Incorporation of Company-Chapter-2-Best CS Executive Online Class

INCORPORATION OF COMPANIES

Factors to consider for incorporation of a Company

  1. Determine the objects of proposed company
    – Depending upon objects, following companies can be incorporated
    • Normal Companies (non-charitable purpose)
    • Section 8 Companies (charitable purpose)
    • Producer Companies (for providing primary product related services to the members of the company)
  2. Determine the scale of proposed company
    – Depending upon the scale, a company can be incorporated as
      • Public Company (large companies with public involvement)
      • Private Companies (small companies with no public involvement)
      • One Person Company
  3. Determine the requirements of funds and liability factors of proposed company
    – Depending upon the requirements of funds and liability factors, a company can be incorporated as
    • Company Limited by Shares
    • Company Limited by Guarantee
    • Company Limited by Guarantee having share capital
    • Unlimited Company without share capital
    • Unlimited Company with share capital
  4. Ascertain the minimum number of members required to incorporate a desired company (Section 3)
  5. Ascertain the minimum number of directors required to incorporate a desired company (Section 149)
  6. Ascertain whether proposed directors have Director Identification Number or not. [Section 152(3)]
  7. Determine the name of company and ascertain whether the proposed name is desirable and available or not [Section 4 and Companies (Incorporation) Rules, 2014].
  8. After getting the name approved from Registrar of Companies (ROC), prepare MOA [Section 4] and AOA [Section 5].
  9. File forms, fee and declarations as specified under Company Laws with the Registrar of Companies (ROC) the state where registered office of the company is proposed to be established [Section 7].
  10. On the basis of documents and information filed, ROC issues a certificate known as Certificate of Incorporation (COI) which is conclusive evidence that all the requirements of company laws is complied with and company is incorporated (registered). [Section 7, 9, 10]

Section 3 (Formation of company)

Section 3(1) – Minimum No. of persons required to incorporate a company
A company may be formed for any lawful purpose by—

  • seven or more persons, where the company to be formed is to be a public company;
  •  two or more persons, where the company to be formed is to be a private company; or
  • one person, where the company to be formed is to be One Person Company that is to say, a private company,

by subscribing their names or his name to a memorandum of association and complying with the requirements of this Act in respect of registration.

           Section 3(1) – Minimum No. of persons required to incorporate a company
Public Company7
Private Company2
OPC1
                   Other conditions to incorporate a company as per Section 3(1)
–       Subscribing names in the MOA
–       complying with the requirements of this Act in respect of registration
                                                            Note

–  There is no limit on maximum number of members in case of Public Companies

–  Private companies cannot have more than 200 members as per its definition u/s 2(67)

–  OPC cannot have more than 1 member

Section 3(2) – Type of Companies
A Public Company, Private Company or OPC may be either—

  • a company limited by shares; or
  • a company limited by guarantee; or
  • an unlimited company.

Minimum Number of Directors Required

Section 149(1) – Minimum & Maximum Number of Directors Required
Every company shall have a Board of Directors consisting of individuals as directors and shall have—

  • a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
  • a maximum of fifteen directors

Provided that a company may appoint more than fifteen directors after passing a special resolution.

Section 149(3) – At least one director shall be residential in India
Every company shall have at least one director who stays in India for a total period of not less than 182 days during the financial year:
Provided that in case of a newly incorporated company the requirement under this sub-section shall apply proportionately at the end of the financial year in which it is incorporated.

Director Identification Number (DIN)

DIN is an unique Identification Number allotted to an individual who is an existing director of a company or intends to be appointed as director of a company.

According to Section 152(3), no person shall be appointed as a director of a company unless he has been allotted the Director Identification Number under section 154 [or any other number as may be prescribed under section
153.]

Section 153 (Application for allotment of Director Identification Number)
Every individual intending to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Central Government in DIR-3 Form.

Provided that the Central Government may prescribe any identification number which shall be treated as Director Identification Number for the purposes of this Act and in case any individual holds or acquires such identification number, the requirement of this section shall not apply or apply in such manner as may be prescribed

Section 154 (Allotment of Director Identification Number)
The Central Government shall, within one month from the receipt of the application under section 153, allot a Director Identification Number to an applicant.

Section 155 (Prohibition to Obtain More than One Director Identification Number)
No individual, who has already been allotted a Director Identification Number under section 154, shall apply for, obtain or possess another Director Identification Number.

