Forming a Company In India

The Companies Act of 2013 sets down rules for the establishment of both public and private companies. The most commonly used corporate form is the limited company, unlimited companies being relatively uncommon. A company is formed by registering the Memorandum and Articles of Association with the State Registrar of Companies of the state in which the main office is to be located. Foreign companies engaged in manufacturing and trading activities abroad are permitted by the Reserve Bank of India to open branch offices in India for the purpose of carrying     on the following activities in India:

1. To represent the parent company or other foreign companies in various matters in India, for example, acting as buying/selling agents in India, etc.
2. To conduct research work in which the parent company is engaged provided the results of the research work are made available to Indian companies.
3. To undertake export and import trading activities.
4. To promote possible technical and financial collaboration between Indian companies and overseas companies.

Application for permission to open a branch, a project office or liaison office is made via the Reserve Bank of India by submitting form FNC-5 to the Controller, Foreign Investment and Technology Transfer Section of the Reserve Bank of India. For opening a project or site office, application may be made on Form FNC-10 to the regional offices of the Reserve Bank of India. A foreign investor need not have a local partner, whether or not the foreigner wants to hold full equity of the company. The portion of the equity thus not held by the foreign investor can be offered to the public. Covering the various States and Union Territories in India, Registrars of Companies (ROC) in India are appointed under Section 609 and are vested with the principal duty of registering companies established in the respective States and Union Territories. These offices maintain all the records pertaining to the companies registered with them. These records are made available for the public for inspection on payment of a prescribed fee. The principal tasks of the Registrars of Companies extend into Company Incorporation, name change, change of financial year, conversion of companies from Private to Public and vice versa, striking off of the names of companies, and default action against companies.

Incorporating a Company

In order to incorporate a company in India with the ROC, certain steps are required to be followed.  The detailed process to complete such company registration is outlined here under:

Step 1: Obtaining Director Identification Number (DIN)

All promoter directors of a company are required to obtain an identification number called the Director Identification Number (DIN) prior to formation of a company.  The DIN is issued by the Ministry of Corporate Affairs (MCA). Firstly, a provisional DIN needs to be obtained through online form DIN-1 which is available on the Ministry of Corporate Affairs website. Take a print out of the Provisional DIN, paste photograph, sign at the prescribed places and send the same to DIN Authorities in DIN Cell by courier along with identity proof and address proof. Upon verification and satisfaction of the correctness of the documents, the DIN Authority converts the Provisional DIN into Permanent DIN.

Documents and Information Required:

• One identity proof containing photo and date of birth and one address proof is required to be submitted along with the executed form.
• Identity proof may be Passport/Voter Card/Driving License/PAN Card etc. In case of foreign citizen/NRI, identity proof should necessarily be a passport copy.
• Address proof may be Passport/Voter Card/Ration Card/Driving License/Electricity Bill/Telephone Bill/Bank Statement etc.
• General information such as name, father’s name, date of birth, nationality, contact details, etc. is required for filling the form. In case of a foreign national, the photograph, identity proof and address proof should be duly attested by the notary public/Indian embassy/apostle authority in the home country of the applicant.

Attestation Requirement:

Photograph, identity proof and address proof needs to be attested by notary public, govt. gazette officer, practicing CA/CS/ICWA etc. In case of a foreign national, the photograph, identity proof and address proof should be duly attested by the notary public/Indian embassy/ apostle authority in the home country of the applicant.

Time Required:

It may take around 3-5 days to obtain a DIN.

Step 2 – Obtaining Digital Signature Certificate (DSC)

The documents required for formation of a company are required to be filed on-line and DSC is a verification tool (equivalent to hand written signature) used for filing such documents with the ROC. DSC can be obtained for any one or more directors of the proposed company under whose name the documents are usually filed. DSC are of various classes and a Class II DSC is applicable for incorporation and for the process thereafter.

Process for Obtaining DSC:

Government has authorized various certification agencies for issuing DSC. In order to obtain DSC, the prescribed application form of the chosen agency has to be filled in and submitted along with the identity proof and address proof. The certification agency office verifies all the documents and upon satisfaction issues DSC in a USB token (and also through email). It is a password protected file.

Documents and Information Required:

• One identity proof containing photo and date of birth and one address proof is required to be submitted along with the executed form.
• Identity proof may be a Passport/Voter Card/Driving License/PAN Card etc. In case of foreign citizen/NRI, identity proof should necessarily be a passport copy.
• Address proof may be a Passport/Voter Card/Ration Card/Driving License/Electricity Bill/Telephone Bill/Bank Statement etc.
• General information such as name, father’s name, date of birth, nationality, contact details, etc. is also required for filling the form. Additionally, father’s and mother’s name is required for the mandatory roll check of DSC with ROC.

Attestation Requirement:

In case of a foreign national, the photograph, identity proof and address proof should be duly attested by the notary public/Indian embassy/ apostle authority in the home country of the applicant.  

Time Required:

It may take around 1-3 days to obtain a digital signature.

Note: An application for DSC can also be made simultaneously with the DIN application to save time.

Step 3 – Filing for Name Availability

Every company needs to have a name and the person incorporating it shall select a few names in the order of preference. The name shall be in consonance with the subject and objects of the proposed company and shall not be similar to the name of any existing company.  Certain guidelines (give a hyperlink for name availability guidelines) have been prescribed by the MCA for selection of the name of a company which needs to be considered before selecting a name.

How to apply for Name Availability:

After the permanent DIN and DSC are obtained, an application in the prescribed form (i.e. Form No.1A) needs to be filed (on-line) with the ROC. The application shall contain 6 names in order or preference, significance of names proposed with the proposed company, brief description on the main objects, authorized capital, promoter names (with DIN).  ROC officials check the Name Approval Application form as per the prescribed guidelines and upon satisfaction, ROC approves the name and reflects the approval online on the MCA portal.

