India was ranked 142 out of 189 countries in the ‘Ease of Doing Business’ list by Forbes in 2014. This had the whole world talking about how difficult India’s laws are for someone who is planning to start a business. For someone new and young, who just wants to begin his/her startup journey, India’s complicated business registration process poses a bigger hurdle than the business itself.
In the next year, India did jump up by 12 positions, but it still remained one of the most difficult countries to do business in. Forbes had also ranked India very low, at 95th position in its list of “Business Friendly Nations”.
In the light of this event, Prime Minister Narendra Modi had launched Startup India Standup India program last year in a huge event which witnessed startup founders from India and abroad come together. Several claims were made and promised. PM Modi had promised that he will take steps in order to improve the ‘Ease Of Doing Business’ in the country. As an initiative towards the same direction, it was decided that the company registration process will be made less complicated and less time-taking as well. The Ministry of Corporate Affairs (MCA) seems to be taking appropriate action on the same and company registrations are happening faster than ever.
Registering a Company in India Within 1 Day – How does it work?
The process of Company registration in India has been improved drastically with most of the manual work being replaced with automated processes. The MCA now has an automated process for the form verification and name verification. Earlier, applicants had to seek the RoC (Registrar of Companies) permission separately to get the company registered. It used to take more than 10 days for the forms and applications to get processed. If the company got stuck in name verification issues then it could take upwards of 16 days.
However, now the Government has reduced the number of documents required to 26 instead of 39 earlier. The name verification and document verification along with stamp duty process has been completely automated thus making it a 24 hour process!
Under the pilot project of fast track company registration, approximately 14,000 new companies were registered in India out of which 70% were registered within 24 hours.
How will This Move Help Startups?
This new move has sent waves of happiness in the startup ecosystem. Anyone who wishes to register his/her business can simply get the company registered within 24 hours! This will also reduce the time and effort taken by new business owners to get their company registered. There has been a very big service cost associated with registering a company in the past. The Chartered Accountants had to get several forms manually verified and thus they had to charge a hefty service fees for the effort. With the new move, the efforts have been decreased with everything becoming online and automated.
Will This Help India in Improving its Position on the World’s Economic Map?
The present Central Government led by Prime Minister Modi is taking ample steps to help people create more businesses and improve India’s GDP. The Government is also trying to improve FDI (Foreign Direct Investments) by fostering international connections and simplifying the tax structure of the country. The introduction of GST is an initiative in this direction. GST Full Form is Goods and Services Tax. This new tax will replace the varied and complicated tax structures that exist now, which in turn improves the chances of FDI into India’s industrial and technological businesses.
With the new 24 hour Company Registration process, the startups and SMEs will get support in setting up their businesses very fast. However, there are several other areas which still require improvement. For example, it is said that Shutting Down a Business in India is tougher than getting a Divorce. As a country, we do not appreciate failures at all. Even our rules don’t. Similarly, company compliances are extremely complicated and takes a lot of money & effort to accomplish. There should be a revenue or profit/loss parameter for the compliances. The companies which are running in loss should receive exemption and assistance from the Government for doing the compliances. The Government can also setup self help kiosks where companies with no or less profits can get their compliances done without paying hefty fees to the Chartered Accountants.
Unless India as a country starts glorifying and accepting failure, people will stay vary of taking risks. If we want India to be the most powerful economy of the world, steps should also be taken to support companies that are failing/need to shut down along with the ones which are doing well. Fear of failure coupled with the hardships businessmen have to face with the Government if their company is in loss or needs to shut down still prevents a lot of people to start their own business.
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.