On 26th January, 2018, the Narendra Modi led government took a giant step in favor of ease of doing business by restructuring the company registration process and also by waiving company registration fees. Now, after the reform, the government claims that the company can be registered in one day with zero fees.
It all looks like a fairy tale for the startups until we stop dreaming the imagination that is being sponsored by the government of India. In simple words, the historic boost for ease of doing business is a complete failure and rather now the procedure has become more tedious and complexed.
The Government’s fairy tale and the real truth
Government of India undertook various steps for ease of doing business but end up making it more complexed and costly. The government decisions with regard to starting a business in India shows that it isn’t aware of the ground realities of company incorporation. Hence, we have listed out the government claims and the reality behind those claims so that one should be aware of the real scenario.
- One Day Company Registration in India
The government has claimed that the company can be incorporated within a day thanks to the reforms and a new introduction of SPICE form. However, it is another fairy tale and nothing else.A company cannot be incorporated in a single day due to a number of steps involved. We will highlight all those steps and the time taken by each step. We will follow an optimistic approach even then you will see that the company cannot be registered in a single day.
Sno. Number of steps At Optimistic level On Average basis 1. Digital Signature & DIN application Half day 1 to 2 days 2. Name application Half day 1 day 3. Preparation of Documents by professional 1 day 2 to 3 days 4. Filing & follow after final form submission 1 day 3 to 5 days Total Time Taken (Without any error) 3 Days 7 to 10 days 5. Time wasted by ROC resubmissions 1 day to 2 days 1 to 7 several days Total Time Taken (With error) 5 days –
Only 2 out of 10 applications can be processed at optimistic level because re-submission on fictitious grounds, rejections further adds to the timeline. Hence, registering a company in a single day is only on papers.
- Company registration with zero fees
Just visit www.mca.gov.in and you will see an auto popup screen which claims that “now you can incorporate your Company with Zero fees”. The government claims that this step is taken to reduce the cost of starting a business in India.The real truth behind this claim
The government has only waived the company final form filing fees which amount to Rs.3,000/- on a average basis. There are many additional fees which are to be incurred while registering a company in India.
Details of other fees still in existence
Sno. Particulars Fees (in Rs.) 1. Name application form Rs.1000 2. Stamp duty state wise Rs.200 to Rs.10,000/- 3. Digital Signature Cost (per Signature per member) Rs.600 to Rs.1200 4. Notarization cost (Per member) Rs.100
- New Reserve Unique Name (RUN) service for simplified procedure
Earlier, the entire professional industry was frustrated with the Company name procedure due to ad-hoc rejections and corruption in the department. Further, various delegations were also sent to the government in this regard.
Hence, the government in order to make it efficient disposes of the year’s old name application procedure and introduces a very new RUN service for company name approval.
With this, the government claims that it has simplified the procedure to a great extent and has also reduced company incorporation time.
Truth behind this claim
This new company registration service which aims to simplify company registration procedure, has resulted into a complete mess. Here are the following reasons:
- Only single name can be filed: One can apply only single company name under RUN services unlike the earlier process where 6 names can be filed. Now, this will result into more frequent rejections which will lead to further delay.
- No re-submissions: If your applied name under RUN services is not available, then ROC will reject your application and there will be no second chance. Earlier, another chance is given for resubmission, so that the applicant can submit new names for approvals.
Further, the government fee is also forfeited if the application is rejected by the government. Hence, it results in higher cost and delay in the procedure.
- Adhoc rejection: Government has failed to recognize the problem of ad-hoc rejections. Many times, the ROC rejects the name application without any logic. Further, if you have direct links with the department personnel, the same name (which was rejected earlier) will be approved.
- No Compliant system: If anyone is aggrieved by the government rejections, there is any system to the complaint. There is no other way but to accept the inspector raj in the system.
Fact recognized by various experts in the industry
All the above facts are also been recognized by the various industry experts. Vaibhav Jain, renowned Chartered Accountant and associate director of Inmacs group, said in a facebook post “RUN is a bad experience so far! Arbitrary name rejection and only one choice. No six options, no resubmission, and fee are Rs.1000/-. I am sure MCA is making more money than before with lesser companies.”
Further, he also received the chain of affirmative comments by various top chartered Accountants. The founder of Hubco.in, Agam Gupta who deals with company registration on a daily basis said “RUN is a real road blocker. Getting name approval before filing company is very important because all the respective documentation for company registration includes a company name. Hence, this is a very bad change.”
The Narendra Modi led government has definitely shown the intentions for a better governance, however, it has failed to create an impact due to lack of knowledge about the ground realities of starting a business in India. However, since more and more businesses and investors are turning their eye of the prospects of Indian markets and ecosystem, it is well expected that some right changes will be introduced by the government in the years to come.