Name of Company

Whenever new name is needed for any company (whether new or existing), an application (in the prescribed form along with specified fee) is required to be filed with ROC for the reservation of the new proposed name. ROC checks the availability and desirability of the proposed name. If such name is available and desirable, ROC reserves that name for the applicant for certain duration. Within that duration such name shall be adopted by the applicant otherwise such name is again open to be reserved by anyone else.

Section 4(2) – Name not to be identical/offensive/undesirable
The name stated in the memorandum shall not—

  • be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or
  • be such that its use by the company—
    i. will constitute an offence under any law for the time being in force; or
    ii. is undesirable in the opinion of the Central Government (power delegated to ROC).

Questions

  1. Which names shall be considered as identical or similar?
    Answer – Rule 8 of Companies (Incorporation) Rules, 2014
  2. Which names shall be considered undesirable?
    Answer – Rule 8A of Companies (Incorporation) Rules, 2014

Section 4(3) – Company shall not be registered with certain names
A company shall not be registered with a name which contains—

  1. any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of,
    • the Central Government,
    • any State Government, or
    • any local authority,
    • corporation or
    • body constituted by the Central Government or any State Government under any law for the time being in force; or
  2. such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word or expression.

Questions
For which names previous approval of the Central Government is required?
Answer – Rule 8B of Companies (Incorporation) Rules, 2014

Section 4(4) read with Rule 9 of Incorporation Rules – Reservation of Name or Change of Name

  • An application for reservation of name shall be made through the web service available at www.mca.gov.in by using web service SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32).
  • An application for change of name shall be made by using web service RUN (Reserve Unique Name),

Such application may either be approved or rejected, as the case may be, by the Registrar, Central Registration Centre after allowing re-submission of such web form within 15 days for rectification of the defects, if any.

Section 4(5)(i) – Reservation of name by ROC for 20 days/60 days
Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of 20 days from the date of approval or such other period as may be prescribed:

Provided that in case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of 60 days from the date of approval.

Extension of reservation of name in certain cases [Rule 9A] – Inserted by the Companies (Incorporation) Third Amendment Rules, 2020
Upon payment of fees provided below through the web service available at www.mca.gov.in, the Registrar shall extend the period of a name reserved under rule 9 by using web service SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32), upto:

  • 40 days from the date of approval under rule 9, on payment of fees of rupees of Rs. 1000 made before the expiry of 20 days from the date of approval under rule 9;
  • 60 days from the date of approval under rule 9 on payment of fees of Rs. 2000 made before the expiry of 40 days referred to in clause (a) above;
  • 60 days from the date of approval under rule 9 on payment of fees of Rs. 3000 made before the expiry of 20 days from the date of approval under rule 9:

Provided that the Registrar shall have the power to cancel the reserved name in accordance with sub-section (5) of section 4 of the Act.

Section 4(5)(i) – Reservation of name by ROC for 20 days/60 days
Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of 20 days from the date of approval or such other period as may be prescribed:

Provided that in case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of 60 days from the date of approval.

Section 4(5)(ii) – In case name is reserved by furnishing wrong or incorrect information
Where after reservation of name, it is found that name was applied by furnishing wrong or incorrect information,
then,—

  1.  if the company has not been incorporated,
    • the reserved name shall be cancelled and the person making application for reservation of name shall be liable to a penalty which may extend to one lakh rupees;
  2. if the company has been incorporated,
    • the Registrar may, after giving the company an opportunity of being heard
      • either direct the company to change its name within a period of three months, after passing an ordinary resolution;
      • take action for striking off the name of the company from the register of companies; or
      • make a petition for winding up the company.

Memorandum of Association

Section 4(1) – Clause/Content of MOA
The memorandum of a company shall state—

Name Clause

The name of the company with the last word

  • “Limited” in the case of a public limited company, or
  • “Private Limited” in the case of a private limited company

Section 8 Companies are exempted from adding the word ‘Limited’ or ‘Private Limited’ at the end of the name.

State ClauseThe State in which the registered office of the company is to be situated.
Object ClauseThe objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof.

Liability Clause

Whether liability of the members is limited or unlimited.
 Further
      a.

in the case of a company limited by shares
it shall be stated that liability of its members is limited to the amount unpaid, if any, on the shares held by them; and

      b.

in the case of a company limited by guarantee
it shall state the amount up to which each member undertakes to contribute—

 (A)

to the assets of the company in the event of its being wound-up

  • while he is a member or
  • within one year after he ceases to be a member,

for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and

                .

(B)

to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves.

