COMPANY LAW SERIES CHAPTER 2
STEPS FOR INCORPORATION OF PUBLIC, PRIVATE COMPANIES, AND ONE PERSON COMPANY

To register a private limited company, a minimum of two adult persons are required to act as Directors of the company. A private limited company must have a minimum of 2 Directors and can have a maximum of 15 directors. One of the Directors of a private limited company has to be an Indian Citizen and Indian Resident. The other director(s) can be a Foreign National. Two persons are also required to act as shareholder of a company. The shareholders can be natural persons or an artificial legal entity. Hence, a company can be owned by two corporate, which are domiciled in India or abroad.

1. PROCEDURE TO INCORPORATE/REGISTER A PRIVATE COMPANY

STEP – I: Apply for Name Approval:

1. Login on MCA Website

Applicant have to login into their account on MCA Website. (Pro-existing users can use earlier account or new users have to create a new account.) After Login user have to click on the icon “RUN ” n MCA Service. An online form shall be open. Applicants have to fill the information online. (This form can’t be download)

              Note* since 26th January, 2018 e-form INC-1 has been omitted from the Companies Act, 2013.

◊ Details required to be mentioned in online form:

  • Entity type (i.e. Part I, OPC, Section 8 etc.)
  • CIN (Corporate Identification Number and it has to be entered only when an existing company wishes to change its name and is using RUN to reserve a new name)
  • Proposed name (Auto Check Facility)
  • Comment (Mention Objects of the proposed Company and any other relevant information Like Trade Mark etc.)
  • Choose File (Any attachment)

2. Choose File:

This option is available to upload the PDF documents. If applicant want to attach any file, can be upload at this option.

3. Submission of Form on MCA Website:

After completion of above steps user shall submit the Form with MCA website.

◊ Payment of Fees:

  • There is no option of pay later challan in RUN. Applicant has to pay fees immediately after submission of form. After payment challan shall be generated.

◊ Validity of Reserved Name:

Reserved name shall be valid for 20 days from the date of approval of Name

 STEP – II: Preparation of Documents for Incorporation of Company:

After approval of name or for Incorporation of Company applicant have to prepare the following below mentioned Documents;

  • INC-9- Affidavit / declaration by first subscriber(s) and director(s) (on duly authorized Stamp Papers).
  • DIR-2– declaration from first Directors along with Copy of Proof of Identity and residential address.
  • NOC- from the owner of the property.
  • Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts);
  • Copy of the utility bills (not older than two months)
  • In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers
  • All the Subscribers should have Digital Signature.

STEP – III: Fill the Information in Form:

Once all the above mentioned documents/ information are available. Applicant has to fill the information in the e-form “Spice” INC-32.

Features of SPICe  (inc-32) form:

  • Maximum details of subscribers are SEVEN (7). In case of more subscribers, physically signed MOA & AOA shall be attaching in the Form.
  • Maximum details of directors are TWENTY (20).
  • Maximum THREE (3) directors are allowed for filing application of allotment of DIN while incorporating a Company.
  • Person can apply the Name also in this form.
  • By affixation of DSC of the subscriber on the INC-33 (e-moa) date of signing will be appear automatically by the form.
  • Applying for PAN / TAN will be compulsory for all fresh incorporation applications filed in the new version of the SPICe form.
  • In case of companies incorporated, with effect from the 26th day of January, 2018, with a nominal capital of less than or equal to rupees ten lakhs or in respect of companies not having a share capital whose number of members as stated in the articles of association does not exceed twenty, fee on INC-32 (SPICe) shall not be applicable

◊ Single Window Form:

Earlier if a Person wants to incorporate Company then it has to apply for the DIN, Approval of the Name Availability, and Separate form for first Director, Registered office address, PAN, TAN etc. But this form is a single window for Incorporation of Company.

This form can be used for the following purposes:

  • Application of DIN (upto 3 Directors) Application for Availability of Name
  • No need to file separate form for first Director (DIR-12)
  • No need to file separate form for address of registered office (INC-22) No need to file separate form for PAN & TAN

STEP – IV: Preparation of MOA & AOA:

After proper filing of SPICE form applicant has to download the e-form INC-33 (MOA) and IN-34 (AOA) form the MCA site. After downloading of form fill all the information in the forms as per requirement of Table A to J of Schedule I.

