The Ease of Doing Business in India in 2019

Coupled with the objective to boost the ease of doing business in India, the Ministry of Corporate Affairs (MCA) has taken some initiatives. In this article, we shall understand these reforms more clearly.

Ease of Doing Business

Exemption of minimum paid-up capital

  • The paid-up capital: the amount accumulated by the sales of the company’s shares. 
  • The MCA has exempted the requirement of minimum paid-up capital for private companies through the Companies (Amendment) Act 2015. 
  • Private companies no longer need to adhere to minimum paid-up capital.
  • This step will increase the ease of doing business significantly.

The inception of Central Registration Centre (CRC)

  • Precisely, in an initiative of Government Process Re-engineering (GPR) to provide speedy incorporation related services and to increase the ease of doing business in line with global best practices, the MCA has established a Central Registration Centre (CRC) under Section 396 of the Companies Act 2013(Act) vide notification dated 22-01-2016. 
  • The main objective behind the formation of CRC was to process and complete the application for name reservation and incorporation of the company on the day of confirmation of payment or the day following it. 
  • The CRC processed applications for name availability through e-form INC1 in the first phase, while it started processing e-forms for the incorporation of companies in the second phase.

The SPICe e-Form

In the place of INC29, the MCA has introduced the Simplified Proforma for Incorporating Company Electronically (SPICe), as an e-Form to certainly improve the ease of doing business.
  • Under SPICe, the MCA has integrated the MCA21 system with the CBDT for the issue of PAN and TAN to a company incorporated using SPICe. 
  • At the time of submitting applications for incorporation using SPICe, stakeholders can also submit applications for PAN and TAN. 
  • The certificate of incorporation of the company now comes affixed with PAN and TAN issued by the Income Tax Department. 
  • SPICe can also be used by the stakeholders to apply for DIN (Director Identification Number) for up to three directors. SPICe has resulted in a reduced number of processes and time to establish a business in India.
  • The SPICe e-form will now include a declaration, in place of Affidavit which was earlier an attachment.
  • According to notification no. 411 (E) dated 07-06-2019, the MCA has amended the incorporation rules for section 8 companies as per which the application for license and incorporation of the said companies will be required to be submitted in SPICe. Previously, e-form INC-12 was required for obtaining such a license from respective ROCs/RDs. It is now merged with SPICe and is made centralized. 
  • Introduction of SPICe has reduced the timeline for section 8 companies incorporation.
  • According to notification G.S.R. no. 275 (E) dated 29-03-2019, the MCA has amended the Companies (Incorporation) Rules, 2014 and inserted Rule 38A to facilitate the integration of the MCA21 system with the registration of EPFO, ESIC, GST at the time of incorporation of companies in SPICe e-Form.
  • This step is going to considerably affect the ease of doing business in India.

The Initiation of R.U.N.

Previously, business names were reserved using INC1. Now ‘Reserve Unique Name’ (R.U.N.) a web-based service has replaced INC1 to further increase the ease of business.
  • The introduction of RUN has also removed the requirement to use a Digital Signature Certificate(DSC) during name reservations. This has also brought significant improvement to the ease of doing business in India.
  • The MCA has simplified the Name Availability Rules through Companies (Incorporation) Fifth Amendment Rules, 2019. These amended rules provide sufficient illustration to avoid confusion in name reservations. 
  • Thereupon, the time taken for approval has reduced and the name rejection rate has fallen. This has also resulted in greater transparency, uniformity, and eradication of discretion.
  • Also, the MCA has amended the LLP Rules 2009 through Limited Liability Partnership (Second Amendment) Rules, 2018 notified on 18.09.2018 and effective from 02.10.2018. 
  • In the place of LLP Form 1, the mentioned amendment has introduced the RUN-LLP Form for reserving the name and FiLLiP Form in place of LLP Form 2 for incorporation. The government has made this process centralized to keep it at par with companies and as a part of starting a business in India.

Exemption of fees for capital up to INR 15,00,000

  • According to notification G.S.R. no. 180 (E) dated 06-03-2019, the MCA has amended the rule 38(2) of the Companies (Incorporation) Rules, 2014. 
  • Following the issue of this notification, the MCA will charge zero fees for all incorporations with an authorized capital up to INR 15,00,000.
The government is viewing these changes as a big hope for the much-needed ease of doing business in India. Read this article to know why every business should get udyog Aadhar registration certificate.

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