Good news for start-ups: Incorporation norms relaxed — Details here

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Updated: March 23, 2019 4:12:11 AM

The amendment to the Companies (Incorporation) Rules, 2014 to this effect was notified earlier this month.

Earlier, the limit was Rs 10 lakh.

To boost ease of doing business, especially for small and medium enterprises (SMEs) and start-ups, the ministry of corporate affairs (MCA) has exempted incorporation fee for firms having share capital up to Rs 15 lakh. Earlier, the limit was Rs 10 lakh.

The amendment to the Companies (Incorporation) Rules, 2014 to this effect was notified earlier this month. An MCA official said this is part of the government’s efforts to make India a start-up hub.

The ministry has also relaxed the requirement to publish the notice of shifting of registered office by any firm in any principal local-language and English newspaper having ‘wide’ circulation, rather than the earlier requirement of ‘widest’ circulation.

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While analysts welcomed the move, they said the amendments only provide nominal relief. “Important thing to note is that if a company is set up with an amount exceeding Rs 15 lakh, the fee will be payable on the entire amount of the authorised share capital and not the differential amount,” said Sumit Naib, director (regulatory) at Nangia Advisors (Andersen Global).

Inder Mohan Singh, partner (general corporate) at Shardul Amarchand Mangaldas & Co, too, said these are small steps.

“The amendments, if implemented in letter and spirit, would facilitate the process of shifting a company’s registered office from a procedural perspective and would enhance the ease of doing business including for SMEs and start-ups,” he added.

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Others, though, believe the amendments bring genuine relief to companies facing issues while changing registered office from one state to another and that the earlier mandate of “widest” specified in the law made it difficult for companies to select the right publication, which gave authorities a legal power to reject applications.

“However, the terminology ‘wide’ also has its own set of challenges, which stakeholders are expected to face in near future. This amendment has not specified a meaning to the term, leaving the same to the judgement of authorities. This is expected to result in confusion and undue delays in processing of applications. Close to 1 lakh newspapers and periodicals are registered with the Registrar of Newspapers for India, most of which, if selected by any company, would defeat the purpose of amendment application,” said Rajat Mohan, partner at AMRG & Associates.

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