Tuesday, March 15, 2011

Streamlined Procedure for Incorporation of Companies, etc.

(The following post has been contributed by Rohan Bagai)
The Ministry of Corporate Affairs, Government of India (“MCA”) has recently notified a General Circular No. 6/2011 dated March 8, 2011 (the “Circular”) simplifying the procedure for incorporation of companies and establishment of principal place of business in India by foreign companies.

In this regard, MCA has come up with certain key recommendations in the Circular, which are provided hereinbelow:

Incorporation of a company

(a) Only the application and declaration for incorporation of a company (Form 1) would be required to be approved by the RoC. The other statutory filings for incorporation like Form 18 for notice of situation of registered office and Form 32 for appointment of directors would be processed online. Accordingly, any rectifications or changes to be carried in the said Forms 18 and 32 would also be notified online;

(b) Conception of a new category for the following incorporation Forms, which would be given highest priority for approval while processing:
 Form 1A: Application form for availability or change of a name;

 Form 37: Application by an existing joint stock company or by an existing company for registration;

 Form 39: Registration of an existing company as a limited company;

 Form 44: Documents delivered for registration by a foreign company, i.e. establishment of principal place of business in India by way of a branch office, liaison office or project office; and

 Form 68: Application for rectification of mistakes apparent on record.
This proposed measure would shrink the average time taken for incorporation of a company to just one (1) day pursuant to the name approval of the company.

Establishment of principal place of business in India by foreign companies

With regard to establishment of a principal place of business in India i.e. branch office, liaison office or project office, a foreign company is required to obtain prior approval of the Reserve Bank of India (“RBI”). Such an establishment should comply with the regulations prescribed by the RBI vide Master Circular No.11/2010-11 on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities dated July 1, 2010. Pursuant to such permission from the RBI, the foreign company is required to apply to the RoC under Form 44 for registration of such establishment in India. Typically, conclusion of the registration process takes around two (2) weeks.

That said, there seems to be an ambiguity in the aforestated recommendation, which reduces the average time taken for incorporation of a company to one (1) day only. It is pertinent to note that the case of registration of a foreign company is not expressly covered under the said proposal. Consequently, it remains to be seen if the same timeline would apply even in cases of registration of foreign companies with the RoC.

- Rohan Bagai

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