CMA Arif Farooqui

The best way to start a business is to incorporate Private limited company because it has many advantages like limited liability of members and directors, separate legal entity, easy compliance, etc. A company can be formed with minimum 2 directors and minimum paid up capital of Rs 1 Lakh.

What is a Company? – A company is a voluntary association of persons formed for the purpose of business activities. A company has distinct name and limited liability, it is a juristic person having a separate legal entity different from its members who constitute it, capable of rights and duties of its own and endowed with a potential or perpetual succession.

Types of Companies – A company can be formed any of the three ways:—

1)    Incorporation of a new company; or

2)    Conversion of existing business (sole proprietorship concern or partnership firm or co-operative societies) into company under the provisions of Chapter IX and Chapter IXA of the Companies Act, 1956; or

3)    Companies incorporated under section 25 of the Companies Act, 1956. (Non Profit Making Companies

The incorporation (birth) and winding up and dissolution (death) of a company are governed by the provisions of the Companies Act, 1956. Therefore each company is subject to the provisions of the Companies Act, 1956, as may be amended from time to time.

COMPANY INCORPORATION PROCEDURES

To register a company, you need to first apply for a DIN. You would then need to acquire your Digital Certificate and register the same on the portal. Thereafter, you need to get the company name approved by the Ministry. Once the company name is approved, you can register the company by filing the incorporation form depending on the type of company

Persons desirous of forming a company must adhere to the step by step procedure as mention below:—

 

a. Selection of type of Company.

b. Apply for Directors Identification Number and Digital Signatures, if does not have.

c. Selection of name for the proposed company.

d. Drafting of Memorandum and Articles of Association.

e. E-filing of various forms and documents with the Registrar.

f. Obtaining Certificate of Incorporation.

g. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 for obtaining the certificate of commencement of business.

h. Obtaining Certificate of Commencement of business.

Note – Step (g) & (h) required only in case of Incorporation of a Public Company.

SELECTION OF TYPE OF COMPANY

The promoters of a company may be individuals or bodies corporate engaged in efforts to incorporate a company. They have the power of defining the object of the company and deciding various connected matters regarding incorporation. Proposed scale of operations, capital involved, etc. depend upon the purposes for which the company is to be incorporated. The promoters are at liberty to select type of the company viz. Private Company, Public Company, Nonprofit Making Company, etc.

APPLICATION FOR DIN

The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006.

As per Section 266A, every individual, intending to be appointed as director of a company shall make an application for allotment of Director Identification Number (DIN) to the Central Government in the prescribed e-form DIN-1. Therefore, before submission of e-Form 1A all the directors of the proposed company must ensure that they are having DIN and if they are not having DIN, it should be first obtained.

Din is individual specific not Company specific. This means DIN once obtained shall serve the requirement for all the companies in which individual is director or intended to be a director.  No one can have more than one DIN.

DIN Form required to be certified by the Company Secretary or Chartered Accountant or Cost Accountant in whole-time practice.

REQUIREMENT OF DIGITAL SIGNATURES

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.

After 16th September 2006, every document prescribed under the Companies Act, 1956 is required to be filed with the use of Digital Signatures by the person authorised to sign the documents. Therefore, it is compulsorily required to obtain digital signatures of at least one director before filling e-Form 1A.

The signatories have to register their Digital signature certificates (DSC) with MCA.

APPLYING FOR APPROVAL OF NAME

Six names are required to be selected in order of preference after taking notes of numerous clarifications, circulars and rules made by the Ministry of Company Affairs. In case key word is required, significance of each key word should be given in the e-Form 1A.

If e-Form 1A is signed by practicing CA/CMA/CS, then only one name is required.

An application shall be in e-Form 1A duly digitally signed by any one promoter or managing director or director or manager or secretary of the company along with required fee of Rs.1000 only for ascertaining whether the selected name is available.

APPROVAL OF THE NAME

After receipt of completed application in e-Form 1A, the Registrar shall intimate whether the proposed name is available for adoption or not. The confirmation of the name made available by the Registrar shall be valid for a period of 60 days from the date of letter issued in these regards.

