MCA Eases Shifting of Registered Office for New Management

The Ministry of Corporate Affairs has notified the Companies (Incorporation) Third Amendment Rules, 2023 specifying that the shifting of the company’s registered office from one State to another may be allowed in case a new management has taken over the company under a resolution plan approved by the adjudicating authority under Section 31 of the Insolvency and Bankruptcy Code, 2016. The amendment rules have come into operation w.e.f. October 21, 2023.

As per provisions of the Companies Act, 2013, the shifting of the registered office from one State to another requires the passing of a special resolution and adherence to Section 13 of the Act. The said Section specifies that such change in the memorandum will have to be duly approved by the Central Government. To facilitate the same, Rule 30 of the Companies (Incorporation) Rules, 2014, elaborates on the procedure to be followed for obtaining the approval.

Overview of Procedure

Rule 30 provides that the application for the Central Government’s approval has to be made in Form No.INC-23. Further, the prescribed fee has to be paid and the application has to be filed along with the requisite documents including copies of the MOA, minutes of the general meeting (where the resolution on the memorandum’s alteration was passed), and the Board Resolution or POA or Vakalatnama. The 2014 rules also envisage the submission of affidavits, advertising the application in Form No.INC-26 (in vernacular and English newspapers), and serving of notices to creditors and debenture-holders (and if the company is listed, to the Registrar and SEBI, and if it is regulated under any special Act or law, then to the concerned regulatory body). If no objection is received to the advertisement or notices, no hearing will be held and the Central Government will directly proceed with issuing an order, either approving the memorandum’s alteration or rejecting it. In case any objection is received, a hearing will be held and based on the company’s affidavit recording the consensus of the parties or the manner in which the objection would be resolved, the Central Government will pass an appropriate order.

After the Central Government passes the order approving the memorandum’s alteration, a certified copy of the same has to be filed in Form No.INC-28 along with the necessary fee, before the Registrar of the State (under Rule 31). The provisions of the 2013 Act mention that such a copy must be filed with the Registrar of both the States and “the Registrar of the State where the registered office is being shifted to, shall issue a fresh certificate of incorporation indicating the alteration”.

Sub-rule (9) of Rule 30 empowers the Central Government to lay down terms and conditions while approving the application for alteration if required. However, the proviso to said sub-rule states that the shifting of registered office from one State to another will not be permitted if any inquiry, inspection, or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

Changes under the Amendment Rules

The amendment to sub-rule (9) of Rule 30 provides that the shifting of the registered office may be allowed in case a new management has taken over the company under a resolution plan approved by the adjudicating authority under Section 31 of the 2016 Code. However, the same is subject to the following conditions: –

  • no appeal against the resolution plan is pending in any Court or Tribunal; and
  • no inquiry, inspection, or investigation is pending or initiated after the approval of the said resolution plan.

A joint reading of the provisos leads one to the following conclusions: –

  • The Central Government confirming the alteration shall no further have the right to order costs to approve the shifting of the registered office from one State to another.
  • The Central Government shall not allow shifting of the registered office from one State to another in case the management of the company has been taken over by new management under a resolution plan approved under section 31 of the Code, when: –
  1. appeal against the resolution plan is pending in any Court or Tribunal; or
  2. inquiry, inspection, or investigation is pending; or
  3. inquiry, inspection, or investigation is initiated after the approval of the said resolution plan.
  • The words “under the Act” have been used under the first proviso to sub-rule (9) of Rule 30 which pertains to the inquiry, inspection, or investigation under the Companies Act. However, the second proviso of sub-rule (9) to Rule 30 does not contain the words “under the Act / under the Code”, which causes ambiguity.

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Photo by Yibei Geng on Unsplash

The amendment to sub-rule (9) of Rule 30 provides that the shifting of the registered office may be allowed in case a new management has taken over the company under a resolution plan approved by the adjudicating authority under Section 31 of the 2016 Code. However, the same is subject to the following conditions: –

  • no appeal against the resolution plan is pending in any Court or Tribunal; and
  • no inquiry, inspection, or investigation is pending or initiated after the approval of the said resolution plan.

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