The Ministry of Corporate Affairs (MCA), very recently, vide its notification dated 1st October 2016, has introduced the Companies (Incorporation) Fourth Amendment Rules, 2016 wherein a very significant technological advancement has been initiated. The amendment provides for the insertion of Rule 38, which came into effect from 2nd October 2016, and establishes an innovative scheme called the Simplified Performa for Incorporating Company Electronically (SPICe). Through this, the process of incorporating company has further been made even simpler by filling up of an eForm INC 32.
e-Form INC-32: Decoded
The notified forms brought forth by this amendment are INC 32, INC 33, and INC 34. While INC 33 and INC 34 contain a pre-drafted electronic version of a standard format of the Memorandum and the Articles of Association respectively (called the Charter Documents), INC 32 is the crucial form which is the single application for incorporation of a company. Previously INC 29 was filed for expediting the incorporation procedure and it eliminated a long series of sequential filings and various forms which was itself considered as a positive initiative.
INC -29 was introduced to replace the practice of filing 5 different forms viz., DIR-3 for application for obtaining DIN (Director Identification Number), INC-1 for approval of the Company’s name, INC-7 for the purpose of company registration with the Charter Documents, INC 22 for proof of registered office of the company and DIR-12 for recording the first directors of the company. However, INC 32 makes the procedure remarkably quick such that it would take only 48 hours for approval of the incorporation application.
The introduction of INC 32 paves way for various types of company to be incorporated using this simplified method. It includes a Part I Company, Public, Private or a One Person Company, Producer Company or even a Section 8 Company (Companies not for profit).
INC 32 deals with the reservation of name, company incorporation, allotment of DIN and related aspects. Procedurally, while filing it needs to be accompanied by the relevant supporting documents such as the Directors details and the charter documents. Once the form is processed by the Central Processing Unit of the Ministry of Corporate Affairs, the company and its director is said to have registered and shall be granted a CIN (Corporate Identity Number) and a DIN respectively. However, the form restricts the number of directors to a maximum of 3 per each form. Documents that have to be furnished as a mandatory requirement are:
- Office Address Proof
- Declaration and Affidavit by the first subscribers and directors
- A copy of the utility bills of not later than two preceding months.
The Rules also mandate a declaration by a Professional who may either be a C.A, a C.S, Cost Accountant or an Advocate, stating that the information entered in the form is true and correct and must enter her/his membership/certificate number.
Prominent Features of INC 32
- INC 32 is much simpler to fill and is wider in application than INC-29 which allowed restricted information to be given with the form.
- This e-Form can be filed even for a mere change of name for an existing company. INC-29 faced a risk of rejection if the suggested name was already under usage, however, by electronic filing; there is provision to file INC 32 even after INC-1 has already been filed for a change of name.
- The Charter Documents are available in a standard electronic format and the applicant needs to mention only the objects of the company and provide for pre-drafted clauses. For authentication, there is a provision to affix one’s signature digitally on the Charter Documents.
- Additionally, the Company’s TAN, PAN, and ESIC registration can also be obtained through the procedure of INC 32.
Minor Setbacks and Shortcomings
Like every coin has to have a flip side, this new scheme under SPICe also has certain issues. Firstly, the authentication method includes affixing a digital signature, obtaining which is a costly affair. Secondly, the form allows a maximum of 7 subscribers as initial subscribers for the company which means that in case the subscribers exceed this limit then the usual procedure of incorporation must be followed. Therefore, it’s not an absolute replacement for the existent practice.
Another small, though not insignificant matter is that only a single name can be proposed or suggested in the form, as there is no provision of entering multiple names. However, the broad objective of INC 32 largely remains unhindered due to these slight deficiencies.
The MCA has taken an incredible initiative by introducing the SPICe system, especially INC 32. Though there do exist certain issues and challenges, nevertheless the purpose envisioned by MCA to set up a speedier system of incorporation seems to be possible and realizable due to this amendment. Only time will tell how effective this method is. MCA has been appreciated for its precise planning, continuous revamping for better efficiency and active role in the corporate regulation area. If utilised appropriately, INC 32 can definitely prove to be an important milestone for both existing and potential corporate players in this digital era.