After completely filing of the form affix DSC of all the subscribers and professional on subscriber sheet of the MOA & AOA.

STEP – V: Fill details of PAN & TAN:

It is mandatory to mention the details of PAN & TAN in the Incorporation Form INC-32. Link to find out of Area Code to file PAN & TAN are given in Help Kit of SPICE Form.

STEP – VI: Submission of INC-32, 33, 34 on MCA-:

Once all the 3 forms ready with the applicant, upload all three documents Linked form on MCA website and make the payment of the same.

STEP – VII: Certificate of Incorporation-:

Incorporation certificate shall be generating with CIN, PAN & TAN.

2. INCORPORATION /REGISTRATION OF PUBLIC COMPANY

Public Limited Company is a form of company which offers its shares to the general public. It gives limited liability to its owners and shareholders. At least seven shareholders are required to incorporate this form of company. It should at least have three directors. This form of company is very common in countries like the United Kingdom. It is a separate legal entity and has no maximum limit to the number of shareholders it can have. They are thus huge and can raise high share capital. There is a defined procedure when it comes to an incorporation of the company, according to the Companies Act. A certificate of commencement of business is required before starting the company. Certain documents are required for incorporation of Public Limited Company. Requirement of minimum number of directors and shareholders:

There is a minimum requirement of directors and shareholders, as mentioned below:-

  • Minimum Shareholders: 7 (Seven)
  • Minimum Directors: 3 (Three)

Statutory compliances

A wholly owned subsidiary, either public or private limited, will have to comply with all the laws, rules and regulations as applicable, including but not limited to the Companies Act, 2013, Foreign Exchange Management Act, 1999, Shops and Establishment Act, Income Tax Act, etc., failing to which may result in heavy penalties. This will result in increase in the running expenses of the Indian subsidiary as professional guidance shall be mandatorily required to stay compliant with all the applicable laws.

PROCEDURE FOR INCORPORATION OF PUBLIC COMPANY

Approving Authority: Registrar of Companies (RoC) and Reserve Bank of India (RBI)

  • Obtaining approval from FIPB (Foreign Investment Promotion Board), if required: If the activities of the Indian wholly owned subsidiary fall under Government approval route, then the approval from FIPB has to be obtained.
  • Obtaining DSC (Digital Signature Certificate) of proposed directors: Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper certificates. DSC is required to sign any electronic document like e-forms. DSC can be obtained from any licensed Certifying Authority.
  • DIN (Director Identification Number) of proposed directors: It is mandatory for proposed directors to obtain DIN (Director Identification Number) upto 3 under the Companies Act, 2013. through SPICE form . In case of existing companies DIN can be applied electronically in Form DIR- 3 on the website of Ministry of Corporate Affairs (MCA), along with required documents and filing fee.
  • Applying for availability of name: The fore most step in formation of a company is to apply for availability of name of the proposed company. One must comply with the naming guidelines in this regard. Form RUN has to be filed with MCA for reservation of name of the proposed company.
  • Drafting of Memorandum of Association (MoA) and Articles of Association (AoA): Memorandum of Association (MoA)is the charter of the company and it sets out its scope of activities. Articles of Association (AoA), on the other hand, regulate the internal working of the company. Both these documents are very crucial to the company and hence, are drafted with utmost caution.
  • Filing incorporation documents Once the name is approved from the Registrar of Companies, documents for incorporation have to be filed in Form -32
  • Filing of documents for registered office of the company (within 30 days of incorporation): The company must have a place of business as its registered office. Form INC-22 has to be filed along with the required documents, within 30 days of date of incorporation of the company.
  • Certificate of Commencement of Business: A company, after its incorporation, could commence its business only when the subscribed amount has been deposited by the subscribers in the bank account of the company.
  • A declaration from director that all the subscribers of the company had paid the value of shares to be taken by them and the paid-up share capital of the company is not less than five lakh rupees in Form INC-21 was required to be filed within 180 days of its incorporation.

In a recent amendment, Government has done away with the above-mentioned requirement of obtaining Certificate of Commencement of Business (effective from end of May, 2015 i.e. 29-05-2015

3. INCORPORATION OF ONE PERSON COMPANY

Rule 3 of the Companies (Incorporation) Rules 2014 say, only a natural person who is an Indian citizen and resident in India:-

  • shall be eligible to incorporate a One Person Company;
  • shall be a nominee for the sole member of a One Person Company.

“Resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.

A person can incorporate only one “One Person Company”, at any point of time and the said person shall not be a nominee of more than a One Person Company. The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.

PROCEDURE TO REGISTER /INCORPORTE ONE PERSON COMPANY

◊ STEP 1-Name approval

The name of the person nominated shall be mentioned in the memorandum of One Person Company and such nomination in Form INC-32 (SPICe), Single Application for Incorporation of Company, along with consent of such nominee obtained in Form INC – 3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum and articles. Form INC-32 is form for incorporation of one Person Company. Rule 3 of Companies (Incorporation) Rules, 2014 – One Person Company           

  • Only a natural person who is an Indian citizen and resident in India-
    • shall be eligible to incorporate a One Person Company;
    • shall be a nominee for the sole member of a One Person Company.

Explanation-For the purposes of this rule,

1. the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.

2. A natural person shall not be a member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company.

  • Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified in sub rule (2) within a period of one hundred and eighty days.

1. No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest.

2. Such Company cannot be incorporated or converted into a company under section 8 of the Act.

3. Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporates.

  • No such company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond
  • fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

STEP 2: TO OBTAIN NECESSARY DOCUMENTS

The essential documents are –

1. Identity Proof: Copy of the Permanent Account Number (PAN) of all the Directors and Promoters (Mandatory);

2. Proof of Address:  Copy of a valid Passport/Driving License/Aadhar Card/Telephone or Electricity Bill, not older than 2 months;

3. a recent passport size photograph of the Directors/Promoters;

4. In case if the office premises are taken on rent then A Rent Agreement or Leave & License Agreement is mandatory;

5. The Utility Bills of the registered office

6. The Consent to act as the Director in the Form DIR-2

7. The details of Directors’ Directorship in any other Companies/LLPs, if any.

STEP 3:PREPARING DSC(DIGITAL SIGNATURE ) AND DIN (DIRECTOR IDENTIFICATION NUMBER) Preparing DSC and DIN

Obtaining Digital Signature Certificate (DSC) and Directors Identification Number(DIN) for all the directors and promoters of the company. An application should be filed in RUN FORM to the Registrar of Company (Central Registration Centre – CRC of Ministry of Corporate Affairs). For name approval maximum 2 names may be provided by the applicant. The approved name has the validity of 20 days. The name must include the words such as foundation, association, forum, council, chambers, etc. as in accordance with the Company (Incorporation) Rules, 2014.

STEP 4 :DRAFTING OF MOA AND AOA

Draft the Memorandum of Association and Articles of Association of the proposed company in required E-form

STEP 5 FILLING ALL OTHER NECESSARY FORMS WITH ROC(Registrar of companies)

  • Forms like Form No. INC – 7, Form No. INC – 22, Form No. DIR – 12 along with the appropriate documents are to be filed with ROC.

STEP 6 GETTING CERTIFICATE OF INCORPORATION OF THE COMPANY

  • If the Concerned ROC is satisfied with the incorporation forms, A Certificate of Incorporation is issued by the Registrar of Companies with a unique Company Identification Number (CIN), after the ROC is satisfied with the filed forms and documents.

The Central Government can direct the company to convert its status to Private or Public Company and change its name by adding the suffix ‘Limited’ or ‘Private Limited’ and there upon the Registrar shall register the company accordingly.  The Central Government may direct such company to be wound up or amalgamated with another company that is registered under this section. But such orders can only be given after the company has been given a reasonable chance to be heard. And then a copy of the order is given to the Registrar.

In case a company violates the term laid down in Section 8, Sub-section (11) of Section 8 of the Companies Act states the company shall be punishable, subject to the fraudulent actions of the company –

1. with fine not less than 10 Lakh rupees and which can be extended up to 1 Crore rupees,

2. Every directors and officer of the company in default shall be punishable with imprisonment for a term which can be of three years with fine which shall not be less than 25,000 rupees but which can extend to 25 Lakh rupees,

DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE PREPARATION.IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.

THE AUTHOR CAN BE REACHED AT VINAYAK.CHARU@GMAIL.COM AND AT 6283643738, 9915509611

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