Registering a company? Starting a business gets just a little bit easier

Registering a company? Soon there will be one fewer thing to worry about, with the Ministry of Corporate Affairs (MCA) planning to give a bank account number to each company as soon as it is incorporated.

The move is part of the government’s push to better India’s ranking on the World Bank’s ease of doing business index, especially on the criterion of starting a business, a senior government official told Business Standard. In giving ranking on ease of doing business, the World Bank has 10 parameters, of which starting a business is one.

While India’s ranking in the World Bank’s Doing Business Report 2019 rose 14 places to 63, the parameter of starting a business has been dragging its performance down. Among 190 countries, India was ranked 136 — an improvement of one rank in ease of starting a business.

Already four banks, including three private ones, have come on board. The government has written to all public sector banks to be part of the new scheme.

Once it is registered, the government allots a company a director identification number, name, incorporation certificate, permanent account number, TAN (Tax Deduction and Collection Account Number), goods and services tax registration number, among other things. Adding a bank account to this list is directed at giving a head start to companies and saving them precious time in dealing with the formalities of opening a bank account.

“It would be a great step. It takes at least four to five days to open a bank account and do a lot of paperwork.

It does not make it any easier that documentation is not standardised across banks,” said Ankit Singhi, partner, Corporate Professionals.

This also means as soon as the bank account is opened, the company will be able to transfer its share capital and file the papers of ‘commencement of business’ with the Registrar of Companies. The government is, however, likely to give an option to companies to not use the bank account allotted to them after registration.

Experts suggested the MCA give access to the data and documents filed by companies to banks. “This will ease the compliance with Know Your Customer norms,” Singhi added.

“Our processes are similar to those of a country like New Zealand. 

But the volume of companies they do on a yearly basis is what we do monthly. 

“However, we are trying to improve the processes,” the senior official added. India registers over 1.2 million companies and limited liability partnerships in a year.

The MCA had introduced a simplified online format for incorporating a company and its memorandum and articles of association, but since the ranking is competitive, other countries have done much more on this.