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Alerts:

Regulatory Alert - Changes in Rules for shifting of Registered Office

31 July 2017

Ministry of Corporate Affairs (‘MCA’) vide a notification dated 27 July 2017, has amended Rule 28 and 30 of the Companies (Incorporation) Rules (“Rules’) for shifting of a company’s Registered Office (‘RO’). The amendment seeks to simplify the shifting of RO i) within same State or ii) from one State to another State.

Key changes in relation to these amendments are summarised in the table below:

  A.  Shifting of RO within same State

Key change in relation to

Erstwhile requirement

Amended requirement

Publication of notice in newspaper

  • To be published in daily newspaper in English and principal language of district of RO
  • To be published atleast 30 days before making application to the Regional Director

No such requirement

Individual notice on each debenture holder, depositor and creditor

To be served atleast 30 days before making application to the Regional Director

  • No such requirement
  • Company to make a declaration alongwith application that it has either the consent of its creditors for the proposed shifting or has made necessary provision for the payment thereof

Right of opposition to the shifting by debenture holder, depositor and creditor

Objection to the shifting to be provided within 21 days of publication of notice

 

No such right available

Declaration regarding no default on payment of workmen dues

No such requirement

Required

Intimation to the Chief Secretary of the State

No such requirement

To be given stating that the employees’ interest is not adversely affected consequent to the proposed shifting

Prohibition on shifting of RO

Prohibited if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under Companies Act

  • No such prohibition
  • Declaration required that the company does not seek to change the jurisdiction of the court where cases for prosecution are pending

Timelines for order approving or rejecting shifting of RO

Not prescribed timeline

Not prescribed timeline

 

  B.  Shifting of RO from one State to another State

Key change in relation to

Erstwhile requirement

Amended requirement

Timeline to publish advertisement in relation to shifting of RO

To be published atleast 14 days prior to the date of hearing before Regional Director

To be published atleast 14 days prior to the date of filing of the application for shifting of RO, but publishing should not be beyond 30 days before filing of such application

Advertisement

Advertisement in prescribed format to be published in a vernacular newspaper in the principal vernacular language and in English language in an English newspaper circulating in that district

Advertisement in prescribed format to be published in a vernacular newspaper in the principal vernacular language and in English language in an English newspaper with the widest circulation in the State in which RO is situated

Timeline to serve individual notice on creditors and regulators

Atleast 14 days prior to the date of hearing before Regional Director

Not more than 30 days before filing of application for shifting of RO

Notice to SEBI by listed company

No specific mention (However, SEBI is intimated as required under SEBI regulations)

Mandatory within time mentioned above

Timelines for order approving or rejecting shifting of RO

No prescribed timeline

  • Where no objections are received – order to be passed within 15 days of application – In such a case, shifting would be approved without any hearing
  • Where objections are received – order to be passed within 60 days of application

 

BDO Comment

The amended Rules intend to bring certainty on the process timeline for shifting of RO from one State to another State. It also simplifies and reduces cost in relation to the process of shifting of RO within same State by doing away requirement to publish advertisement and serving individual notices to creditors, etc. It would have been helpful if Rules would have prescribed timelines for approval for shifting of RO within same State as well. These changes seem to be yet another effort by the Government to improve ease of doing business in India.