Posted on by Nikita Bhatia

Government announces company incorporation with zero fees

With a new set of rules that simplify the process of company incorporation, the government aims to make it easier to do business in India. Here’s a look at the revised process.

On the eve of 69th Republic Day, the Government of India has taken another massive step to make it easier to do business in India. The Ministry of Corporate Affairs (MCA) has implemented various rules to simplify the process of company incorporation.

For the last few years, the government has been continuously pursuing initiatives to make the company registration process straightforward and uncomplicated.

The current reforms in the procedures can be described as the most significant ones till date.

Let us have a look at the current and revised processes for company incorporation:

  • Zero fees for incorporation:

To foster and promote new startups and businesses, the Ministry of Corporate Affairs (MCA) has announced zero fees of incorporation for SPICE Forms, e-MoA and e-AoA. This will enable the saving of a few thousand rupees, thereby encouraging more startups to formally register their company. Stamp duty will still be applicable at a rate depending upon the state of incorporation.

  • Introduction of Reserve Unique Name (RUN) Form:

The MCA has further simplified the name reservation process by introducing Reserve Unique Name (RUN) Form.

Earlier, company name could be reserved either in advance through the Name Reservation — INC-1 form or directly through the incorporation application (SPICE Form). Form INC-1 has now been replaced by RUN Form.

Past Scenario Current Scenario
Application for name reservation was being done through e-Form INC-1 which has provision of applying up to six names. Application for reservation will be done through RUN – a web-based form, where only one name choice can be provided at a time.
INC-1 required Director Identification Number (DIN) of at least two directors and at least one DSC to sign the e-form. RUN web-form does not require any prior DIN or DSC, thus making the process extremely quick and easy.
MCA fees for filing INC-1 is Rs 1,000 per form. If the proposed names are not in consonance with the Name Reservation Rules, the MCA provides one another chance of resubmitting the form with fresh names. MCA Fees for name reservation using RUN web-form is Rs 1,000 per form submission – irrespective of the name being approved or not.
The approved name was valid for a period of 60 days for both new and existing companies. An approved name is valid for a period of-          20 days from the date of approval, in case of new company.

–          60 days from the date of approval, in case of existing company.

Hence, proposed companies have the option to apply for the name reservation directly by themselves by submitting the simple RUN web-form and they would be intimated by the MCA on the approval through email. 

It is suggested that RUN Form be used when there is ambiguity on the preferred name being approved due to its similarity with existing companies or LLPs.

Direct application through SPICE form can also be used in cases when the proposed name is unique. It has high chance of acceptance and the applicant can save time and money.

  • Director Identification Number (DIN)

Earlier, DIN could be applied by the proposed director/applicant directly through e-Form DIR-3 or at the time of incorporation through the SPICE form.

However, the new rules state as under:

  • Directors of a new company can now apply for DIN only through the SPICE Forms. Details of such directors have to be filled in the SPICE Forms along with their proof of identity and address.
  • Existing companies can use Form DIR-3 for adding a new director. The new DIR-3 Form has the provision to furnish the CIN of the company for which the director is being appointed and a declaration that the DIN is being obtained for adding the person as a director to the mentioned company.

The government is definitely expecting a spur in company incorporations with the new set of rules, which aim at not only simplifying the procedures but also making them foolproof.

This article was also published on YourStory

Nikita Bhatia
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