Share Capital Clause

In the case of a company having a share capital, MOA shall state the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount. (Authorised Capital)

Subscription
Clause

In the case of a company having a share capital, MOA shall state

  • the total number of shares which the subscribers to the memorandum agree to subscribe (which shall not be less than one share) (Subscribed Capital); and
  • the number of shares each subscriber to the memorandum intends to take, indicated opposite his name;

Section 4(6) – Prescribed formats of MOA
The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I as may be applicable to such company.
Table A – MOA of Companies Ltd. by Shares
Table B – MOA of Companies Ltd. by Guarantee not having SC
Table C – MOA of Companies Ltd. by Guarantee having SC
Table D – MOA of Unlimited Companies not having SC
Table E – MOA of Unlimited Companies having SC

Article of Association

Section 5(1) & 5(2) – Content of AOA

  1. The articles of a company shall contain the regulations for management of the company.
  2. The articles shall also contain such matters, as may be prescribed. A company may include such additional matters in its articles as may be considered necessary for its management.

General Content of AOA
Provisions related to

  • Share capital and variation of rights
  • Lien on Shares etc.
  • Calls on shares
  • Transfer of shares
  • Transmission of shares
  • Forfeiture of shares
  • Alteration of capital
  • Capitalisation of profits
  • Buy-back of shares
  • General meetings
  • Voting rights
  • Board of Directors
  • Proceedings & Meeting of the Board
  • Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer
  • Dividends and Reserve
  • Accounts of Company
  • Winding Up of Companies
Section 5(3), 5(4) & 5(5) – Provisions for entrenchment
3The articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.
4The provisions for entrenchment shall only be made
 either on formation of a company,
 or by an amendment in the articles
  
  • agreed to by all the members of the company in the case of a private company and
  • agreed to by a special resolution in the case of a public company.
5Where the articles contain provisions for entrenchment, whether made on formation or by amendment, the company shall give notice to the Registrar of such provisions in such form and manner as may be prescribed.

 

Rule 10 of Companies (Incorporation) Rules, 2014

In case of New Company
Where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such provisions in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) at the time of incorporation of the company
In case of existing companies
Where the articles contain the provisions for entrenchment, the same shall be filed in Form No.MGT.14 within 30 days from the date of entrenchment of the articles

Section 5(6), 5(7) & 5(8) – Prescribed format of AOA

6.The articles of a company shall be in respective forms specified in Tables, F, G, H, I and J in Schedule I as may be applicable to such company.
7.A company may adopt all or any of the regulations contained in the model articles applicable to such company.
8.

In case of any company, which is registered after the commencement of Companies Act, 2013,

– in so far as the registered articles of such company do not exclude or modify the regulations contained in the model articles applicable to such company,

–       those regulations shall, so far as applicable,

–       be the regulations of that company in the same manner and to the extent as if they were contained in the duly registered articles of the company.

Table F – AOA of Companies Ltd. by Shares
Table G – AOA of Companies Ltd. by Guarantee not having SC
Table H – AOA of Companies Ltd. by Guarantee having SC
Table I – AOA of Unlimited Companies not having SC
Table J – AOA of Unlimited Companies having SC

Section 7 (Incorporation of company)

Section 7(1) – Documents required for incorporation of a company
There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to
be situated, the following documents and information for registration, namely:—

  1. the memorandum (MOA) and articles (AOA)
    • of the company duly signed by all the subscribers in such manner as may be prescribed;

Rule 13 of Companies (Incorporation) Rules, 2014

Signing of memorandum and articles
The MOA and AOA of Association of the company shall be signed in the following manner, namely:-
1.

The MOA and AOA of the company shall be signed by each subscriber to the memorandum, who shall add his

  •  name,
  • address,
  • description and
  • occupation, if any,
 in the presence of at least one witness who shall attest the signature and shall likewise
 –       sign and add his name, address, description and occupation, if any and
 –       shall state that
 
  •  I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given);
 
  • I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in.
2Where a subscriber to the memorandum is illiterate,
he shall affix his thumb impression/mark which shall be described as such by the person, writing for him, who shall place the name of the subscriber against or below the mark and authenticate it by his own signature and he shall also write against the name of the subscriber, the number of shares taken by him.
3Such person shall also read and explain the contents of the memorandum and articles of association to the subscriber and make an endorsement to that effect on the memorandum and articles of association.
4

Where the subscriber to the memorandum is a body corporate,
the memorandum and articles of association shall be signed by director, officer or employee of the body corporate duly authorized in this behalf by a resolution of the board of directors of the body corporate and

Where the subscriber is a Limited Liability Partnership,
MOA & AOA shall be signed by a partner of the Limited Liability Partnership, duly authorized by a resolution approved by all the partners of the Limited Liability Partnership:

Provided that in either case, the person so authorized shall not, at the same time, be a subscriber to the memorandum and articles of Association.

