HOW TO FORM A COMPANY IN INDIA?
Before we could analyse the procedures for incorporating a company in India, let us have a quick view of some of the basic particulars.
WHAT IS A COMPANY?
- A Company can be termed as a voluntary association of person incorporated for the purpose of carrying out some business.
- In the eyes of law, a company is considered as a juristic person.
- The company can sue and it can be sued.
- It has its own name and a separate legal entity, distinct from its members who constitute it.
- A company has its own property; the members (shareholders) can not claim the property of the company as their own property.
- Though a company is treated as a legal person, it is not considered as a citizen; hence, it doesn’t hold any citizenship in this country.
- The liability of the members (shareholders) of the company is limited to the amount of shares they hold in the company.
- Shares of a company are easily transferable to any person. It means the business can be transferred from one hand to another.
AUTHORISED SHARE CAPITAL:
The Companies act, 1956 limits the powers of board to issue share within the limit of Authorised Share Captial. It can be increased at any time after complying with certain formalities prescribed under the Act.
The minimum authorised share capital for incorporating a Private Limited company is INR 100,000.
The minimum authorised share capital for incorporating a Public Limited company is INR 500,000.
PAID UP SHARE CAPITAL
Paid-up Share Capital is that portion of Authorised Share Capital for which shares have been issued by the company and shareholders had paid for those shares.
As the name indicates, Promoters are the persons who promote / float / incorporate a company. They stand as the primary persons to take through a company. Promoters are normally been appointed as directors of the company.
Number of Promoters
For incorporating a Private Limited Company a minimum of two promoters are required.
For incorporating a Public Limited Company a minimum of seven promoters are required
NUMBER OF DIRECTORS
For incorporating a Private Limited Company a minimum of two directors are required.
For incorporating a Public Limited Company a minimum of three directors are required.
FORMATION OF COMPANIES UNDER THE COMPANIES ACT, 1956
- As per the Company law, the name of each company should be unique. As such, the proposed name of the company has to be approved by the Registrar of Companies and blocked till registration. The following is the process to get availability of name
- Promoters / Directors have to file an application in Form 1A giving the following particulars:
- Names and addresses of promoters
- Proposed name of the company
- Two Alternative names of the proposed company is required if the proposed name is not available
- Type of company – Private or Public
- Brief objectives of the company
- Proposed Directors and their addresses
- Proposed address of the company
- Authorised Share Capital
- Details of Group companies, if any
- Details of fees paid for name availability
- Note about significance of the proposed name. This is because
regulations have some criteria based on which names are to be allowed
- Director Identification Number:It is a unique Identification Number allotted to an individual who intends to be appointed as director of a company pursuant to section 266A & 266B of the Companies Act, 1956. DIN is mandatory for all directors
- Digital Signature Certificate:
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed
electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
- Application for the availability of name: Apply to the jurisdictional Registrar of Companies to ascertain the availability of name in Form- 1A along with fee of Rs. 500/-. Registrar of Companies normally informs the status of the application within 4 days. If the name proposed is not available, apply again for a fresh name. On approval of name, the Registrar will issue a name allotment letter and will block the name.
- Memorandum and Articles of Association:
- Arrange for drafting of the Memorandum and Articles of Association, vetting of the same by the Registrar of the Companies and printing of the same.
- Arrange for stamping of the Memorandum and Articles of Association as per instructions of Registrar of Companies
- Get the Memorandum and Articles of Association (MoA & AoA) signed by Directors, and each shall also write in his own hand his name, father’s name, occupation and address and number of shares subscribed for, and duly witnessed by at least one person who shall also write in his own hand his name, father’s name, occupation and address.
- In case the Memorandum and Articles is to be signed by any of the promoters out side India, then the signing should be done in the presence of Consul of India at the Indian Consulate. The MoA & AoA should be dated on a date after the date of stamping
- Fee Structure:
Fee required to be paid to the ROC for incorporation of the company.
Fee / incremental fee (INR)
|Upto INR 100,000||
|From INR 100,000 to INR 500,000||For every INR 10,000||
|From INR 500,000 to INR 5,000,000||For every INR 10,000||
|From INR 5,000,000 to INR 10,000,000||For every INR 10,000||
|Over INR 10,000,000||For every INR 10,000||
- The following forms are to be filled and signed:
- Statutory declaration by Company – Form No.1.
- Notice of situation of Registered Office of the Company – Form No. 18.
- Particulars of Directors, Manager or Secretary – Form No. 32.
- Consent to act as Directors – Form No. 29.
- File the following documents with the Registrar of Companies:
- Stamped and signed copy of Memorandum and Articles of Association.
- Form No. 1, 18, 32, and 29 in duplicate.
- Certified true copy of the Registrar of Companies letter intimating availability of name.
- Power of attorney in favour of any person for making corrections
on their behalf in the documents and papers filed for registration.
- Certificate of Incorporation:
- Once all these procedures are through, Registrar of Companies will issue a Certificate of Incorporation
- In case of Private Limited Companies, they can commence business immediately on receipt of the certificates of incorporation from the Registrar of Companies.
- In case of Public Limited Companies, following additional steps are to be completed.
- Arrange for payment of application and allotment money in cash by the Directors on the shares taken or agreed to be taken by them
- File the statement in lieu of prospectus with the Registrar of Companies in accordance with Schedule IV of the Companies Act, 1956
- File a declaration in Form No.20 with the Registrar of Companies to the effect that the application and allotment monies have been paid/will be paid in respect of shares taken up/agreed to be taken up by the Directors
- After these formalities are over, the Registrar of Companies will issue Certificate of Commencement of Business