National development in India has become one of the prime objectives of the Narendra Modi Government ever since its election. The aim of building the nation’s economy and market structure to a larger capacity has been widely supported by various startup policies for increasing the rate of entrepreneurship and labor structure in all the states in the nation. These plans have also been seen through by the various regulations and policies being set up and modified for the easy integration of these plans in the required time.
One of the ways the government sought to promote lucrative business and industrial opportunities was the reformation of the process taken to register a company in India. The idea of increasing the profit margin of the country’s sectors by foreign investments through subsidiaries in the country was also one of the steps preconceived to help explore the growth measures.
In January 2018, the government took a big step of easing the burdens of aspiring entrepreneurs who had been looking to register their company in India by the implementation and modification of some policies involved in registering a company in the country. This included the waiving of the fees usually required from any foreign or local body looking to register their company in India and making use of digital means as a proposal for shortening the process.
Although the idea sounds really good in theory, the reality of these policies along with the ground rules of new company incorporation is quite a long and tedious process which seemed to weave the government’s processes and promises into a new set of challenges.
Some of the challenges faced are highlighted below, and they show that even though the government’s intentions towards reformation are to be applauded, the challenges of this setup do not match up to the expectations of the people.
External and Additional Charges have Negated the Zero Fee Registration Reform
According to the Ministry of Corporate Affairs, one could register a company in India with no fee, and this was clearly specified on their website. However, this is not the case, as this waiver does not preclude the payment of other additional fees such as the stamp duty (which is usually state-wise), name application form, digital signature cost, and notarization cost. The government’s waiver was only on the final form filing fees any company that registers in India.
The number of steps required for the incorporation of a new company negates the one-day registration claim.
The purpose of the newly integrated program SPICe (Simplified Proforma for Incorporating Company electronically) was to ensure that registration processes are completed within a day, but the number of steps involved ensures that this is impossible. Most of the time, only two applications out of ten required are processed due to the request for resubmissions, which are usually considered baseless.
The New Reserve Unique Name (RUN) Service Delays Quicker Processing of Registration
The effective measure for the name incorporation of companies put in place by the government was to be the use of the RUN service. The former policy for this process was considered to be a time-wasting technique by professionals wishing for a swifter way to register their company in India. There were ad-hoc rejections by the department which slowed down the progress further.
The government’s notion of the creation of this service was to ease the burden created, but it caused further issues which were considered as difficult as the previous service.
One of the issues encountered by the integration of the service was the inability to file more than one name. The service was integrated such that only single name can be filed as opposed to the previous service which allowed the filing of six different names. This resulted in various rejections and caused further delays.
Another issue recognized is the failure to rectify the complaints made about the ad-hoc rejections of the previous system. The new system seems to be an advanced form of the previous one without a proper review. It had been noted that the Registrar of Companies (ROC) rejects names sent in, but approves the same rejected names if there are direct links with any of the department’s personnel.
Another of these complaints is the issue of no resubmissions as well as no systems for complaints. It is to be noted that only one name submission is allowed, but when rejected, there is no chance of resubmission, and there are no systems of complaints against the rules made for any aggrieved clients. The process of application is usually to be restarted by the client with forfeiture of other payments made. This is a delay tactic for these bodies.
There are more investment applications for the country by external and local investors. However, these issues set to create a roadblock for this development. There are expectations for improvement of these outstanding issues by the government. It is duly expected that changes are made to ensure other innovations and ideas for the improvement of the country’s economy to work out as planned.