5

Where subscriber to the memorandum is a foreign national residing outside India-

  • visited in India and intended to incorporate a company, in such case the incorporation shall be allowed if, he/she is having a valid Business Visa.
  • In case of Person is of Indian Origin or Overseas Citizen of India, requirement of business Visa shall not be applicable.
  

 

2. a declaration in the Form No. INC. 8

  • by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and
  • by a person named in the articles as a 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;

3. a declaration in Form No.INC.9

  • from each of the subscribers to the memorandum and
  • from persons named as the first directors, if any, in the articles

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 preceding five years and
  • 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;

4. the address

  • for correspondence till its registered office is established;

5. the particulars of subscribers to the MOA

  • their name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;

Rule 16 of Companies (Incorporation) Rules, 2014

Particulars of every subscriber to be filed with the Registrar at the time of incorporation

The following particulars of every subscriber to the memorandum shall be filed with the Registrar-

1.

Name (including surname or family name) and recent Photograph affixed and scan with MOA and AOA

2.

Father’s/Mother’s/ name

3.

Nationality

4.

Date of Birth

5.

Place of Birth (District and State)

6.

Educational qualification

7.

Occupation

8.

Income-tax permanent account number

9.

Permanent residential address, Present address and the office/business addresses

10.

Email id of Subscriber

11.

Phone No. of Subscriber

12.

Fax no. of Subscriber (optional)

13.

Proof of Identity:

 

For Indian Nationals:

 

PAN Card ( mandatory) and

 

any one of the following

 

 

·         Voter’s identity card

·          Passport copy

·         Driving License copy

·         Unique Identification Number (UIN)

For Foreign nationals and Non Resident Indians

Passport

14.

Residential proof such as Bank Statement, Electricity Bill, Telephone / Mobile Bill

Provided that Bank statement Electricity bill, Telephone or Mobile bill shall not be more than two months old;

15.

Proof of nationality in case the subscriber is a foreign national.

16.

If the subscriber is already a director or promoter of a company(s), the particulars relating to-

i. Name of the company;

ii. Corporate Identity Number;

iii. Whether interested as a director or promoter;

6. the particulars of the persons mentioned in the articles as the first directors of the company,

  • their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and

7. 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 Form No. DIR.12.

Rule 12 of Companies (Incorporation) Rules, 2014

Application for incorporation of companies

An application for registration of a company shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32);

Provided that in case pursuing of any of the objects of a company requires registration or approval from sectoral regulators such as the Reserve Bank of India, the Securities and Exchange Board, registration or approval, as the case may be, from such regulator shall be obtained by the proposed company before pursuing such objects and a declaration in this behalf shall be submitted at the stage of incorporation of the company.

 

Simplified Proforma for Incorporating Company Electronically Plus (SPICe+)

  1. The Application for incorporation of a company under this rule shall be in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) alongwith e-Memorandum of Association (e-MOA) in Form No. INC-33 and e-Articles of association (e-AOA) in Form no. INC-34.
    In case of Section 8 Companies
    Provided that in case of incorporation of a company falling under section 8 of the Act, SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) shall be filed along with Form No. INC-13 (Memorandum of Association) and Form No. INC-31 (Articles of Association) as attachments.

    In case of more than 7 subscribers
    Provided further that in case of incorporation of a company having more than 7 subscribers or where any of the subscriber to the MOA/AOA is signing at a place outside India, MOA/AOA shall be filed with SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) in the respective formats as specified in Table A to J in Schedule I without filing form INC-33 and INC-34]For the purposes of sub-rule (1),
  2. the application for allotment of Director Identification Number upto three Directors,
  •   reservation of a name,
  • incorporation of company and
  • appointment of Directors
    of the proposed for One Person Company, private company, public company and a company falling under section 8 of the Act shall be filed in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32), with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated along with the fee of Rs. 500 in addition to the registration fee as specified in the Companies (Registration of Offices and Fees) Rules. 2014:
    Where name is already reserved
    Provided that where an applicant has applied for reservation of a name under Rule 9 and which has been approved therein, he may fill the reserved name as proposed name of the company.
    No registration fee in certain cases
    Provided further that 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 15 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 20, fee on INC-32 (SPICe) shall not be applicable.

