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MCA recently came out with a notification[1] G.S.R. 144(E)[2] which adds some rules to existing rules notified in 2014. The key point of this notification is Active Company Tagging Identities and Verification (ACTIVE). This relates to One Form[3] that needs to be filled by every company incorporated before 2018. This form includes the location(lat-long), details of key managerial personnel (Directors/Company Secretary/CEO), Chartered Accountant and pictures outside and inside office.
Rationale:
- This applies to every company: from Hindustan Unilever to Zomato to GAIL
- It is possible that these requirements are to check shell companies. Shell companies claim to have employees, an office and operations whereas they only exist on paper and are a conduit for illegitimate transactions
- This could help in identifying dormant companies. It is common to find founders abandoning their companies and not going through with striking off and other procedures to wind up a company. With this move, it would become easier to identify those companies
- As India moves to a faster incorporation regime, checks and balances would have to be introduced in the system after the process, at a later date. This is in line with international best practices where companies are considered incorporated at the time of filing and the due diligence happens later
- This would bring in awareness among founders as to compliances
On a lighter note, I have seen multiple explanations for this notification. The funniest one was:
“Being required to publish GST number at the entrance of the company and clicking pictures is like your bae asking you to update your fb status to In a Relationship”
[1] http://www.mca.gov.in/Ministry/pdf/CompaniesIncorporationAmendmentRules_21022019.pdf
[2] Called as Companies (Incorporation) Amendment Rules, 2019.
[3] Form 22A
