FM Nirmala Sitharaman urged to waive e-form 22A for firms

Memorandum to Finance minister explains why the provision can’t be implemented.

CHENNAI: Finance and Company professionals based in Chennai strongly feel that the Ministry of Corporate Affairs (MCA) recent notification mandating all incorporated companies to file what in technical parlance is known as 'e-form Active (Active Company Tagging Identities and Verification) on or before June 15, 2019, and its attendant rider to necessarily appoint a 'Whole Time Company Secretary', as totally impracticable and missing the spirit of compliance with Law.

At the outset, congratulating the new Finance Minister in the new BJP government, Dr Nirmala Sitharaman, who has her roots in Tamil Nadu, for taking over a very crucial portfolio as "a very proud moment for the entire country," Mr S Sundar Raman, an independent practicing chartered accountant here, has urged her immediate intervention in this issue as there are barely three days to go for the compliance date, after which many registered companies may be in trouble.

In a five-page memorandum to the FM, he said the filing of 'e-form Active' for all companies incorporated by December 31, 2017, except two or three categories that include firms under liquidation and so on, has been made mandatory.

'ACTIVE' is the e-form that enables MCA "to geo-tag the location of the registered office (both interior and exterior) of Applicable Companies, and the 'Applicable Company' should have its unique e-mail ID, "not being used by any other company." This is fair enough.

But the MCA also wants all sorts of other nit-picking details, like the latitude and longitude details of the registered office of the company, photograph of the registered office with at least one of its directors seated on his/her chair and so on, which makes it very impractical to comply in the first place.

Further, Sundar Raman said in respect of companies which has not appointed 'Whole Time Company Secretary', when the form is submitted, "it throws an error and does not allow to file the form." Sundar Raman, for the benefit of the Finance Minister, has also appended a screenshot of that page which says a 'Whole Time Company Secretary', has to be appointed before filing this e-form.

Referring to the modified provision in the Companies Bill which has lowered the paid-up capital limit from Rs 10 crore to Rs 5 crore for compulsory appointment of 'Whole Time Company Secretary', Mr Sundar Raman, citing details from the monthly bulletin of the Ministry of Corporate Affairs', points out that the total number of 'ACTIVE' companies limited by shares in the country is presently 11,49,580.

Though exact numbers were not available, approximately 58,000 qualified company secretaries are available all over India, as against a requirement of 89,623 companies needing to appoint a 'Whole Time Company Secretary', he explained. Of them 40 per cent are already employed and hence for only about 20,000 company secretaries are presently available for the purpose of complying with the new Law, which is just only 25 per cent of the total requirement. Hence, Mr Sundar Raman contended that "it is very sad that the Ministry has enacted a Law, which in the first place is not possible to comply." Secondly, the penal provisions for non-compliance was very high for many of the smaller companies in the country, even as there were other difficulties of company secretaries unwilling to move to smaller towns like in Tamil Nadu for various reasons. For many other companies, Mr Sundar Raman pointed out that appointing a 'Full Time Company Secretary' was not possible within their budget requirement. They take care of the compliance with Company Law requirements with the help of practicing company secretaries and hence the "appointment of a Whole Time CS is not just within their business requirement."

Stating that such companies "cannot appoint" a 'Whole Time Company Secretary' just to file one 'ACTIVE e-form', Sundar Raman said the predicament was worse as most of them would be deemed 'Inactive' merely because they cannot file this e-form for want of a 'Full Time Company Secretary'. It is a paradoxical situation both ways and Mrs. Nirmala Sitharaman should intervene and help the business community, given other ways to secure the spirit of compliance.

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