3. Particulars of maximum 3 directors is allowed in SPICe Form
For the purposes of filing SPICe Form, the particulars of maximum of 3 directors shall be allowed to be filled in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32), and allotment of Director Identification Number of maximum of three proposed directors shall be permitted in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32)] in case of proposed directors not having approved Director Identification Number.

4. Only 1 proposed name is allowed in SPICe Form
The promoter or applicant of the proposed company shall propose only one name in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32).

5. MOA/AOA
The promoter or applicant of the proposed company shall prepare Memorandum of Association (e-MoA) in Form No. INC-33 and Articles of Association (e-AoA) in Form no. INC-34, in accordance with rule 13.
Provided that the subscribers and witness or witnesses shall affix their digital signatures to the e-MoA and e-AoA

6. No recent photograph required
For incorporation using application as provided in this rule, provisions of the sub-clause (i) of sub-section (5) of section 4 of the Act, rule 9, and clause (a) of sub-rule (1) of rule 16 to the extent of affixing recent photograph shall not apply.

7.Verification of its registered office
A company using the provisions of this rule may furnish verification of its registered office under section 12(2) of the Act by filing SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) in which case the company shall attach along with such Form No.INC-32 (SPICe), any of the documents referred to in sub-rule (2) of rule 25 for verification of its registered office.

8. Form No.INC-22 shall not be required to be filed in case the proposed company maintains its registered office at the given correspondence address.

9. In case of defective application

  • Where the Registrar. on examining SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32)], finds that it is necessary to call for further information or finds such application or document to be defective or incomplete in any respect, he shall give intimation to the applicant to remove the defects and re-submit the e-form within 15 days from the date of such intimation given by the Registrar.
  • After the resubmission of the document, if the registrar still finds that the document is defective or incomplete in any respect, he shall give one more opportunity of 15 days to remove such defects or deficiencies.
    Provided that the total period for re-submission of documents shall not exceed 30 days.

10. Certificate of Incorporation
The Certificate of Incorporation of company shall be issued by the Registrar in Form No. INC-11.”

Rule 38A of Companies (Incorporation) Rules, 2014

Application for registration of Goods and Service Tax Identification Number (GSTIN), Employee State Insurance Corporation (ESIC) registration, Employees’ Provident Fund organisation (EPFO) Registration and pofession Tax Registration, Opening of Bank Account and Shops and Establishment Registration

The application for incorporation of a company under rule 38 shall be accompanied by e-form AGILE-PRO-S (INC-35) containing an application for registration of the following numbers, namely:-

  • GSTIN with effect from 31st March, 2019
  • EPFO with effect from 8th April, 2019
  • ESIC with effect from 15th April, 2019
  • Profession Tax Registration with effect from the 23rd February,2020
  • Opening of Bank Account with effect from 23rd February, 2020.
  • Shops and Establishment Registration

 

Section 7(2) read with Rule 18 of Incorporation Rules – Certificate of Incorporation by ROC
The Registrar on the basis of documents and information filed with it shall register all such documents and information in the register and issue a certificate of incorporation in the Form No.INC. 11 to the effect that the proposed company is incorporated under this Act.

The Certificate of Incorporation shall mention permanent account number of the company where if it is issued by the Income-tax Department.

Section 7(3) – Corporate Identity Number
On and from the date mentioned in the certificate of incorporation issued under sub-section (2), 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.

Section 7(4) – Maintenance of incorporation documents by company
The company shall maintain and preserve at its registered office copies of all documents and information as originally filed with ROC at the time of incorporation till its dissolution under this Act.

Section 7(5) – Action under Section 447 against any person providing incorrect information
If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.

Section 7(6) – Action under Section 447 against promoters, directors & persons making declaration
Where, at any time after the incorporation of a company, it is proved that the company has been got incorporated

  •  by furnishing any false or incorrect information or representation or
  • by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or
  • by any fraudulent action,

the

  •  promoters,
  • the persons named as the first directors of the company and
  • the persons making declaration shall each be liable for action under section 447.

shall each be liable for action under section 447.

Section 447 – Punishment for fraud

Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud

-involving an amount of at least 10 lakh rupees or 1 % of the turnover of company, whichever is lower.

  • shall be punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and
  • shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud.

Where the fraud in question involves public interest, the term of imprisonment shall not be less than 3 years.

Provided further that where the fraud involves an amount less than 10 lakh rupees or 1 % of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud

  • shall be punishable with imprisonment for a term which may extend to 5 years or
  •  with fine which may extend to 50 lakh rupees or
  •  with both.

