WHAT IS COMPANY INCORPORATION
Company Incorporation in India
One of the most important rules a businessman or entrepreneur needs to follow is to register your company legally as per the rules laid down by the government. In this article, we will discuss about the various procedures that businesses needs to follow as well as the important documents that are required for the process of Company Incorporation in India.
The procedure of Company Incorporation in Indian has been simplified, unlike yesteryears when it was tedious and difficult for businesses to incorporate their company in India. The recent revision in rules have encouraged businesses to grow and flourish in the country.
Today Company Incorporation is done with a simplified and integrated process:
- 1. SPICe Form INC-32
- 2. e-Memorandum of Association in Form No. INC-33
- 3. E-Articles of Association in Form No. INC-34.
Following are the different types of companies :
The term 'Company' specifically means an entity that is formed under the Companies Act, 2013. Incorporation of a company is done on the basis of the activity/ or requirement of the promoters. Companies could be broadly classified as follows:
1. Private Limited Company:
A private limited company are those type of companies where there are a minimum or two members and maximum of 200 members. Under a Private Limited Company there are three types of companies:
(a) Company Limited by Guarantee :
This is a form of company that is formed by charitable organizations or not-for-profit businesses. The surplus profit amount is used to further the non-profit or charitable aims rather than using the profits as personal income. This company provides limited liability protection to its business owner(s). A company limited by guarantee is viewed as a legal 'person' who is responsible for its own debts. Such a company does not have shares or shareholders but is owned my guarantors (also referred to as members). One can become a guarantor of a limited liability company by guaranteeing a fixed sum of money to the company that is to be paid if the company becomes insolvent.
(b) Company Limited by Shares:
Majority of the companies today are formed as limited by shares. This form of company is ideal for those who want to keep the business profits to themselves. This company provides limited liability protection to its business owner(s). A company limited by shares is viewed as a legal person and is responsible for its own debts. This type of company is owned by one or more than one person and it is best suited for small sized businesses or sole traders. The shareholders and members are the owners of the company. To become a shareholder, an individual must buy at least one share in the company. In case the business becomes insolvent, the shareholders only need to pay for their shares. The shareholders are entitled to receive a share of business profits depending on the ownership percentage of shareholdings.
(c) Unlimited Company :
A company that does not have any limit on the liability of its members is an Unlimited company.
3. One Person Company :
One Person Company introduced under the Companies Act, 2013 enables entrepreneurs who on their own are capable of starting a venture by allowing them to spawn a sole person economic entity. An One Person Company just requires one member for incorporation whereas a Limited Liability Partnership or a Private Limited Company requires a minimum of two members. An One Person Company company can be easily incorporated which offers limited liability protection to its shareholders.
4. Limited Company:
Limited Company has extensive and stiff compliance requirements unlike Private Limited Company. A Limited Company should have a minimum of three Directors and there is no maximum limit on the number of members.
5. Section 8 Company :
Section 8 Company, a form of Non-Profit Organization is formed for promotion of commerce, sports, are, education, science, social welfare, research, charity, religion, protection of environment or with a similar objective. Section 8 Company should apply its profits, if any, or other income to promote its objects and it should prohibit the payment of any dividend to its members.
Application for Incorporation :
As notified under Schedule 1, the Table of MOA applicable to the company has to be selected. This form is linked to the INC-32 Form.
The Table of AOA needs to be selected and it provides an option to alter or add any article in the form. The INC-34 (AOA) form is linked to the INC-32 Form.
Incorporation of Company:
(1) For the Incorporation of a Company, a business has to check company name availability to ensure that the proposed name selected does not contain any word as prohibited under the Companies Act, 2013.
(2) The business has to obtain a Director Identification Number (DIN) for the proposed Directors of the new company.
(3) For a Limited Liability Partnership Company, the business needs to obtain a Designation Partner Identification Number (DPIN)
(4) A Digital Signature Certificate (DSC) has to be obtained for the proposed Directors of the company.
(5) SPICe Form has to be duly filled and submitted to Registrar of Companies form incorporation of the company.
(6) An Electronic Memorandum of Association (eMOA- INC 33) and Articles of Association (eAOA- INC 34) in SPICe 32 has to be filed.
(7) The pre-filled application forms which are 49A (PAN) and 49B (TAN) will be generated automatically by the MCA21 system after submission of the SPICe which need to be downloaded by the stakeholders. After this is done, the digital signature needs to be affixed and both the signed forms needs to be uploaded on MCA21 system as linked forms.
(8) Once form 49A and 49B are duly signed, uploaded and the payment is confirmed by the Ministry of Corporate Affairs, the new version of the SPICe incorporation form will be processed.
(9) Once all the documents and forms are verified and inspected by the Registrar of Companies, it suggests few changes that needs to be made in the attachments or forms. These changes needs to be made accordingly.
(10) A company seal has to be made for issuance of share certificates. Once this is done, the Ceritificate of Incorporation can be obtained.