MCA Seeks Location Photo of Company’s Registered Office in Form INC 22A

The ministry of corporate affairs (MCA) in its drive to tackle  ‘letter box companies’ have unveiled the Companies (Incorporation) Amendment Rules, 2019 (the Amendment Rules) vide its notification dated 21 February  2019, thereby amending the provisions of Companies (Incorporation) Rules, 2014 (the Rules).

Background

The government has launched a sustained campaign in the last four years against black money and has taken several bold steps including constitution of the special investigation team on black money, enactment of the ‘Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’, income declaration scheme, 2016, Benami Transactions (Prohibition) Amendment Act, 2016 and the demonetization scheme. One such measure was the setting up of a task force in February 2017 by the prime minister’s office under the joint chairmanship of the revenue secretary and secretary, MCA. 

 

The task force was mandated to check in a systematic way, through a coordinated multi-agency approach, the menace of companies indulging in illegal activities including facilitation of tax evasion and those commonly referred to as ‘shell companies’. Its members included the department of financial services, the Central board of direct taxes (CBDT), Central Board of Excise and Customs (CBEC), Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO), Financial Intelligence Unit – India (FIU-IND), the Reserve Bank of India (RBI), the Securities Exchange Board of India (SEBI), the Director General of Goods and Services Tax Intelligence (DG GSTI) and the Central Economic Intelligence Bureau (DG-CEIB).

 

In a drive carried out under the supervision of the MCA in FY2017-18 the registrars of companies (ROCs) identified and removed from the register of companies under Section 248 of the Companies Act, 2013 the names of 2,26, 166 companies, which had not filed their financial statements or annual returns for a continuous period of two or more financial years. As many as 3,09,619 directors were also disqualified under Section 164(2)(a) read with Section 167(1) of the Companies Act, 2013 for non-filing of financial statements or annual returns for a continuous period of immediately preceding three financial years (2013-14, 2014-15 & 2015-16).

 

The introduction of the amendment rules are part of the crackdown on shell companies. The new e-form INC 22A-ACTIVE introduced through the amendment rules will record the address of the registered office along with a photo of the registered office with the latitude and longitude of the place where registered office is situated. Basically the e-form enables geo-tagging, i.e attaching data of the exact location of the office, it will allow the online return filing system to alert government officials wherever it detects that far too many companies are registered in the same premises, a trend noticed in past investigations into shell companies.

 

The detailed article discusses changes brought in through the amendment rules by the MCA.

 

Analysis of the Amendment Rules

 

The analysis of the amendments brought in by the amendment rules has been reproduced hereunder:

 

I. Applicability:

 

The rules shall come into force from 25 February 2019

 

 

II. Active Company Tagging Identities and Verification (ACTIVE)

                               

 

III. Consequences of Non-filing 

 

a. If the company fails to file e-form INC 22A-ACTIVE within the prescribe period of time it shall be marked as "ACTlVE -non-compliant" on or after 26 April 2019 and shall be liable for action under sub-section (9) of section 12 of the Act.

 

b. The registrar shall not accept the following forms filed by the company, unless the default is made good:

i. SH-07 (change in authorized capital)

ii. PAS-03 (change in paid-up capital)

iii. DIR-12 (changes in director except cessation)

iv. INC-22 (change in registered office)

v. INC-28 (amalgamation, de-merger)

 

 

IV. What happens if the company files the e-form after the due date?

 

Where a company files e-Form INC 22A-ACTIVE before 25 April 2019 the fee payable shall be NIL, and on or after 26 April 2019, the company shall be marked as “Active Compliant”, on payment of fees of ten thousand rupees.

 

V. Exemption

 

a. The company which has not filed its due financial statements under section 137 or due annual returns under section 92 or both with the registrar of companies shall be restricted from filing e-form-ACTIVE, unless such company is under management dispute and the registrar has recorded the same on the register.

 

b. Companies which have been struck off or are under the process of being struck off as recorded in the register.

 

c. Companies under liquidation process or amalgamated or dissolved as recorded in the register.

 

VI. Glimpse of the e-Form INC-22A ACTIVE

 

The e-Form INC 22A-ACTIVE will comprise the following mandatory details:

• Address of the registered office (photo of the registered office also showing at least one director(s)/ key management personnel (KMP) who has affixed his/her digital signature to this form is mandatory) with latitude and longitude of the  place where the registered office is situated
• One time password (OTP) for verification will be sent on companies’ registered e-mail id
• The director identification number (DINs) shall be in approved condition and it shall not be invalid on ground of non-filing of form DIR-3 KYC nor disqualified u/s 164(2).
• Details of KMPs of the company
• Service Request Number (SRN) of e-form AOC-4/AOC-4 XBRL and MGT-7 filed for FY17-18.
• Mandatory attachment:
  o Photograph of registered office showing external building and inside building also, showing at least one director/KMP who has affixed his/her DSC to this form.

 

Conclusion 

The e-Form INC 22A-ACTIVE will record details pertaining to the address of the registered office which would comprise a photo of the registered office along with latitude and longitude. This will help to locate whether or not such a place exists, to avoid the use of bogus address by shell companies. The government expects that its efforts to clean up the registry will create a transparent and compliant corporate ecosystem in India, promote the cause of ‘ease of doing business’ and enhance the trust of the public. This move of MCA will act as an early warning system to detect mushrooming of shell companies.