 

Provisions related to OPC

OPC is a special type of private company which can be incorporate by one person only. Such person shall be a natural person who is an Indian citizen and resident in India (stayed for at least 182 days in India in immediately preceding financial year). A person can incorporate only one OPC.

Such a company

  • cannot be incorporated or converted into a company under section 8 of the Act.
  • cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporates.

A natural person shall not be 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.

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

Concept of Nominee in case of OPC
If a person wants to incorporate OPC, he/she shall appoint another person as nominee (after obtaining his/her consent) who shall, 

  • in the event of the subscriber’s death or his incapacity to contract become the member of the company.
    The memorandum of One Person Company shall indicate the name of nominee with his prior written consent.  The written consent of such person shall be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles in Form No  INC-32 (SPICe) along with consent of such nominee obtained in Form No INC.3.

 

Withdrawal of consent by nominee 
The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company.

In such case the sole member shall nominate another person as nominee within fifteen (15) days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No. INC.3.

The company shall within thirty (30) days of receipt of the notice of withdrawal of consent file with the Registrar, 

  • a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC.4 and
  • the written consent of such another person so nominated in Form No. INC.3.

Change of nominee
The subscriber or member of a One Person Company may, by intimation in writing to the company, change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form No INC.3.

The company shall, on the receipt of such intimation, file with the Registrar, a notice of such change in Form No INC.4 and with the written consent of the new nominee in Form No.INC.3 within thirty (30) days of receipt of intimation of the change. 

Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

In case nominee becomes member of OPC death or incapacity to contract of sole member
Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of such One Person Company, 

  • such new member shall nominate within fifteen (15) days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and
  • the company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 within thirty (30) days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3.

 

Special Provisions related to incorporation of Section 8 companies

A person or an association of persons, desirous of incorporating a company with limited liability under section 8 shall make an application in SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC-32) to the Registrar for a license under Section 8.

The memorandum of association of such company shall be in Form No.INC.13.

Such application shall be accompanied by the following documents, namely:—
(a) the memorandum and articles of association of the proposed company;
(b) the declaration in Form No.INC.14 by an Advocate/CA/CS/CMA,

  • that the memorandum and articles of association have been drawn up in conformity with the
    provisions of section 8 and rules made thereunder and
  • that all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

(c) an estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
(d) the declaration by each of the persons making the application in Form No. INC.15.

Effect of registration

According to Section 9 of Companies Act, 2013,

  • from the date of incorporation mentioned in the certificate of incorporation, subscribers to the MOA and all other members of the company,
    • shall be a body corporate (by the name contained in the memorandum), capable of exercising all the functions of an incorporated company under this Act
      • having
        • perpetual succession
        • a common seal (by Amendment Act, 2015)
  •  and
          • power to acquire, hold and dispose of property, both movable and immovable,
            tangible and intangible in its own name
          •  power to contract in its own name
          • power to sue and be sued in its own name

Effect of Memorandum and Articles

According to Section 10(1) of Companies Act, 2013,

  • memorandum and articles shall, when registered,
    • bind the company and the members thereof
      • to the same extent as if they respectively had been signed by the company and by each
        member, and
      • contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

Further, according to Section 10(2) of Companies Act, 2013,

  • all monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

Commencement of business etc. [Section 10A]

A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless—

  1.  a declaration (in form no. INC 20A) is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
  2. The company has filed with the Registrar a verification of its registered office as provided in sub–section (2) of section 12.

If any default is made in complying with the requirements of this section,

  • the company shall be liable
    •  to a penalty of Rs. 50,000 and
  • every officer who is in default shall be liable
    • to a penalty of Rs. 1000 for each day during which such default continues but not exceeding an
      amount of 1 lakh rupees.

Where no declaration has been filed with the Registrar within a period of 180 days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may initiate action for the removal of the name of the company from the register of companies.

About SPICe+

The Companies (Incorporation) Amendment Rules, 2020 w.e.f 23rd February, 2020 introduced new web form SPICe+ for incorporation of the Companies replacing the old e-form SPICe.

SPICe+ is an integrated Web form offering 11 services by

  • 3 Central Government Ministries & Departments. (Ministry of Corporate Affairs, Ministry of Labour & Department of Revenue in the Ministry of Finance) and
  • 3 State Government (Maharashtra, Karnataka & West Bengal)

Services offered through SPICe+ are:

  • Name Reservation,
  • Incorporation,
  • DIN allotment,
  • Mandatory issue of PAN,
  • Mandatory issue of TAN,
  • Mandatory issue of EPFO registration,
  • Mandatory issue of ESIC registration,
  • Mandatory issue of Profession Tax registration (applicable only in Maharashtra, Karnataka & West Bengal),
  • Mandatory Opening of Bank Account for the Company and
  • Allotment of GSTIN (if so applied for),
  • Shops and Establishment Registration (applicable in case Delhi Only).

