In its latest notification, the Ministry of Corporate Affairs (MCA) has made suitable changes to the rule 30 of the Companies (Incorporation) Rules, 2014, which essentially deals with the shifting of registered corporate offices.
It now adds a new proviso to the rule that says: “…where the management of the company has been taken over by new management under a resolution plan approved under section 31 of the Insolvency Bankruptcy Code, 2016, and no appeal against the resolution plan is pending in any court or Tribunal and no inquiry, inspection, investigation is pending or initiated after the approval of the said resolution plan, the shifting of the registered office may be allowed.” The new rule came into force on October 21.
Experts say the move comes as a relief for new promoters who want the registered offices of the insolvent firms shifted to another state or Union territory to achieve better operational synergy with their other businesses.
As many as 720 companies were rescued under the insolvency law since it came into being in late 2016, according to the data compiled by the Insolvency and Bankruptcy Board of India (IBBI). Creditors recovered 31.6% of their admitted claims in such cases until June 2023. However, the realisation was as much as 83.9% of the fair value of the firms worked out when they were admitted for insolvency resolution, the data showed.
According to rule 30 of the Companies (Incorporation) Rules, 2014, an applicant has to seek prior approval of the Central government for the alteration of memorandum for shifting the registered office from one state/Union territory to another.This rule under the Companies Act also states that the Centre may approve the change of location “on such terms and conditions, if any, as it thinks fit, and may include such order as to costs as it thinks proper”.The latest MCA order seeks to omit the condition–“and may include such order as to costs as it thinks proper”—from the rule and insert the new proviso, giving flexibility to sick companies that see resolution under the IBC.
