Features and Basic Information - eForm CRL- 1

Information to the Registrar by company regarding the number of layers of subsidiaries

Finally, eForm CRL-1 as prescribed under Companies (Restriction on number of layers) Rules, 2017 (the Rules) is made available on MCA w.e.f. 26th February, 2018. Let us go through some of the basic details about form CRL-1 and relevant Rules.

Law(s) Governing the eForm

Every company other than certain exempted class of companies, which has number of layers of subsidiaries in excess of the layers specified in the Companies Act 2013 shall file a return in Form CRL-1 with the Registrar within a period of 150 days from the date of publication of these rules in the Official Gazette.

Section 2(87) and Rule 4 of the Companies (Restriction on number of layers) Rules, 2017.

Rule 4 of the Rules.

·        On and from the date of commencement of these Rules, no company, other than a company belonging to a class specified in sub-rule (2), shall have more than two layers of subsidiaries:

a.      Provided that the provision of this sub-rule shall not affect a company from acquiring a company incorporated outside India with subsidiaries beyond two layers as per law of such country:

b.      Provided further that for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.

·        The provision of this rule shall not apply to following classes of companies, namely: -

a.      A banking company as defined in clause (c) of section 5 of Banking Regulation Act,1949 (10 of 1949);

b.      A non-banking financial company as defined in clause(f) of Section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank of India and considered as systematically important non-banking financial company by the Reserve Bank of India;

c.      An insurance company being a company which carries on the business insurance in accordance with the provision of the Insurance Act, 1938 (4 of 1938) and Insurance Development Authority Act, 1999 (41 of 1999);

d.      A Government company referred to in clause (45) of section 2 of the Act.

·        The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of section 186 of the Act.

·        Every company, other than a company referred to in sub-rule (2), existing on or before the commencement of these rules, which has number of layers of subsidiaries in excess of the layers specified in sub-rule (1)

a.      shall file, with the registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days from the date of publication of these rules in the Official Gazette;

b.      shall not, after the date of commencement of these rules, have any additional layer of subsidiaries over and above the layers existing on such date; and

c.      shall not, in case one or more layers are reduced by its subsequent to the commencement of these rules, have the number of layers beyond the number of layers it has after such reduction or maximum layers allowed in sub rule (1), whichever is more.

·        If any company contravenes any provision of these rules the company and every officer of company who is in default shall be punishable with fine which may extend to ten thousand rupees and where any contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

Features and other information about Form CRL-1:

A) Processing: It is an Auto Approval (STP) form. So once the form is filed and fees are paid, it will be approved automatically.

B) Details to be provided in eForm CRL-1

·        Basic information like CIN, Name of the Company etc

·        Number of layers of subsidiaries as on the date of commencement of the Rules i.e. as on September 20, 2017.

·        Number of layer of subsidiary should be between 1 to 99

·        Provide number of subsidiaries in each layer.

·        Based on information total subsidiaries will be auto calculated in the form.

·        No CIN or other details of subsidiaries are required to be provided in the eForm. However, once the form is uploaded

·        Time limit (days) for filing 180 days (As per Rules it was 150 days) from the date of publication in the Official Gazette

C) Filing Fees: Fees will be payable as per the Companies (Registration offices and Fees) Rules, 2014 including additional fees, if any, payable.

D) Due date for filing of form:

As per rule, the Company has to file Form CRL-1 within 150 days from the date of publication of Rules in official gazette. However, the helpkit in form provides that, the Company has to file the same within 180 days (viz. on or before March 19, 2018). We expect an amendment to Rule to be published soon.

E) Allowed Numbers - Layers of Investment

No Company other than 4 categories of company mentioned in Rule 2 above, shall have more than two layers of subsidiaries except for the exemption provided hereinbelow:

i.                 Acquiring Company incorporated outside India: These provisions shall not affect a company from acquiring a Company incorporated outside India with subsidiaries beyond two layers as per the law of such Country.

Note: If a company incorporated outside India and having more than 2 layers of subsidiaries according to their law. An Indian company acquiring that foreign body corporate then these provisions shall not affect such transaction. Indian Company can acquire foreign company which have more than 2 layers of subsidiaries.

ii.                One Layer of Subsidiaries: For computing the numbers of layers, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.

Note: If a Company have more than 2 WOS or subsidiaries on one layer, such companies shall not taken into account while calculating the layers of subsidiaries. On one layer there may be more than 2 Subsidiaries or WOS’s.

NOTE:

In case Company having more than 2 layers of subsidiaries as on September 20, 2017, the Company has to:

‘(i) file form CRL-1 with ROC within 150 days (180 days as per Helpkit of Form CRL-1)

(ii) no need to reduce the excess no. of layers by dis- investment in Companies

F) MOST IMPORTANT: UPLOAD DETAIL OF SUBSIDIARIES

After uploaded the form CRL-1 and SRN is generated, it is required to upload the details of the subsidiary companies within 15days from the payment date otherwise SRN shall marked as NTBR .

Login to MCA portal with the same credentials as was used to upload the CRL-1 form and then click the link under MCA Services > Upload Subsidiary Details to upload the details of subsidiaries.

·        Once the provided details are validated, the system is allowed to download the excel sheet. After validating the detail, click the ‘Generate Excel’ button to generate the excel file and fill in all the relevant information as per the instructions. The excel file shall be generated based on the information filed by the user in the CRL-1 form.

·        Fills the subsidiary data in excel as per the instructions and uploads the excel sheet by clicking the ‘Upload Excel’ button.

·        On click of ‘Submit’ button, system shall check whether the CIN/FCRN/LLPIN entered is ‘valid’ and is ‘Active’ in status. In case the CIN/FCRN/LLPIN is not Valid or ‘Active’, an error message shall be displayed as ‘CIN/FCRN/LLPIN is not valid/Active. Please enter the correct details’.

·        The system shall also perform the validation for the number of layers and the number of subsidiaries in a particular layer. System will notified for the error records in the excel sheet with appropriate color code.

·        In case the CIN/FCRN/LLPIN is ‘valid’ and ‘Active’ in status, the corresponding names should be pre-filled.

·        No system checks shall be performed where ‘Other registration number’ is selected as the type of registration. Enter the name of subsidiary/holding in such case.

·        Once all the details are submitted and there is no error w.r.t type of registration as ‘CIN/FCRN/LLPIN’, the data is saved in the database.

G) Penalty:

If any company contravenes any provision of these rules the company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.