This Article contains the procedure to incorporate a company under Companies Act, 2013 with detailed documentation required. Once a incorporation of company legally established, it becomes a distinct entity from those who invest their capital and labor to run the company.
Incorporate A Company
In India, to incorporate a company both the Indian promoters and the foreign promoters can form the following business entities they are as follows:
- Private Limited Company
- Public Limited Company
- Unlimited Company
- Limited Liability Partnership (LLP)
- Sole Proprietorship
- Liaison Office / Representative Office
- Project Office
- Branch Office
- Joint Venture Company
- Subsidiary Company
The foreign companies also have the options to incorporate a company the following type of business entities:
- Liaison Office/Representative Office,
- Project Office, Branch Office, and
- Joint Venture Company.
It must be noted that a Joint Venture Company is not a separate type of legal entity; it could either a Private Limited Company, a Public Limited Company, or an Unlimited Company. Similarly a wholly owned Subsidiary of a foreign company in India could be either a Private Limited Company, a Public Limited Company, an Unlimited Company, or a Branch Office.
In India a foreign Investor has to choose a right kind of business or corporate entity which suits its purposes. Foreign Investor should also takes care of liability issues and tax planning issues to incorporate a company. Foreign Companies planning to do business in India should pay special attention to Entry Strategies in India for Foreign Investors and corporate structuring to save taxes to the extent allowed by laws and international tax treaties.
It is also mandatory for foreign investors or foreign shareholders, both individuals and corporate shareholders, to seek Government Approvals for Investing in India. In some special cases Foreign Investment Promotion Board, FIPB Approval for Foreign Investment in India is required. In other cases Reserve Bank of India, RBI Approvals for Foreign Investment in India as required. The sectors where RBI Approval for foreign investors thus available under automatic route can found at FDI in India Sector wise Guide.
A Company in India can have foreign directors provided some conditions are fulfilled. The directors of an Indian company, both Indian and foreigner directors, are required to obtain Director Identification Number and Digital Signature Certificate.
Basic Procedure to incorporate a company
1.Digital Signatures to incorporate a company
The first step to incorporate a company is to obtain authorized signatories as specified under the Information Technology Act, 2000. A digital signature, an electronic signature which 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) to incorporate a company
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 prescribed. It is however mandatory for the directors to apply for the DIN.
3.Name for proposed to incorporate a company
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 to incorporate a company
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,—
- 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;
- 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) to incorporate a company
These two documents contain the rules and regulations to incorporate a 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.
- 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.
Incorporation of Private Company
- To incorporate a company as a private limited 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 incorporate a company
- 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 to incorporate a company
- 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 to incorporate a company
- 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 to incorporate a company
- 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 to incorporate a company
- 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 thus found genuine and approved by Registrar of Companies, Certificate of Incorporation will then generate and will 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 of company and it shall file Form No.INC.22 (Rule 25) to verify the same.
After all documents then submitted to incorporate a company process hence finally completed, company can start commencement from date mentioned.