Oct 13, 2017
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Company Incorporation under The Companies Act, 2013

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A company comes into existence by a process referred to as incorporation. This Article contains the procedure for Company Incorporation under Companies Act, 2013 with detailed documentation required. Once a company has legally incorporated, it becomes a distinct entity from those who invest their capital and labor to run the company.

Company Incorporation under The Companies Act, 2013

Formation Of Companies

  1. A company formed for any lawful purpose by
  • seven or more persons, where the company formed is a public company;
  • two or more persons, where the company formed is a private company; or
  • one person, where the company formed is a One Person Company that is to say, a private company, by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration.

2. A company formed may be either

  • a company limited by shares; or
  • a company limited by guarantee; or
  • an unlimited company.

Basic Procedure for Company Incorporation

1.Digital Signatures

The first step towards the company incorporation is to obtain authorized signatories as specified under the Information Technology Act, 2000. A digital signature is an electronic signature which is duly issued by a certifying authority that shows the authority of a person signing the same.

Under MCA-21 there are four types of identified users of digital signatures:

  • MCA Employees;
  • Professionals (CA, CS, cost accountants and lawyers);
  • Authorized signatories of the company including Managing Director or Manager or Directors or Secretary;
  • Representatives of banks and financial institutions

2.Director Identification Number (DIN)

It is mandatory for the directors to apply for the DIN. DIN then required before commencing the incorporation of the company. Every individual thus appointed as director of a company shall make an application for allotment of Director Identification Number in form DIR-3 to the Central Government with such fees as may be prescribed.

3.Name for proposed company incorporation

An application for the reservation of a name shall be made in Form No. INC.1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Center. In selection of Company name should thus in accordance with name guidelines given in Rule-8 of Companies (Incorporation) Rules, 2014. After approval of name by registrar of companies, the ROC will issue a Name availability letter with respect to approval for availability of name for a proposed company.

4.Validity of Name approved by Registrar Of Companies


The Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application.

Note- Where after reservation of name if found that name then applied by furnishing wrong or incorrect information,—

  1. if the company has not been incorporated, the reserved name shall be cancelled and the person making application shall be liable to a penalty which may extend to one lakh rupees;
  2. if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard—
  • either direct the company to change its name within a period of three months, after passing an ordinary resolution;
  • take action for striking off the name of the company from the register of companies; or
  • make a petition for winding up of the company.

5.Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)

These two documents contain the rules and regulations of the company and thus prepared with. Drafting of the MOA and AOA is subsequent step after the acceptance of name given by the Registrar. The main objects of MOA & AOA should match with the objects shown in e-Form INC. 1. Memorandum of Association shall be in the respective form as prescribed in Tables A, B, C, D and E in schedule 1 and Article of Association in F, G, H, I and J in schedule 1.

6.Private company

  • Private Limited Company as a separate legal entity/ jurist person of offers limited liability, or legal protection for its members or subscribers. Their liability thus restricted to what they have invested or guaranteed to the company. Limited companies hence limited by shares or by guarantee. The liabilities of its owner and shareholders however limited.

Company incorporation of Private Company

  • For company incorporation of a private limited company there must be at least 2 promoters, who will promote/incorporate the company. They can be individuals or corporate body. Another requirement is that there must be at least two directors. Generally in maximum cases directors and promoters are same individuals.
    Application for Directorship
  • To apply for the directorship of a company, firstly individuals will have to apply for Director Identification Number(DIN) in form DIN 3 along with affidavit of Rs. 10 (this may differ from state to state) as an attachment along with copy of Pan card and Address proof which should either notary attested or self-attested. This form: DIN 3 has attested by a professional i.e. CA/CS/CWA who will certify the photograph and that the documents attached are the true copy of the original documents. Then DIN 3 thus applied to the concerned authority.
  • One of the directors must have digital signature which shall attained by any of the DSC vender i.e. TCS/ Sify/ etc. These venders thus known as certifying agencies that duly recognized by the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000.
    Application for Promoters
  • The promoters will have to apply for the name of the company to approve with the concerned Registrar of Companies of the State, where the company has formed in e-form INC 1 (Rule 9). This has done by the payment of Rs. 1000 through Credit Card or Net Banking, describing the capital of the company, state in which the company has to incorporated and its main objectives. The promoter can apply for 6 names amongst which the Registrar of Companies will approve only one. In case Registrar of Companies rejects all the 6 names then the promoters will have two more chances to apply for the name again with the incurred fees while filing Form INC 1.
    Drafting Memorandum of Association and Article of Association
  • Once the name shall approved, the promoters/directors will have to draft Memorandum of Association and Article of Association. In the MOA, the 5 clauses are mandatory i.e. Name Clause, Main object clause, capital clause (minimum capital required is Rs. 1,00,000) registered office clause and subscribers clause. The MOA shall thus be in respective form as prescribed in Table A, B, C, D and E of Schedule I to the Companies Act, 2013 as may be applicable.
  • In Article Of Association all the rules and By-laws of the company shall be in respective form as prescribed in Table F, G, H, I and J of Schedule I to the Companies Act, 2013 as may be applicable. The names of first directors thus showed compulsory in the AOA.
  • However after the AOA and MOA thus drafted, form no. INC 7 will then have filed with Registrar of Companies (Rule 12-18) along with the article of association and memorandum of association. Directors will have to avail professional service i.e. from CA/CS/CWA to incorporate the company. A declaration, via Digital Signature, in Form No.INC.8 by an advocate or Practicing professional (CA, CS, CA) who is engaged in incorporation, and a person named in director as Director, Manager or Secretary, has to be attached with form INC 7 stating that all requirements related to incorporation has been complied with and all the document attached therein are genuine.
    Form No. INC.9 & Form INC. 7
  • An affidavit in Form No. INC.9, has to attached with Form INC. 7, from each subscriber and from each person named as first director in the articles stating that he is not convicted of any offence in connection with promotion, formation or management of any company, he is not found guilty of any fraud or misfeasance or of any breach of duty to any company during preceding five years, and all the documents filed with the Registrar contain correct, complete and true information to the best of his knowledge and belief.
  • Form no.INC 7 will have filled along with the address for correspondence till its registered office thus established, the particulars of every subscribers along with proof of identity, the particulars of first directors along with proof of identity, the particulars of interests of first directors in other firms or bodies corporate along with their consent to act as directors.
    Purpose of E-forms
  • The applicant will then make the payment of Govt. fees as well as stamp duty fees. If the fees however less than Rs.50,000 then through net banking or credit card and more than Rs.50,000 then it can paid through challan deposited in a bank. The E-forms then will be verified by the Registrar of Companies at their level. Hence if the E-forms are found to be genuine and get approved by Registrar of Companies, Certificate of Incorporation will be generated and will be dispatch online at the email id of the person/entity given in the e-forms.
  • However after the commencement of the business activities of the company the Directors shall have to file a declaration with Registrar of Companies in Form No. INC.21 (Rule 24) and a company must have a registered office within 15 days of Incorporation and it shall file Form No.INC.22 (Rule 25) to verify the same.

 

After all the documents then submitted the company incorporation process hence finally completed, the company can start the commencement from the date mentioned.

 

Find legal advisor for issues relating to company law.

Article Categories:
The Companies Act, 2013

Avani is a LL.B. student of New Law College. Classical use of language and adeptness with the written word make her treasure useful legal information. In her spare time, she writes prose and pursue an active interest in creative writing.

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