INCORPORATION OF COMPANY  

Next step is to file the following Forms with the Registrar for incorporation of the Company. These shall be submitted to the Registrar along with adequate filing fees as applicable for registration of the Company within a period of 60 days from the date of Name Approval:

Form 1: This E-form is filled for Application and declaration for Incorporation of a Company. Form 1 should attach Memorandum of Association and Articles of Association. These should be duly signed by the subscribers and witnessed, showing the number of shares against their names. It should be noted that main objects should match with the objects shown in e-Form 1A.

These two documents are basically the charter and internal rules and regulations of the company. Therefore, it must be drafted with utmost care and with the advice of the experts and the other object clause should be drafted in a very broader sense.

Form 18: This E-form is filled for situation or change of situation of registered office. It is to be filed with the Registrar electronically with the digital signatures in regard to location of the registered office. E-Form 18 shall also be certified by the Company Secretary or Chartered Accountant or Cost Accountant in whole-time practice.

Form 32: It is required to be filed with the Registrar electronically for filing particulars of directors. The personal details should match with the information provided in the DIN.

E-Form 32 is required to be digitally signed by the director or managing director or manager or secretary of the company. E-Form 32 shall also be certified by the Company Secretary or Chartered Accountant or Cost Accountant in whole-time practice.

Notes-

1. E-Form 18 & E-Form 32 should be filed together at the time of filing of E-Form 1.

2. Only e- payment is allowed for payment of all MCA fee (I.e. Net banking / Credit Card / NEFT) for all e-forms. No challan payment will be accepted under revised procedure.

CERTIFICATE OF INCORPORATION

 Once the form has been approved by the concerned official of the MCA; you will receive an email regarding the same along with Certificate of Incorporation. Now no hard copy of Certificate of Incorporation will be send. You need to take print out of attached Certificate for future use.

Corporate Identity Number (CIN) – After Incorporation each Indian company (Listed or Unlisted) will allotted a unique 21 Digit CIN (Alphanumeric). Once this number is filled, company details are automatically filled in E-Forms issued by MCA by using pre-fill function.

How it is structured?

Digit No.

What it Shows

Remarks

1st digit

Listing status

If Company is Listed it will start with ‘L ‘and if Company is not Listed it will start with ‘U’

Next 5 digit

Industry code

Next 2 digit

State code

I.e. UP for Uttar Pradesh.

Next 4 digit

Year of incorporation

I.e. for Company formed in Calendar Year 2012 the same will be 2012.

Next 3 digit

Ownership

PLC for Public Limited CompanyPTC for Private Limited Company.

Last 6 digit

ROC reg.

i.e. 048933 for ROC- Kanpuri.e. 090633 for ROC- Kolkata

 COMMENCEMENT OF BUSINESS

A Private limited company and a company not having share capital may commence its business activities from the date of its incorporation. However, a Public Limited Company having share capital is also required to obtain a separate certificate of commencement of business according to section 149(2A) of the Companies Act, 1956.

MCA 21 project has made it possible to get company incorporated without visiting any registrar office. Entire formation is completed online, from getting Directors Identification Number (DIN) to getting Certificate of Incorporation

As the entire process is now can be completed online, formation of Private Company takes around 10 to 15 days time. So that for a business man to start a business this option is highly advisable.

(Author can be reached at arif_cwa@yahoo.co.in)

More Under Company Law

Posted Under

Category : Company Law (3352)
Type : Articles (13997) Featured (4134)
Tags : CMA Arif Farooqui (10) Companies Act (1821)

0 responses to “Procedures for Incorporation of Company in India”

  1. jitendra tripathi says:

    i am very impress with this article but i want to know that if we are going from one state to another state then will we have to prepare everything again like registration,memorundum of association and article of assosiation,and different govt policy in construction company

  2. CMA Arif Farooqui says:

    Thanks, Subhash Sir, and Jayesh.

  3. JAYESH says:

    good job…well done…

  4. CA. Subhash Chandra Podder ,FCA. says:

    Good Informative write up.Thanks to CMA Arif Farooqui.Keep it up.
    CA. Subhash Chandra Podder , FCA
    Kolkata
    11/08/2012

Leave a Reply

Your email address will not be published. Required fields are marked *