Companies (Incorporation) Amendment Rules, 2022: Explained

Overview

The Ministry of Corporate Affairs periodically updates company incorporation rules to address regulatory requirements and improve compliance. One such change was introduced through the Companies (Incorporation) Amendment Rules, 2022, notified on 8 April 2022.

These rules amended the Companies (Incorporation) Rules, 2014, mainly in relation to companies proposed to be incorporated as Nidhis. The amendment introduced an additional requirement under Rule 12, substituted Form INC-20A, and inserted a Nidhi-specific declaration in Part B of Form INC-32 (SPICe+).

For promoters planning Nidhi Company Registration, understanding these changes is important because merely incorporating a company as a Nidhi does not permit it to commence Nidhi business. The prescribed declaration from the Central Government under Section 406 of the Companies Act, 2013 must also be obtained.

What Are the Companies (Incorporation) Amendment Rules, 2022?

The Companies (Incorporation) Amendment Rules, 2022 amended the Companies (Incorporation) Rules, 2014. The Ministry of Corporate Affairs issued the amendment on 8 April 2022, and the Government’s India Code database records it separately as the Companies (Incorporation) Amendment Rules, 2022.

The notification was issued by the Central Government in exercise of the powers available under the Companies Act, 2013. It came into force from the date of its publication in the Official Gazette.

The primary focus of this particular amendment was the incorporation of a company intending to operate as a Nidhi. It introduced a compliance declaration at the incorporation stage and aligned certain MCA forms with that requirement.

It is important not to combine this amendment with the Companies (Incorporation) Second Amendment Rules, 2022 or the Third Amendment Rules, 2022 because those were issued through separate notifications later in the year.

What Changed Under the Companies (Incorporation) Amendment Rules, 2022?

The Companies (Incorporation) Amendment Rules, 2022 introduced three important changes to the existing incorporation framework.

1. Additional Requirement Under Rule 12

Rule 12 of the Companies (Incorporation) Rules, 2014 deals with the application for incorporation of a company.

The amendment inserted an additional proviso concerning companies being incorporated as Nidhis. A company proposed to be incorporated as a Nidhi is required to make a declaration that it will not commence Nidhi business unless the Central Government has declared it to be a Nidhi under Section 406 of the Companies Act, 2013.

Section 406 falls under Chapter XXVI of the Companies Act, 2013 and deals specifically with Nidhis. The official India Code version of the Act places Nidhis under a separate statutory chapter.

This requirement makes an important distinction between incorporating a company and becoming legally entitled to carry on Nidhi business.

Businesses considering this structure can also refer to our Nidhi Company Registration and Compliance Guide to understand the broader incorporation and compliance framework.

2. Substitution of Form INC-20A

Another major change under the Companies (Incorporation) Amendment Rules, 2022 was the substitution of Form INC-20A in the Annexure to the Companies (Incorporation) Rules, 2014.

Form INC-20A is used for the declaration for commencement of business under Section 10A of the Companies Act, 2013.

Section 10A applies to a company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital. Such a company cannot commence business or exercise borrowing powers unless the prescribed declaration is filed and the applicable registered office verification requirement is complied with.

Businesses that need assistance with this compliance can refer to our INC-20A filing service. Our team also has a detailed guide on E-Form INC-20A and Commencement of Business Certificate, which explains the form, filing timeline and commencement-related requirements.

The substitution of Form INC-20A ensured that the commencement-of-business framework remained aligned with the Nidhi-related incorporation conditions introduced by the amendment.

3. Change in Form INC-32 and SPICe+

The Companies (Incorporation) Amendment Rules, 2022 also made a corresponding change to Form INC-32.

Company incorporation in India is now generally carried out through the integrated SPICe+ company registration process.

The amendment inserted an additional declaration in Part B of the relevant incorporation form. Through this declaration, the company confirms that it will not commence Nidhi business unless all required approvals, including the declaration to be issued under Section 406 of the Companies Act, 2013, have been obtained from the Central Government.

This puts the compliance obligation directly into the incorporation process instead of leaving it only as a post-registration requirement.

Forms Affected by the Amendment

The Companies (Incorporation) Amendment Rules, 2022 affected two important incorporation-related forms.

