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What’s causing the MCA to be hyper ACTIVE?

The Ministry of Corporate Affairs (MCA) has been quite “Active” lately. In its latest diktat it has introduced a new form called the active company tagging identities and verification (ACTIVE) form ( Inc 22A) . The notification coming in effect from the 25th of February 2019 requires all companies incorporated on or before 31st December 2017 to file particulars of the company and its registered office in e-form ACTIVE on or before 25th of April 2019.

Companies who do not comply will be marked “Active non compliant” on the database of the ROC and will not be able to make any changes in :

  • Authorized capital
  • Paid up capital
  • Appointment of directors
  • Registered offices
  • Amalgamations or de-mergers

Delay in filing the form shall also result in a penalty of Rs 10,000/-

Among other details the companies are also expected to provide:

  • a photo of the registered office with at least one director or KMP also being in the picture.
  • Information on statutory auditors of the company
  • Information on cost auditors of the company
  • Details of CEO, CFO and Company secretary of the company

 

CNK RK Comment

The MCA’s hyperactivity on compliance certainly begs several questions. Most if not all the information requested in the Form ACTIVE is already available with the ROC, this of course does not include the photo of the interior as well as exterior of the registered office. The official requirement clearly stating that the director/KMP signing off on the form also has to be in the pictures.

Several sources also indicated that perhaps the latitudinal and longitudinal coordinates of the registered office may also have to be disclosed as part of the form. Thankfully the draft form seems to exclude this requirement.

This would be funny if it were not so tragic.

The requirements of the form clearly ignore the domain of rationality by refusing to acknowledge the concept of virtual offices. The regulators also seem unaware that the company’s registered office and actual place of business may differ. It is quite prevalent for smaller businesses to be registered at the home address of the promoters while functioning from other locations. The new form would require people to open their homes to the government so to speak.

The form also tends to ignore practicality, businesses and their directors are separate entities and the two can be in disparate parts of India or, for that matter, the world. The bureaucrats that drafted and released this form expect directors who may be travelling or located in other parts of the world for the time being to travel back in order to get their mugshots taken at their registered addresses.

The aim of the form seems to be to identify and curb shell companies. How this form will help them differentiate between a real business using a virtual office address and a shell company is anybody’s guess.

Patchy record

Over the last year or so the MCA has hit the reset on several compliances, sending corporates and their compliance teams on wild goose chases to file one e-form after the other. Such measures include but are not limited to :

  • Director KYC reissue process
  • Striking off companies
  • MSME compliance (MSME -1 form)
  • Information on loans received ( DPT-3)

If the aim of the government is to ensure ease of doing business then perhaps it should refrain from subjecting existing businesses from an endless onslaught of newfangled compliances.

Not only do they cost small businesses money they also divert the focus of the business owners from the core aim which is running their business.

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