MCA Revises Form CRL-1 to Regulate Subsidiary Layers in 2025

The Ministry of Corporate Affairs (MCA) has issued a significant amendment through Notification G.S.R. 427(E) dated June 27, 2025, revising the Companies (Restriction on Number of Layers) Rules, 2017. The amendment introduces a newly updated Form CRL-1, which will come into effect from July 14, 2025.

This form is a crucial compliance tool aimed at increasing transparency in corporate structures and restricting the formation of excessively layered subsidiaries, often linked to money laundering, tax evasion, and opaque ownership patterns.

What Is Form CRL-1?

Form CRL-1 is a statutory return that companies must file to declare the number of subsidiary layers within their organizational structure. The updated form must now be filed as per:

• Proviso to Section 2(87) of the Companies Act, 2013

• Rule 2(4)(i) of the Companies (Restriction on Number of Layers) Rules, 2017

The revision enhances the level of disclosure and brings clarity to complex corporate arrangements.

Key Features of the Amended Form CRL-1 (2025)

The newly substituted form requires companies to disclose the following:

1. Company Identification

• Corporate Identity Number (CIN)

• Company name

• Registered office address

• Email ID

2. Subsidiary Structure

• Total number of subsidiary layers

• Layer-wise structure showing subsidiaries under each level

• Full details of each subsidiary and its respective holding company

3. Detailed Particulars of Each Entity

• Type of registration (Company, LLP, etc.)

• Registration number

• Names of subsidiary and holding companies

• Percentage of shareholding held by the parent company

4. Digital Signature and Board Approval

• Must be digitally signed by a Director, CEO, CFO, Manager, or Company Secretary

• Accompanied by a Board Resolution authorizing the signatory to file the return

5. Declaration of Authenticity

• A mandatory declaration confirming that all details are true, accurate, and complete

• False information or suppression may attract serious penalties under Sections 448 and 449 of the Companies Act, 2013

Objective of Restricting Subsidiary Layers

The MCA's goal is to curb the misuse of multi-layered company structures, which can be used to:

• Hide beneficial ownership

• Enable round-tripping of funds

• Facilitate tax avoidance

• Obscure financial accountability

By limiting and closely monitoring the number of layers, the government seeks to ensure transparency, compliance, and ease of audit.

Legal Penalties for Non-Compliance

If a company submits false or misleading data in Form CRL-1, it may face penalties under:

• Section 448: Punishment for false statements (imprisonment up to 7 years + fine)

• Section 449: Punishment for false evidence (imprisonment of 3 to 7 years + fine up to ₹10 lakh)

The consequences emphasize the seriousness of accurate reporting.

Which Companies Must File Form CRL-1?

All companies (except exempted categories like banking, NBFCs, or government companies in specific cases) that:

• Have subsidiary companies

• Operate through multiple layers of subsidiaries

• Fall under the applicability of Rule 2(4)(i) or Section 2(87) proviso

These companies are required to file the updated Form CRL-1 as of July 14, 2025, reflecting the structure as on that date.

What Should Companies Do Now?

Immediate Steps to Take:

• Review your company’s current subsidiary hierarchy

• Identify all layers and holding-subsidiary relationships

• Collect accurate CINs, shareholding percentages, and registration details

• Pass a board resolution authorizing the filing

• Get the form digitally signed by an authorized officer

Best Practices for Compliance:

• Maintain updated records of all subsidiaries and beneficial owners

• Conduct an internal compliance check or audit

• Use professional support (CS or CA) for error-free reporting

• Document board meetings and resolutions clearly for audit trail

FAQs: Revised Form CRL-1

Q1. When is the revised Form CRL-1 effective from?
It comes into effect from July 14, 2025.

Q2. Who needs to file it?
All companies with more than one subsidiary layer or those covered under Section 2(87) of the Companies Act.

Q3. What if a company provides wrong information?
Penal actions under Sections 448 and 449 of the Companies Act may apply.

Q4. Can a CS or CFO file the form?
Yes, the form can be digitally signed by a Director, CS, CEO, CFO, or Manager, as per the Board’s authorization.

Q5. Is there a filing deadline?
While the effective date is July 14, 2025, the MCA may issue further instructions about specific timelines and filing windows.

Conclusion

The revised Form CRL-1 marks an important step in streamlining corporate governance and ensuring greater transparency in company structures. With the increased focus on financial compliance and regulatory oversight, companies must treat this filing with the utmost seriousness.

This amendment isn’t just about another form—it’s about building trust, maintaining clean books, and avoiding the risks associated with complex or layered ownerships.

If your company has a multi-tiered structure, begin preparation immediately to ensure smooth and timely filing by or after July 14, 2025.