For businesses planning a broader company setup, our Company Registration Services explain the incorporation process, including documentation, DSC, DIN, SPICe+ filing and Certificate of Incorporation.

Understanding the Section 406 Requirement for Nidhi Companies

Section 406 of the Companies Act, 2013 deals with Nidhi companies. Broadly, a Nidhi operates for the purpose of cultivating thrift and savings among its members and carries out permitted deposit and lending activities among members subject to the prescribed framework.

The Companies (Incorporation) Amendment Rules, 2022 brought greater focus to Section 406 at the incorporation stage.

A company may receive its Certificate of Incorporation, but that certificate does not automatically mean that the company can immediately begin carrying on Nidhi business.

Before starting such activities, the company must fulfil the applicable legal requirements and obtain the required declaration from the Central Government.

This distinction is important because company incorporation and authorisation to commence Nidhi business are separate regulatory stages.

Why Was Rule 12 Amended?

The amendment to Rule 12 created a clearer link between company incorporation and the special regulatory requirements applicable to Nidhis. By requiring the declaration at the incorporation stage, the rules make promoters formally acknowledge that the company cannot begin Nidhi operations merely because it has been incorporated.

This helps ensure that the conditions applicable under Section 406 and related rules are considered before the business starts accepting deposits or undertaking permitted lending activities among members.

The amendment also aligns the incorporation documents with the subsequent approval requirement, giving the Registrar and the applicant a clearer compliance record from the beginning.

Impact on Nidhi Company Incorporation

The Companies (Incorporation) Amendment Rules, 2022 primarily affected promoters who intended to establish a Nidhi company.

Promoters need to correctly disclose the nature of the proposed company during incorporation and provide the prescribed declaration in the incorporation form.

They must also understand that obtaining the Certificate of Incorporation is only one part of the process. The company cannot begin operating as a Nidhi until the applicable declaration under Section 406 and other statutory requirements have been completed.

What Should Businesses Keep in Mind?

Businesses planning incorporation should always check the latest MCA requirements before submitting an application because incorporation forms and declarations may be modified through subsequent amendments.

For a proposed Nidhi, particular attention must be given to the declaration required at incorporation and the Section 406 requirement before commencing Nidhi business.

Companies with share capital should also review their post-incorporation obligations, including the declaration for commencement of business where applicable.

Our guide on post-incorporation compliances for a Private Limited Company provides an overview of commonly applicable compliance requirements after registration.

Using updated MCA forms, verifying supporting documents and understanding the difference between incorporation and commencement permissions can help reduce avoidable compliance issues.

Simplify Company Incorporation with Ebizfiling

Keeping up with changing MCA requirements can make incorporation more complicated than simply filing a few forms. The Companies (Incorporation) Amendment Rules, 2022 are a good example of why businesses need to understand not only how to register a company, but also the conditions that may apply before commencing business.

Ebizfiling helps entrepreneurs manage the incorporation journey with support for documentation, DSC and DIN requirements, SPICe+ filing, and other applicable MCA formalities. Businesses can use our company incorporation services to get professional assistance from application preparation through registration.

Compliance does not necessarily end once the Certificate of Incorporation is issued. Where applicable, Ebizfiling also assists with the INC-20A filing for commencement of business. For entities affected by the Companies (Incorporation) Amendment Rules, 2022, understanding these incorporation and commencement requirements can help prevent compliance gaps from the beginning.

Ready to incorporate your company? Connect with Ebizfiling today and get expert assistance with your registration and applicable MCA compliances.

Conclusion

The Companies (Incorporation) Amendment Rules, 2022 introduced focused changes concerning companies proposed to be incorporated as Nidhis. The amendment added a requirement under Rule 12, substituted Form INC-20A and inserted a related declaration into the incorporation framework.

The key point is that incorporation of a Nidhi company does not, by itself, authorise it to commence Nidhi business. The required declaration from the Central Government under Section 406 and other applicable approvals must be obtained before the company commences Nidhi business.

Promoters should therefore refer to the official MCA and India Code notifications and use the current incorporation forms while completing their company registration and post-incorporation compliances.

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