Companies Act, 2013 (Amendment): Physical verification of Addresses of the registered offices of Companies

The MCA (Ministry of Corporate Affairs) has with a recent circular inserted provisions to strengthen the law that makes the process of ‘Physical address verification of registered offices of companies’ more transparent by adding several formalities by the officials in charge of the process. If you are a business operator with a registered address for your company, these are certain changes in the procedure which you need to know. 

Key Abstract

To ensure a transparent process for the physical verification of any company’s registered address as well as the process of having the presence of independent witnesses and taking photographs of the registered address of the company’s office at the time of verification, the new Companies (Incorporation) Third Amendment Rules, 2022 have been notified.

According to this new regulation, the ROC shall perform the physical verification of the Company’s registered office in the presence of two impartial witnesses from the neighborhood where the Company’s registered office is located. Additionally, ROC might ask the local Police for help with this verification if necessary.

Meaning of Registered Company

A startup business is one that is run by a small group of individuals who are able to work together to solve its difficulties. Basically, the creation of such a start-up can be explained by the fact that the founders of any existing company identify issues with the current system and decide to fix these issues by founding a new company or organization. Additionally, a start-up registration can be completed when the company’s founders have an idea that has the potential to succeed or when they decide that the services the start-up now offers are subpar or that they do not wish to continue with them.

Section 7 of the Companies Act, 2013 provides for the procedure a company can shift their title to as ‘Registered’, which explains that “An organization becomes a registered company when in accordance with the law it claims a legal status.” After receiving the status the company has to periodically update its management to the authority and work under their due observance.

In simplified sense, registered office of the company is an official address where the communication is sent for acknowledgement by the Company. As a public record any Government department, Authority or other qualified organization will use the collected record to establish communication with the company.

Recent Notification

The Companies (Incorporation) Third Amendment Rules 2014 were notified by the Government of India on August 18, 2022, in accordance with the authority granted by Sections 3, 4, 5 (5) 6, 7, 1, 2, 8, 1, 2, 11, 1(a)(b), 12, 2, 3, 4, proviso of 5, 14, 2, 17, 1, 20, 1, 2, and 469 (1) (2) of the Companies Act, 2013.

The new Companies (Incorporation) Third Amendment Rules, 2022, have been notified in order to ensure a transparent process for physical verification of any company’s registered address, as well as the presence of independent witnesses and the taking of photographs of the registered address of the company’s office at the time of verification.
After being published in the Official Gazette, the Rule will take effect.

Introduction of Rule 25B 

Section 12 of the Companies Act, 2013 discusses the registered office, and its sub-section (9) discusses the physical verification of the registered office address. It provides that the Registrar of Companies has the authority to physically check a registered address of a company’s office if he has reasonable grounds to think that the company is not conducting business correctly. And the sole basis for this Amendment is physical verification.

After Rule 25A in the Companies (Incorporation) Rules 2014, a new Rule 25B with the headline “Physical Verification of the Company’s Registered Office” has been included. The Companies (Incorporation) Amendment Rules, 2019 inserted Rule 25A, which is related to the ACTIVE (Active Company Tagging Identities and Verification), and this Companies (Incorporation) Amendment Rules 2019 was notified by the Government of India via the Ministry of Corporate Affairs on 21st February 2019 and took effect on 25th February 2019. Rule 25A was added after Rule 25, which discusses the verification of the registered office.

Outline of Rule 25B 

The Physical Verification of the Company’s Registered Office is discussed in New Rule 25B. The Registrar must visit the registered address of the company office and may also conduct physical verification of the said registered company’s office in the presence of two independent witnesses from the same locality of the registered office based on the information or documents available on MCA. If necessary, he may request the aid of local police for such verification.

The registrar must carry the documents filed in support of the address of the company’s registered office for physical verification as well as to check the authenticity of the same by cross-verifying with the documents of such address obtained during physical verification and duly authenticated from the occupant/owner of the property where the company’s registered office is located.
During the physical verification, the Registrar must take photograph the company’s registered address and write the physical verification report solely in the proper manner.

