CA,CS to physically verify company addresses

CA,CS to physically verify company addresses

MCA begins crackdown on shell cos, benami directors. Cos to rectify 'mistakes' in 6 months

N Sundaresha Subramanian / New Delhi Dec 29, 2012, 13:04 IST In a massive clean-up exercise that will address the age old problem of shell companies and directors with questionable credentials, the ministry of corporate affairs (M CA) has tightened the rules governing the registration of addresses and appointment of directors. The exercise has been set off through a series of notifications amending key rules that were released during the week and followed up with newspaper advertisements. The ministry has amended the Form 18, the standard filing for situation of the registered office or any change thereof. Under the new form, onus has been put on the chartered accountant (CA), cost accountant or company secretary (CS) who verifies the filing to physically check the existence of the company. Under the old form, these verifying professionals had to give a certificate that hey have verified the address from the “books of account and records” of the company. Now, a new clause has been added where the CA/CS has to declare that, “I further certify that I have personally visited the new address, verified it and I am of the opinion that the premises are indeed at the disposal of the applicant company.” Further both the company official filing the form such as managing director, manager or the company secretary and the CA/CS verifying it are required to give identification details such as PAN number/ Director Identification number (DIN) or the membership numbers. In addition to the complete address of the registered office and the address of the police station in which the registered office falls, which were the original requirements, companies will now have to produce the proof of address, which is a mandatory requirement under the new form 18. The practice of using hundreds of shell companies with same addresses, some of them fictitious, as holding and subsidiaries has become so common in the Indian corporate sector. Many promoters also followed the dubious practice of appointing distant relatives or personal staff such as driver, barber etc as directors thus keeping control but without any responsibility. However, recent instances where such companies are used for routing political payments and other corporate favours seemed to have triggered the reforms latest reforms, say experts.  Saurabh Agarwal, director, Kennis Consultancy, which specializes in compliance matters, said, “The ROC (Registrar of ompanies) did not have a formal framework for verification of addresses. It is good that such a structure has been put in place as there were increasing instances of companies with bogus addresses. There will be lot of documentation work that needs to be done by several companies.” Agarwal said his firm is also studying what sort of documentation will be required for companies still under formation. “A company still under formation may not own premises or have leases in its name. We are trying to understand what kind of certification would be necessary in such cases. Physical verification can be done. But we have to certify based on vetting of documentary evidence.” If the company does not own the premises or has taken it on lease, then it has to produce further documentary evidence. If the registered office premises is owned by one of the directors of the company, then a no-objection certificate from the director is required to be attached. If the premises are owned by any other entity then a proof that the company is permitted to use such an address needs to be submitted, the amended form 18 showed. The Ministry has also given a six month period for all companies to rectify any errors or mistakes in the key forms such as Form 1( application for incorporation), Form 1A (Application for name) and Form 44 ( Registration form for a foreign company). Further, through a separate notification, the ministry has also amended the form for application of directors identification number (DIN).  In addition to furnishing proof of identity and residence proof, the persons appointed as directors also need to be verified and certified along with their photographs.