How to Register a Company in India

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A Company is a separate legal entity which is registered under the companies act. Every country will be having own process for company formation. In India, companies are registered under Companies act 1956. The formation of a company is not an easy task & it requires following a procedure that is mentioned here.

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What formalities need to be present before company incorporation?
• One has to possess Permanent Account Number (PAN) from IT Department
• May need to apply Shop and Establishments Act
• Registration process to apply Import Export code from Software Technologies Parks of India registration (STPI) if company set up there.
• RBI approval required for foreign entities who are investing in India and FIPB approval.
• The directors of an Indian company, are required to obtain Director Identification Number - DIN and Digital Signature Certificate - DSC

What are the requisites to register for a Private Limited Company?
A Registered Business Name: This must be followed by the word ‘Limited' or ‘Ltd'. The Companies Registration Office exercises some control over the choice of name, it cannot be identical (or very similar to) the name of an existing company. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. The company name must be displayed in a conspicuous place at every office, or other premises where the company carries out business.

A Registered Office: This need not necessarily be the same address as the business is conducted from. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. This is the address, through, where all official correspondence will go.

Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribers'). A private company can have up to fifty shareholders.

Share Capital: The Company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100.

Memorandum of Association: The memorandum is the company's charter. It states the company's name; the situation of its registered office; its share capital; the fact that liability is limited and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause but in practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. Nevertheless, it is worth bearing in mind that directors of the company will incur personal liability if the company engages in a type of business which is not authorized by the objects clause. The memorandum must be signed by at least three shareholders.

Articles of Association: The document contains the internal regulations of the company, the relationship of the company to its shareholders and the relationship between the individual shareholders. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the Companies Act.

Certificate of Incorporation: This is the document, which the registrar of companies issues to you once he has approved your choice of name and your memorandum. When you receive this document your company legally exists and is ready to trade.

Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or doesn't present) a true and fair view of the company's affairs and complies with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting.

Accounts: The Companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.

Registers, etc.: In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders; a book can be purchased to hold all of the above. This will be provided automatically if you buy a running concern.

Company Seal: All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.

What is the procedure in obtaining a name approval for the proposed Company?
An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated. The application is required to be signed by one of the promoters. The details to be state in the said application are as follows:
1. Four alternative names for the proposed company. (The name can be coined names from the objects of the proposed company or the names of the directors, etc. but should definitely be indicative of the main object of the company. Justification for the name needs to be specified along with the application)
2. Names and addresses of the promoters (Minimum 7 for a public company while 2 for private company).
3. Authorized Capital of the proposed company.
4. Main objects of the proposed company.
5. Names of other group companies. On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued.

What are the Memorandum of Association (MOA) and the Articles of Association (AOA) of a company and what is the procedure in their regard?
On receipt of the name approval letter from the ROC the MOA and the AOA are required to be drafted. The MOA states the main, ancillary / subsidiary and other objects of the proposed company. The AOA contains the rules and procedures for the routine conduct of the proposed company. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. After that, the MOA and AOA are required to be stamped.A stamp duty is required to be paid on the MOA and on the AOA. The stamp duty depends on the authorized share capital.

What are the documents required to be executed for incorporation?
The following documents are required to be executed (signed) before they are submitted to the ROC:
1. MOA and AOA - These are required to be executed by the promoters in their own hand in the presence of a witness in quadruplicate stating their full name, father's name, residential address, occupation, number of shares subscribed for, etc.
2. Form No. 1 - This is a declaration to be executed on a non-judicial stamp paper of INR 20 by one of the directors of the proposed company or other specified persons such as Attorneys or Advocates, etc. stating that all the requirements of the incorporation have been complied with.
3. Form No. 18 - This is a form to be filed by one of the directors of the company informing the ROC the registered office of the proposed company.
4. Form No. 29 - This is a consent obtained from all the proposed directors of the proposed company to act as directors of the proposed company. (Not required in case of private company).
5. Form No. 32 - This is a form stating the fact of appointment of the proposed directors on the board of directors from the date of incorporation of the proposed company and is signed by one of the proposed directors.
6. Name approval letter in original.
7. Power of Attorney signed by all the subscribers of MOA authorizing one of the subscribers or any other person to act on their behalf for the purpose of incorporation and accepting the certificate of incorporation.
8. Power of Attorney in case of a subscriber who has appointed another person to sign the MOA on his behalf.
9. Filing fees as may be applicable.

When can the newly formed company start its business operations?
On receipt of the certificate of incorporation, the public company has to complete certain other legal formalities such as a statutory meeting (within 6 months), statutory report, etc. On completion of the said formalities and on filing of the statutory report with the ROC the ROC issues the certification of commencement of business to the company. Thereafter, the Public Company can start the business operations. The Private Company can start its business immediately on incorporation.

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How to Register a Company in India

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This article was published on 2012/03/27