Obligation of Registrar of Companies under the purview of Recent Notification

The physical verification of the Company’s registered office should be done by ROC in the presence of two independent witnesses from the neighborhood where the Company’s registered office is located, according to the new regulation. Furthermore, if necessary, the ROC might request the aid of the local police for such verification.

The Registrar shall carry the documentation filed on MCA in support of the company’s registered office address in order to undertake physical verification of the company’s registered office.
To ensure the legitimacy of the documents, they should be cross-checked with “copies of supporting documentation of such address gathered during the said physical verification, fully attested from the occupant of the property where the said registered office is situated.

RoC to submit a report on the Physical Verification of the Company’s Registered Office:  During the physical verification, the registrar is obliged to photograph the company’s registered office. Once the physical verification is completed, a full report on the physical verification including various information must be provided in the following manner.
The report on physical verification of the company’s Registered Office comprises the following information –

• The company’s name and CIN
• The most recent address of the company’s registered office as recorded in MCA 21.
• The date of the Registrar of Companies’ authorization letter.
• Name of the Company Registrar
• Visit Date and Time for Physical Verification of Registered Office
• Location information, including a landmark
• Any information about the individual accessible at the time of the visit, such as the person’s name, father’s name, residence address, and relationship with the company, etc.
• Any further remarks
• Document attachments list
• A copy of the agreement/ownership/rent agreement/NOC of the company’s registered office from the owner/tenant/lessor
• Image of the registered office
• The person’s self-attested ID card is available.
• Any other documentation.

ROC power to Remove the Company Name: If the registered office is unable to receive communications, RoC must notify the directors of his intention to withdraw Companies name from the register.
If the registered office of the company is determined to be incapable of receiving and recognising all correspondence and notifications, the registrar of companies (RoC) should notify the company and all of its directors of his intention to remove the company’s name from the register of companies.
Furthermore, before taking any action under Section 248 of the Companies Act, 2013, regarding the removal of the company’s name from the register, the registrar must request that the company and its directors send their representations, along with copies of relevant documents, within 30 days of the date of the notice. The updated rules establish a clear procedure for performing physical verification of the company’s registered address.

Existing RoC requirements on Registered Office Verification: Under section 12(9) of the Companies Act, 2013, the Registrar may conduct a physical verification of a company’s registered office in the manner provided if there are reasonable grounds to think that the company is not carrying on business properly.
The verification of the registered office must be filed in Form No.INC.22 along with the fee and supporting documentation, according to Rule 25 of the Companies (Incorporation) Rules, 2014. Previously, neither the section nor the rules specified a method for performing physical verification of the company’s registered office. The mechanism for undertaking such physical verification has now been established under the Rules.

Authority performing the verification of the Addresses

The Companies Act, 2013 envisages the provisions of verification by the Registrar of Companies (mentioned in this article as, RoCs). They hold the power to perform verification as a delegated authority and maintaining the records of the registered companies, the information of which is accessible to public on payment of a specified fee. The Administrative control over the RoC, with the help of Regional directors, stays preserved with the Central Government for the assistance to the ‘Ministry of Corporate affairs’.

What if company fails to Reciprocate Acknowledgement?

Section 12(9) of the Companies Act, 2013 imparts with the situation when authority acts on reasonable cause to believe on incapability of the company to discharge functions in the prospected form and in case contrary appears, the Registrar of companies are entitled to take actions after adapting due procedure to convey and put the formal notice on part of the company. In case the registered office of the company is found to be not capable of receiving and acknowledging all the communications and notices, the registrar of companies supervising the action will, with intent to seek information send notice to the company and all its directors and managing authorities, failing to reciprocate which will result in;

• Removal of name of the company from the records;
• Cancellation of the registration title of company;
• Striking off Companies

Takeaway

By inserting the Rule 25B, Companies (Incorporation) Rules, 2014 the aforementioned amendment ensure the unambiguous execution of company’s businesses with transparency in terms of record. The Companies (Incorporation) Third Amendment Rules, 2022, aim to physically verify the registered address of a company. A new regulation 25B has been included by this Amendment, which discusses the major subject of this Amendment, namely, physical verification of the company’s registered office.
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