Note:

  • From 23rd February 2020 onwards, RUN is applicable only for change of name of existing companies. In case of new incorporation of any company, name shall be applied only on SPICe+.
  • Two names can be proposed in case application is being made ONLY for name reservation. if SPICe+ Part A is submitted individually. In case complete SPICe+ is being submitted for name reservation as well as incorporation, only one name can be proposed.
  • In SPICe+, DIN can be applied max. for 3 directors

SPICe+ is divided in to two parts viz.:
Part A- for Name reservation for new companies and
Part B – for all other services

For the Incorporation of company the user may

  • either choose to submit Part-A for reserving a name first and thereafter submit Part B for incorporation & other services
  • or file Part A and B together at one go for incorporating a new company.

 

Central Scrutiny Centre (CSC)

  • The Central Government has established a Central Scrutiny Centre (CSC) for carrying out scrutiny of Straight Through Processes (STP) e-forms filed by the companies under the Companies Act, 2013 and the rules made thereunder which has come into force from March 23, 2021.
  • The CSC shall function under the administrative control of the e-governance Cell of the Ministry of Corporate Affairs. It shall carry out scrutiny of the aforesaid forms and forward findings thereon, wherever required, to the concerned jurisdictional Registrar of Companies for further necessary action under the provisions of the Companies Act, 2013 and the rules made thereunder.
  • It is located at the Indian Institute of Corporate Affairs (IICA), Plot No. 6, 7, 8, Sector 5, IMT Manesar, District Gurgaon (Haryana), Pin Code- 122050.

Steps for the Incorporation of a Private Company

  1. Ascertain atleast 2 persons to incorporate a private company (Sec 3 of CA, 2013)
  2. Ascertain atleast 2 individuals to be named as first directors of the company (Sec 149 of CA, 2013). If such individuals do not have DIN, they can apply for DIN in DIR-3 or their DIN can be applied directly in SPICe+ (INC 32 – Incorporation Form).
  3. Determine the desired name of the company. Promoters can provide only 2 desired names in the part A of SPICe+. It should be noted that now, in case of new company, name can be reserved only by filing Part A of the SPICe+ (not in RUN).
  4. Determine the objects of the company. This is to be attached in the Part A of the SPICe+ while reserving the name. Further, if approval of any authority is required, such approval shall also be attached in the Part A.
  5. Login to mca.gov.in to fill Part A of SPICe+ for the reservation of name. User can opt to file Part A and Part B simultaneously, or User can file only Part A for the reservation of name and file Part B after getting the name approved.
  6. In case of new company, name is reserved for 20 days only. It means user shall file Part B of SPICe+ and other forms for incorporation of Company with approved name within 20 days of name approval.
  7. After getting the name approved, we have to submit SPICe+ MOA, SPICe+ AOA, INC-9, AGILE-PRO and Part B of SPICe+.
  8. It should be noted that all these forms (SPICe+ MOA, SPICe+ AOA, INC-9, AGILE-PRO and Part B of SPICe+) are also web-based. After submitting these web-based forms, user can download and save these forms in PDF in his/her computer.
  9. It should be noted that in certain cases MOA and AOA are required to be created in PDF like where number of subscribers are above 7 or numbers of first directors are above 3.
  10. It should be noted that declaration in Form INC 8 is incorporated in Part B of SPICe+. Thus INC 8 is not required to be filed separately.
  11. If the address of the registered office of the company is same as correspondence address given in the SPICe+ form, form INC 22 is not required to uploaded with SPICe+. But if address of the registered office is different from the correspondence address, INC 22 is also required to be uploaded within 30 days from the incorporation of the company.
  12. After downloading the above submitted forms, user shall upload the PDF of these forms under “My Workspace” on mca.gov.in (after login) after affixing Digital Signatures. under “My Workspace” user has to opt for normal forms and linked forms.
  13. Once uploading will be complete, payment screen will appear. User can pay fee simultaneously or later. Now, user can’t create challan to pay offline. User has to pay online only.
  14. If everything will be correct, ROC will issue Certificate of Incorporation in Form INC 11 which will be having CIN and PAN of company.
  15. Documents required at the time of incorporate
    • DIR 12 – Consent of 1st Directors
    • Digital Signature Certificate
    • Passport Size Photographs
    • Subscribers’ Id Proof such as Aadhar Card, Passport, Voter Id
    • Director’s Id Proof
    • Address Evidence (Conveyance/lease deed/Rent Agreement)
    • No objection certificate from landlord if office is rented
    • Copy of utility bills (like electricity bills) not older than 2 months.

