Company Law

FORMATION OF COMPANY

Companies are broadly of below types :

  • Private Limited Company (with Private Limited or Pvt. Ltd. as its suffix)
  • Public Limited Company (with Limited or Ltd. as its suffix)
  • One Person Company (with OPC as its suffix)
     
The companies so formed could be with limited liability (by shares or guarantee) or with unlimited liability.

Note : For Government Companies, suffix “Pvt. Ltd / Ltd.” not required (Notification dated 5th June 2015)

Section 3 of the Companies Act, 2013 deals with the basic requirement with respect to the constitution of the company. In the case of a public company with or without limited liability any 7 or more persons can form a company for any lawful purpose by subscribing their names to memorandum and complying with the requirements of this Act in respect of registration. In exactly the same way, 2 or more persons can form a private company and one person where company to be formed is one person company.

However, that one person need to specify the name of one nominee in the Memorandum of Association (MOA) who would take his place in case of his death or his incapacity to contract. The nominee could be changed as per the process and this will not attract process for alteration of the Memorandum of Association.

Persons who form the company are known as promoters. It is they who conceive the idea of forming the company. They take all necessary steps for its registration.

One person company (OPC)

One member company

Private Company in nature

Encourages entrepreneur- ship and corporatization of business

Procedural requirements are simplified through exemptions

Separate Legal Entity

Limited Liability

Law with respect to formation of OPC provides that—

  • The memorandum of OPC shall indicate the name of the other person,who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of the company.
  • The other person whose name is given in the memorandum shall give his prior written consent in prescribed form and the same shall be filed with Registrar of companies at the time of incorporation.
  • Such other person may be given the right to withdraw his consent
  • The member of OPC may at any time change the name of such other person by giving notice to the company and the company shall intimate the same to the Registrar
  • Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.
  • Only a natural person who is an Indian citizen and resident in India (person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year)-

    • Shall be eligible to incorporate a OPC;
    • Shall be a nominee for the sole member of a OPC.
  • A natural person shall not be a member of more than a OPC at any point of time and the said person shall not be a nominee of more than a OPC.
  • Where a natural person being member in OPC becomes member in another such company by virtue of his being a nominee in that OPC, such person shall meet the eligibility criteria (as given in point above) within a period of 182 days.
  • No minor shall become member or nominee of the OPC or can hold share with beneficial interest.
  • Such Company cannot be incorporated or converted into a company under section 8 of the Act. Though it may be converted to private or public companies in certain cases. The procedure of conversion is given in the rules 6 & 7 of the Chapter II.
  • Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporate.
  • OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation, except where the paid up share capital is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

INCORPORATION OF COMPANY

Steps for Incorporation

  • Obtain Digital Signatures
  • Obtain Director Identification Number
  • Name availability for proposed company
  • Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)
  • Application for incorporation fo a private company
  • Duty of registrar to scrutinise the documents
  • If after fillings the Requisite forms for incorporation with the Registrar of Companies along with fees, ROC is satisfied with the contents of the documents filed, ROC will issue the Certificate of incorporation in Form No. INC 11 as directed by Rule-18 of Companies (incorporation) Rules, 2014
  • Certificate of Incorporation issued by ROC
INCORPORATION OF COMPANY : Section 7 of the Companies Act, 2013 provides for the procedure to be followed for incorporation of a company.
1) Filing of the documents and information with the registrar : For the registration of the company following documents and information are required to be filed with the registrar within whose jurisdiction the registered office of the company is proposed to be situated—

  • the memorandum and articles of the company duly signed by all the subscribers to the memorandum.
  • a declaration by person who is engaged in the formation of the company (an advocate, a chartered accountant, cost accountant or company secretary in practice), and by a person named in the articles (director, manager or secretary of the company), that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with.
  • an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles stating that—

    • He is not convicted of any offence in connection with the promotion, formation or management of any company, or
    • He has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the last five years,
    • And that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;
  • the address for correspondence till its registered office is established;
  • the particulars (names, including surnames or family names, residential address, nationality) of every subscriber to the memorandum along with proof of identity, and in the case of a subscriber being a body corporate, such particulars as may be prescribed.
  • the particulars (names, including surnames or family names, the Director Identification Number, residential address, nationality) of the persons mentioned in the articles as the subscribers to the Memorandum and such other particulars including proof of identity as may be prescribed; and
  • the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed.
     
Particulars provided in this provision shall be of the individual subscriber and not of the professional engaged in the incorporation of the company [The Companies (Incorporation) Rules, 2014].

(2) Issue of certificate of incorporation on registration : The Registrar on the basis of documents and information filed, shall register all the documents and information in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.

(3) Allotment of Corporate Identity Number (CIN) : On and from the date mentioned in the certificate of incorporation, the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate.