Companies Act, 2013: Learn how to incorporate a Company!

Reading time: 10-12 minutes.

Incorporation of a company starts with selection of the name and the type of company you wish to establish. The name should not be contradictory to provisions laid down in Companies Act, 2013 (hereinafter referred to as “Act”). There are various types of companies in India; the type of company completely depends upon the nature of the business, the objective of business, future expectations from the business and capital and the number of members one wishes to include in the business. Secondly, the applicant needs to file Memorandum of Association (hereinafter referred to as “MoA”) and Article of Association (hereinafter referred to as “AoA”) with Registrar of Companies (hereinafter referred to as “RoC”). The Government of India (hereinafter referred to as “GoI”) has made the incorporation of a company easy vide various amendments in Companies (Incorporation) Rules, 2014 (hereinafter referred to as “Rules, 2014”). In this article, the Author will take the reader through all the major steps in the process of incorporation of a company.

Selection of Name

Clause 2 and 3 of Section 4 of the Act provide for the restrictions in the selection of the name. They provide that the name should not be identical or resembling the name of an already registered company under the Act, or any previous company law. Further, a company shall not be registered with the name giving the impression that the company in any way is connected with, or having patronage to the GoI, any State Government or any corporation set up by GoI or State Government thereof, unless a prior approval of the Central Government has been obtained for the use of any such word or expression.

Selection of Type of Company

The Act gives legal status to various kinds of companies. It is upto the applicant to decide which type of company one wishes to establish. There are various factors to decide, such as, number of members, the amount of capital that will be invested and future expectations from the company. A company formed may be either— (a) a company limited by shares; or (b) a company limited by guarantee; or (c) an unlimited company.

Public Company: A public company is a company whose shares are freely transferable. This kind of company may or may not be a listed company; a minimum of seven numbers of people are required to form a public company. A public company is ideal for large businesses as after some years of establishment when the market is capitalized, a public company can be listed on a recognized stock exchange.

Private Company: A private company is a company whose shares are not freely transferable and the number of subscribers is limited. A minimum of two persons are required to form this kind of a company. A private company is ideal for new startups, as investors can easily invest in a private company and no SEBI regulations apply on private companies. This kind of company is most common in India.

One Person Company: A one-person company (hereinafter referred to as “OPC”) is a private company having only one member and only that member’s name is indicated in the MoA, alongwith the successor to the member, in case of death or incapacity to enter into contracts.

Producer Company: “Producer Company” means a company having special objects and activities listed in Section 581B of the Act, such company needs to be registered as producer company according to the provisions of the Act.

Documents Required and Filings

INC form 32: TheApplicant needs to file form INC 32 with the RoC. The process for this filing has become entirely electronic, as the GoI had introduced Simplified Proforma for Incorporating a Company Electronically (SPICe) vide amendment in Rules, 2014 for ease of doing business. Earlier, forms INC 1, INC 7, INC 8 and INC 10 were required to be filed with RoC, however, after the amendment only form INC 32, INC 33 and INC 34 are required. The change was widely accepted by the applicants as the process is now speedy and tranquil. 

Memorandum of Association: TheMoA contains the following information regarding the company: (1) Name Clause; (2) Registered Office Clause; (3) Object Clause; (4) Liability Clause; (5) Capital Clause; and (6) Association Clause. MoA is filed with RoC in form INC 33 duly signed by directors of the company.

Articles of Association: AoA of a company lay down the working of a company and the rights and liabilities of shareholders and directors. AoA is filed with RoC in Form INC 34.

Certificate of Incorporation: Onthe basis of the documents and information filed with it, the RoC shall register all the documents and information referred to in the register and issue a certificate of incorporation in the prescribed form, to the effect that the proposed company is incorporated under the Act, from the date mentioned in the certificate of incorporation issued. Further, the RoC shall allot to the company a Corporate Identity Number, which shall be the distinct identity for the company and which shall also be included in the certificate.

Registered Office: According to the Act, a company must have a registered office capable of receiving and acknowledging all communications and notices on and continuously from the 15th (fifteenth) day of its incorporation. Once the registered office has been established, the company shall furnish proof to Registrar for verification of the address within 30 (thirty) days of incorporation. Form INC-22 is to be filed with the Registrar for this purpose.

These are the basic steps involved in the incorporation of a Company.

Author: Naman Saxena from D.Y. Patil College of Law. Navi Mumbai. 

Editor: Astha Garg, Junior Editor, Lexlife India.

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