| Minimum paid- up capital criterion for registration of firms may go |
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New Delhi, 13 December The government has proposed removing the minimum paidup share capital requirement to commence a business in India. The Union Cabinet is learnt to have approved the proposal on " omitting requirements for minimum paid up share capital, and consequential changes". "This is being done to increase the ease of doing business," said a senior government official who did not wish to be named. According to the Companies Act, 2013, every company has to give a declaration to the Registrar of Companies ( RoC), stating its paid- up capital is not less than ₹ 5 lakh in the case of public companies ( the listed ones, as well as those that have raised money from the market through debt); and not less than ₹ 1 lakh in the case of private companies. This declaration is necessary for obtaining a commencement certificate for business. According to experts, this is one of the provisions of the Companies Act, 2013, that had made setting up a company much more cumbersome than earlier. However, it is not yet clear how the government plans to practically implement this provision: The issue is about whether or not a company will be allowed to register with zero paid- up capital. "The government can either decrease the minimum required amount or defer the time required to deposit the prescribed amount," said Agam Gupta, co- founder of quickcompany. in, which helps entrepreneurs register their firms. Lionel Charles, chief executive of indiafilings. com, which claims to register around 100 companies a month, said 80 to 90 per cent of his clients are middle- class people who find it difficult to show this much cash in their bank account. "Such a step will surely help reduce another hassle in registering a company." "We are concerned as the number of companies being registered has fallen almost 40 per cent in the past six months — after the implementation of the new companies law," said the official quoted earlier. According to official data, 31,641 companies were registered in May- October this year, a drop of 35 per cent from 48,636 in the same period last year. Similarly, the total authorised capital of the companies registered during MayOctober this year stood at ₹ 14,771.24 crore, a decline of almost 24 per cent from ₹ 19,409.46 crore in 2013- 14. "Smaller companies, which were previously shying away from registration because of compliance issues, will now come back if the government removes this barrier," said Sai Venkateshwaran, partner & head of accounting advisory services at KPMG in India. |
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