Incorporation Process Simplified with Run Services and Zero Fee for Incorporation

Narendra Kumar

04 Sep, 2020

On the occasion of 69th Republic Day MCA^[1] has introduced some major changes termed as Government Process Re-engineering (GPR) initiatives for simplification of the incorporation procedure. These initiatives are taken with a view to achieving a position in the top 50 countries for “Ease of Doing Business”. These rankings are published by the World Bank every year.

There have been many initiatives taken by the Government in the last 3 years with a view to promote and support people willing to start a new business. For Company Registration alone, the old forms of incorporation were replaced by INC-29, then by Spice. Spice is a single form which is to be a file for registration of a new company.

With the new initiatives launched on 26^th January 2018, the incorporation procedure is further simplified. Earlier before filing the Spice, the applicants were required to get Director Identification Number. Now, that step can be avoided if the Incorporation Process is done directly through Spice+ without name reservation.

Major Changes introduced under the GPR initiatives

1. RUN Service: It is an online service for name reservation of the proposed company, known as Reserve Unique Name (RUN). It was launched on 21.01.2018. RUN replaced the Form INC-1, which was earlier, filed for name reservation.
2. Zero fees for incorporation: MCA has issued a notification stating that there will be no fees charged by MCA for the incorporation of any company with an authorized capital of up to 10 lakhs. Earlier at the time of filing Spice, the applicant was required to pay the MCA fee along with the relevant Stamp duty. Now, after the introduction of these changes, the only stamp duty will be required to be paid, no MCA fee will be applicable to the incorporation of a company with an authorized capital up to 10 lakhs rupees.
3. Re-engineered DIN allotment Procedure: To become a director one is required to have a Director Identification Number. Before 26^th January 2018 for acquiring a DIN, the individual was required to file DIR-3. After the introduction of these new initiatives, DIN can also be applied through Spice.

In other words, we can say that Din can be acquired in the following two ways;

Option 1:  Through filing Dir-3 by Existing Companies

Earlier Dir-3 was filed by individuals for acquiring a DIN no. Now, even the Dir-3 form is being amended. Information relating to the company in which the person is to be appointed as directed will be filled in the DIR-3 form.

Now, DIR-3 will be used by existing companies for the purpose of adding a director on the board.

Option 2: Through filing Spice for Proposed Companies

For the appointment of an individual as a director in any proposed company, no separate DIN application is required to be filed. DIN can be applied directly through the SPICE+ form mentioning the PAN and address proof details.

Banes and Boons of RUN Service

The new name reservation service introduced by the name RUN (Reserve Unique Name) is one of the new initiatives taken by the Government with a view to simplifying the incorporation process. However, there are certain merits and demerits of this service.

Merits:

1. No proposed director/ promoter information is required.
2. No ROC information is required, restricting the jurisdiction of the proposed company. This means any name reserved can be Annual Filing of Producer Company with registered office in any state within India.

Demerits:

1. Only one name can be reserved, in discarded form INC-1 6 choices can be given.
2. No resubmission provisions are there under RUN service.