 

Steps for the Incorporation of a Public Company

  1. Ascertain atleast 7 persons to incorporate a private company (Sec 3 of CA, 2013)
  2. Ascertain atleast 3 individuals to be named as first directors of the company (Sec 149 of CA, 2013). If such individuals do not have DIN, they can apply for DIN in DIR-3 or their DIN can be applied directly in SPICe+ (INC 32 – Incorporation Form).
  3. Rest steps are same as in case of private company.

 

Steps for the Incorporation of a One Person Company

  1. Only an individual who is Indian Citizen and resident of India can incorporate One Person Company (Sec 3 of CA, 2013 read with Incorporation Rules). Such person must have Digital Signature.
  2. Ascertain atleast 2 individuals to be named as first directors of the company (Sec 149 of CA, 2013). If such individuals do not have DIN, they can apply for DIN in DIR-3 or their DIN can be applied directly in SPICe+ (INC 32 – Incorporation Form).
  3. If a person wants to incorporate OPC, he/she shall appoint another person as nominee (after obtaining his/her consent) who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of the company.
  4. The memorandum of OPC shall indicate the name of nominee with his prior written consent. The written consent of such person shall be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles in Form No INC-32 (SPICe plus) along with consent of such nominee obtained in Form No INC.3.
  5. Rest steps are same as in case of private company.

Steps for the Incorporation of a Section 8 Company

  1. Determine whether the company shall be incorporated as private company or public company.
  2. In case of private company at least 2 persons and at least 2 first directors are required. In case of public company at least 7 persons and at least 3 first directors are required.
  3. An application seeking license for the formation of proposed Company 8 is to be made in e-form INC 12 to the ROC.
  4. If individuals proposed to be appointed as first directors do not have DIN, they can apply for DIN in DIR-3 or their DIN (max. for 3) can be applied directly in SPICe+ (INC 32 – Incorporation Form).
  5. It should be noted that objects of Section 8 company shall be the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.
  6. MOA of Section 8 Company shall be in the format prescribed in INC 13 and AOA shall be in INC 31.
  7. Some specific forms to be attached with SPICe Plus are INC 14 and INC 15
  8. Rest steps are same as in case of normal company.

Active Company Tagging Identities and Verification (Active)

Rule 25A of Incorporation Rules

Every company incorporated on or before the 31st December, 2017 shall file the particulars of the company and its registered office, in e-Form Active (Active Company Tagging Identities and Verification) on or before 15.06.2019.

Cases when filling of e-Form Active is not allowed
Any company which has not filed its

  • due financial statements under section 137 or
  • due annual returns under section 92 or
  • both

with the Registrar shall be restricted from filing e-Form-Active, unless such company is under management dispute and the Registrar has recorded the same on the register

Cases when filling of e-Form Active is not Required
Companies which have been struck off or are under process of striking off or under liquidation or amalgamated or dissolved, as recorded in the register, shall not be required to file e-Form Active.

Consequences of not filing e-Form Active

  • In case a company does not intimate the said particulars, the Company shall be marked as “Active-non-compliant” on or after 16th June, 2019 and shall be liable for action under sub-section (9) of section 12 of the Act
  • Further, no request for recording the following event based information or changes shall be accepted by the Registrar from such companies marked as “Active-non-compliant”, unless “ e-Form Active” is filed –
  • SH-07 (Change in Authorized Capital);
  • PAS-03 (Change in Paid-up Capital);
    • DIR-12 (changes in Director except in case of :
    • cessation of any director or
    • appointment of directors in such company where the total number of directors are less than the minimum number provided in clause (a) of sub-section (1) of section 149 on account of disqualification of all or any of the director under section 164.
    • appointment of any director in such company where DINs of all or any its director(s) have been deactivated.
    • appointment of director(s) for implementation of the order passed by the Court or Tribunal or Appellate Tribunal under the provisions of this Act or under the Insolvency and Bankruptcy Code, 2016).]
    • INC-22 (Change in Registered Office);
    • INC-28 (Amalgamation, de-merger)

Filing of “e-Form Active”, on or after 16th June, 2019
Where a company files “e-Form Active”, on or after 16th June, 2019, the company shall be marked as “Active Compliant”, on payment of fee of Rs. 10,000.

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