directorship in other companies;
   3. Capital structure and shareholding pattern
   4. Financial position and working results;
   5. Comments on filing position and compliances of Schedule VI read with Accounting Standards;
   6. Nature of complaints registered on MCA-21, their nature and any noticeable findings;
   7. Whether any complaint was received alleging that the company is involved in fraudulent activities, siphoning of funds etc. If so, the details thereof.
   8. Whether any scrutiny/inspection was carried out, if so, the details thereof;
   9. Whether the company is having any holding or subsidiary company, if so, details thereof;
   10. Whether company has raised funds through IPO, if so, the utilization of amount collected, compliance of provisions of the Act for deviation from the object stated in Prospectus/Offer Document; transactions with related parties;
   11. In case of public company, whether it has accepted public deposit. If so, whether the payment of matured amount including interest was made as per schedule. In case any amount is still pending, the details of amount and interest thereon.
   12. The quantum of unsecured loan amount and related party transactions thereto.
   13. Secretarial reports and qualifications made by the auditors on accounts of the company;
   14. Whether company or its members/creditors have requested for investigation into the affairs of the company, if so, the details thereof

Further, in case of companies wherein any inspection or investigation as per the relevant provisions is pending of the Companies act, 1956, ROC is required to complete the same and provide a report to the Official Liquidator within 30 days which shall be placed before the Hon’ble court for seeking appropriate action.

Moreover, strict action shall be initiated against director, ex-director and key management of the company for any violation of law/ Companies Act, 1956. 

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