Changes to Companies (Incorporation) Rules

In the recent amendment to the Companies Incorporation Rules, the Ministry of Corporate Affairs has altered Rule 28 and Rule 30 in addition to replacing Form Inc. 23 and 26. (Readers may note that the notification has proposed the replacement of the entire rule 28, the author is uncertain as to whether the intent was to replace Rule 28(1) alone.)

The core changes are as follows: Rule 28 that deals with shifting of registered office within the same state now requires the following documents to be submitted along with the application:

1. Board resolution,

2. Special resolution with approval,

3. KMP/director declaration stating that the company has not defaulted on payment to workmen along with the consent of the creditor or a provision for payment to creditors,

4. Declaration stating that the company would not seek any change in jurisdiction pertaining to any pending matters,

5. Acknowledged copy of intimation to the chief secretary of the state re the proposed shifting also mentioning that employee’ interests are not adversely impacted due to this.

What has been done away with in this rule (by omitting subsection 2 in the amendment) is the requirement to publish a notice in two newspapers and serving of an individual notice on each debenture holder, depositor and creditor of the company.

Rule 30 that deals with shifting of the office from one state or union territory to another state now requires additional documents including a copy of the articles of association, a and a copy of the minutes of general meeting. What is no longer a requirement is a copy of the notice calling for the general meeting and the explanatory statement and an affidavit verifying the application.

Additionally, the time period to advertise in newspapers/serve individual notices under subsection 6 of Rule 30 has been changed: Earlier the rule required this to be done at least 14 days before the date of hearing and now the rule requires this to be done (a maximum of) 30 days prior to filing of the application. Further a time limit has now been attached for the Central Government to issue its order relating to the shifting after weighing in on any objections it has received.

While these changes undoubtedly adds to the documentation hassles, the change in Rule 30(6) could reduce the time-frame if planned well and in advance. The hope of course, is these changes aid in the improving our rankings in the ease of doing business index.