MCA Enhances Business Facilitation: Amendments to Companies (Incorporation) Rules, 2014

Posted On - 25 November, 2023 • By - King Stubb & Kasiva

The Ministry of Corporate Affairs (MCA) has issued the Companies (Incorporation) Third Amendment Rules, 2023, effective from October 21, 2023[1]. These amendments specifically focus on Rule 30 of the Companies (Incorporation) Rules, 2014, governing the process for shifting the registered office of companies from one state or union territory to another.

Key Amendments:

1. Deletion of Empowerment to Impose Costs: The 2023 Rules by MCA bring a notable change, eliminating the authority of the Central Government or Regional Director (RD) to impose costs on companies for relocating their registered office outside the state or union territory, streamlining the approval process outlined in Sub-rule 9 of Rule 30.

2. Exception for Shifting Registered Office During Corporate Overhaul: The Rules of 2023 introduce a second proviso to Sub-rule 9, offering an exemption for companies facing prosecution. While the initial proviso prohibits the relocation of the registered office during ongoing prosecutions, the new proviso provides an exception. Shifting the registered office may be allowed if new management assumes control of the company through a resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016. This exception applies when no appeal against the resolution plan is pending, and no inquiries, inspections, or investigations are initiated following the approval of the resolution plan.

Implications and Timeline:

Starting October 21, 2023, these amendments demonstrate a commitment to improving India’s business climate by eliminating the Regional Director’s authority to impose costs and introducing provisions for companies in resolution processes. The MCA’s goal is to simplify regulations and foster a business-friendly environment, prompting companies relocating their registered offices to ensure compliance with the updated Rules.