There have been news items on the birth of an IT company in less than an hour. While the Ministry of Company Affairs (MCA) going online is a welcome development, and the experience reported was very sweet, but the same is too good to happen in a day-to-day working.
Considering the formalities and the procedures involved, it is extremely unlikely, in fact, practically impossible, to repeat this experience in the normal course except for well-coordinated publicity purposes. The minimum time required is 5-7 days, which in itself is a big achievement compared to the past drudgery.
The first step in the formation of a company is checking the name availability electronically by paying a fee. It takes a minimum one day to get the name cleared, if there are no hurdles in the same. If the requested name is not available, then the process has to be repeated for seeking alternative names.
The next step is stamping of the memorandum & articles of association, which has to be done at Tis Hazari treasury between 10 am to 1 pm. If the fees is up to Rs 40,000, then it can be paid in cash, otherwise a bank draft is required. The minimum time taken by the treasury to return the documents is one day for cash payments and three days for payments by bank draft.
Thereafter, the memorandum & articles of association and Forms 1, 18 and 32 have to be filed online on the MCA portal. These are voluminous documents and take time due to frequent jamming of the site.
Further, the fees to be paid on the filing of these documents may go into lakhs of rupees depending upon the authorised share capital. The minimum time required for filing the e-documents and to get back the paid challan from the bank is one day if the fees is paid in cash and may extend to three days if the same is paid through bank draft. However, for credit card payments adequate limit must be available on the same. This expedites the process.
Having filed the above documents online, their physical set has to be delivered to the ROC. On receipt, ROC scrutinises and vets the documents and in particular the Objects Clauses of the Memorandum. There is always some thing or the other being not acceptable to ROC, which can only be sorted out by physical appearance and discussions. The vetting and finalisation process takes a few days. It is only after all these formalities have been gone through that a company comes into existence and a Certificate of Incorporation is issued , which is sent by post and takes around three days to come.
All this is when one assumes that the Memorandum & Articles of Association have been printed in advance, there is no blocking of the MCA website and the person incorporating the company holds a credit card with ample limit available to enable the fees to be paid electronically.
To really speed up the process, and make it practical to incorporate a company in at least a day (if not an hour), it is necessary to permit payments of all kinds of fees, including stamping fee, electronically through a single window, eliminating the requirement of filing the physical copies of the documents with the ROC and also the scrutiny and vetting of the Memorandum & Articles of Association.
The ROC should accept Memorandum & Articles of Association, including the objects clauses as framed by the promoters of the company because otherwise some times this becomes a bone of contention and results in avoidable wastage of time. The certificate of incorporation should also be transmitted by the ROC to the company electronically. The company as well as the ROC can take print outs of the required documents for filing, if required. Otherwise, all records can be maintained electronically.