Formation and Incorporation of a Company – Company Law

The procedure for the incorporation of a company can be understood through the following steps –

Incorporation of a company

Selection of the type of a company-

The first step for incorporation of a company is to select the type of company the promoters or owners wish to form i.e. one person company, private company, public company, non-profit company etc.

Preliminary Requirements –

In order to file the application for incorporation of a company all the directors of the proposed company must have a director identification number (DIN). Out of all the directors, at least one director must have a digital signature to sign the incorporation and other official documents digitally.

Reservation of Name-

The next step for incorporation of a company is the reservation of company name. The promoters must apply to the registrar of companies (ROC) for the reservation of the name of the proposed company. While applying for the reservation of the company name, the following points must be kept in mind –

  1. The Application in e-Form No. INC.1 along with the fees of Rs. 1.000/- must be filed as prescribed in the companies act, 2014.

  2. Maximum six proposed names must be given in order of preference.

The registrar of companies, upon the receipt of the application form INC.1 for the reservation of name verifies all the criteria and guidelines under sec 4 and related rules. After the verification, the registrar of companies, approves any one name which is valid for a period of sixty days from the date of intimation by the registrar/MCA. After 60 days, if the documents of incorporation of the company are not filed with the registrar, the reservation of the name for the proposed company shall lapse automatically.

Preparation of the Memorandum of Association and Articles of Association-

Memorandum of Association and Articles of Association are prepared or drafted after the reservation of name. Memorandum of Association and Articles of Association shall be in the forms as specified in schedule-1. It should be noted that main objects of Memorandum of Association and Articles of Association must be matched with the objects shown in e-form INC.1. These two documents are the charter of the company and contain all the internal rules and regulations of the company, therefore it should be drafted with utmost care and should be prepared with the advice of experts.

Number of copies of memorandum and articles of association should be printed and made available with the company. One copy of the Memorandum and Articles must be duly stamped by the collector of stamps and submitted to the registrar of companies.

Filing of the documents with the Registrar of companies –

It involves the task of submitting the following documents to the registrar of companies along with the fees as provided in the companies act (registration offices and fees rules, 2014) within 60 days from the date of intimation regarding the reservation of name:

  1. A duly stamped, signed and witnessed copy of Memorandum of Association and Articles of Association signed by all the suscribers.

  2. A statutory declaration in the prescribed format signed by a Charted Accountant or Company Secretary

  3. An affidavit containing details and particulars of all the directors, managers, secretaries

  4. A written consent of the person named as the first director to act in that capacity along with an undertaking that he has taken up the qualification shares

  5. Proof of the address and location of the registered office of the company.

  6. A statutory declaration signed by Advocate of High Court or Supreme Court etc. stating all above requirement have been complied with.

  7. A public company with share capital must follow the guidelines laid out by SEBI, to obtain the required capital for the company.

Certificate of Incorporation and allotment of Corporate Identity Number –

The registrar of companies issues the certificate of incorporation within 7 days of the receipt of documents, if he is satisfied that everything has been complied according to the companies act.

The validity of registration cannot be challenged after the certificate of incorporation has been issued but that does not mean that the certificate of incorporation legalizes the illegal objects mentioned in the memorandum.

Registrars allot a corporate identity number on or from the date mentioned in the certificate of incorporation which acts as a unique identity number for the company.

Effect of Registration –

After receiving the certificate of Incorporation the company becomes be a body corporate with a name, perpetual succession, common seal, capable of exercising all the functions of a company, with the power to hold and dispose property, to contract, to sue and be sued. The subscribers of the articles become the members of the company.

A private company can begin its business operations on receiving the Certificate of Incorporation, while a public company can begin its business activities on after receiving the Certificate of Commencement of Business.

Commencement of business – 

A Statutory declaration must be signed by director or company secretary and submitted to the registrar. If the registrar is satisfied, a trading certificate will be issued which provides authority to the company to begin its business operations.

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