3 important changes in the Companies Incorporation Rule in India

3 important changes in the Companies Incorporation Rule that startup needs to be aware of

As every startup is aware of the fact that before starting their business, they are legally bound to submit all papers and documents related to incorporation that have to be duly filled, signed, stamped and submitted to the registrar of Companies of Incorporation. Only once they receive a green signal from this registrar can a startup go ahead and begin their firm.

This year, this rule saw a few amendments pertaining to startups, beginning from changes in forms and extending up to rules relating to penalties and other important aspects. The Companies Incorporation (Amendment) Rules, 2015 now has an option of filling out forms through the web. Startups highlight that introduction of E-Forms have facilitated easier incorporation processes for firms as it has reduced the time involved in filling forms in the registrar offices.

The amended act has also introduced Form Inc.29 which is a single form that has all details required to be filled by a startup. On the contrary thee previous filling was a step by step procedure which first involved allotment of Director Identification Number (DIN), followed by an application to be submitted for name change of director (if any) and then the approval of all these documents.
Now, form Inc. 29 provides a space for all of these details in one form itself. There appears to be no mention of the digital signature requirement as of today, so one can presume that the process to get the digital signature in place is still a mandatory step before filing this new form.
Apart from these changes, there are 3 important amendments made in this new rule, that every startup must be aware of –

1) Amendment relating to penalties
Earlier, Rule 5 dealt and held all rules relating to penalties, but in the amended act, this entire section has been omitted and a new rule 7A has been added instead of Rule 5. The new rule states that the maximum penalty has been halved to INR 5000 for any offence committed by a one person company or any of its officers. Further, the maximum fine for each day of contravention after the first offence has been halved to INR 500.

2) Amendment pertaining to conversion from private company to One Person Company (OPC)
Earlier, the main requirement for conversion was to either have a paid up share capital of a maximum of INR 50 Lakhs or an average annual turnover of INR 2 crore, maximum. But with the amendment, today a private company can request a conversion by substituting the “or” provision with “and”. Thus, the conversion requirement now is that the private company has to have a paid up share capital of a maximum of INR 50 lakh “and” an average annual turnover in the relevant period of a maximum of INR 2 crore.
This restricts access to conversion for many companies that may not essentially work best on a one-person company model.

3) Amendment relating to subscriber’s particulars
Today with the amendment, the subscribers just need to submit a self – attested form duly filled and signed, overruling the previous rule which required specimen signature and latest photo attached to be verified by the banker or a notary done by a lawyer, under form Inc. 10
The main aim of the amendments is to make lives easier and simpler for startups, and hope this amendments really does work in the favour of startups and avoids frauds of any kind. Be aware of the changes, and take maximum advantage of them to begin your startup at the earliest today.

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