Documents and Information Required:

The following information is required for the purposes of Form 1A:

• Full names, occupation and complete address of the applicant who should be one of the initial shareholders of the proposed company;
• Full names, complete address and PAN / DIN / CIN / registration number of the 2 initial shareholders (subscribers to the Memorandum of Association) – a minimum of 2 shareholders /subscribers are required in case of a private company and 7 for a public company;
• DIN of promoter directors (at least 2 directors required)
• DSC of any one promoter director for signing the form
• Amount of authorized capital size
• Name of the city and state in which the proposed company is to be registered.
• At least one suitable name and up to a maximum of six names, indicative of the main objects of the company.
• Brief description on main objects of proposed company.
• In case of the proposed name is similar to the parent company, copy of Directors/Members meeting resolution is also required giving its no objection to such usage and a NOC certificate.

Time Required:

Approx 2-6 days.

Notes:

• If any of the initial shareholders are bodies corporate, a copy of a board resolution is required granting approval for incorporation of a company in India and nominating individuals resident in India on their behalf to do the necessary acts including signing of MOA and AOA on behalf of the company.
• If any of the initial shareholders is a foreign body corporate, the board resolution as stated hereinabove and the NOC etc. would require notarization from the notary public and consularization from the Indian Embassy prior to being sent to India.

Step 4: Drafting of Memorandum of Association and Articles of Association of the company:

The name approval received from the ROC is valid for a period of sixty (60) days (the validity of the same can be extended by another thirty (30) days by applying to the ROC), within which time period, the necessary documents for incorporation of a company should be filed with the concerned ROC.  The Memorandum of Association and Articles of Association are the most important documents to be submitted to the ROC for the purpose of incorporation of a company. The Memorandum of Association is a document that sets out the constitution of the company. It contains, amongst others, the objectives and the scope of activity of the company besides also defining the relationship of the company with the outside world. The Articles of Association contains the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes.

The ROC will give the certificate of incorporation after the required documents are presented along with the requisite registration fee, which is scaled according to the share capital of the company, as stated in its Memorandum. A private company can commence business on receipt of its certificate of incorporation. A public company has the option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus, which provides information about the company to potential investors. The Companies Act specifies the information to be contained in the prospectus. The prospectus has to be filed with the ROC before it can be issued to the public. In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a “Statement in Lieu of Prospectus” with the ROC. On fulfillment of these requirements, the ROC issues a Certificate of Commencement of Business to the public company. The company can commence business immediately after it receives this certificate.

• Drawing up of the Memorandum of Association and Articles of Association
• Getting the appropriate persons to subscribe to the Memorandum (a minimum of 7 for a public company and 2 for a private company)

Documents Required:

For incorporating a company in India, the applicant needs to file the following documents with the ROC:

• Articles of Association;
• Form 1- application and declaration for incorporation of a company;
• Form 18- location of registered office;
• Form 32-particulars of directors;
• Consent letters from the proposed directors of the company;
• Colored photographs of the proposed directors;
• Power of Attorney in favour of person/consultant to make corrections to incorporation documents and collect the Certificate of Incorporation;
• In cases where the subscribers/ initial shareholders are persons resident outside India, the MOA and AOA will have to be notarized in the country of their residence and then apostilled.

Process:

All the above documents are filed on-line and a physical copy of some of the documents is also filed with the ROC. Stamp duty & ROC registration fees needs to be paid (challan shall be generated electronically and can be paid through net banking or credit card or in bank branch by cheque/DD).

Time Required:

Approx 6-9 days

Stamp Duty:

The stamp duty varies as per the size of the authorized capital of the company. Details of the same are provided at the MCA web portal.

ROC Registration Fees:

The registration fees also depends upon the size of the authorized capital of the company as provided at the MCA portal.

Step 5 – Receipt of CIN and Certificate of Incorporation

On submission of above documents and payment of requisite fees, ROC officials verify all the documents and upon satisfaction ROC allots a Company Identity Number (CIN) to the proposed company. The Certificate of Incorporation is the conclusive evidence of the incorporation of a company.

Note:

A private company can start its operations upon receipt of the certificate of incorporation. However, in case of a public limited company, a certificate for commencement of business is also required to be obtained.

The ROC shall verify the documents and suggest modifications wherever required. The authorized person should duly carry out such modifications. The modified documents should be e – filed again. Thereafter, Registrar on being satisfied that all the requirements for the registration of the company as laid down under the Act and rules made there under have been duly complied with shall certify under his hand that company is incorporated and issue a certificate of incorporation to the company. Although a private company can commence business immediately after receiving the certificate of incorporation, a public company cannot do so until it obtains a Certificate of Commencement of Business from the ROC.

Rules Applicable

Companies (Central Governments’) General Rules and Forms, 1956

Filing Registering/Approving Authority:

One copy has to be submitted along with a forwarding letter addressed to the concerned Registrar of Companies.
Enclosures

The declaration must be submitted with the following annexures

1. Document evidencing payment of fee.
2. Memorandum and Articles of Association.
3. Copy of agreement if any, which the proposed company wishes to enter into with any individual for appointment as its managing or whole-time director or manager.
4. Form 18.
5. Form 32 (except for section 25 company).
6. Form 29 (only in case of public companies).
7. Power of Attorney from subscribers.
8. Letter from Registrar of Companies making names available.
9. No objection letters from directors/promoters.
10. Requisite fees either in cash or demand draft

Fees
Fee payable depends on the nominal capital of the company to be registered and may be paid in one of the following modes. Cash/postal order (upto Rs.501-), demand draft favouring Registrar of Companies/Treasury Challan should be payable into specified branches of Punjab National Bank for credit.

Time-Limit
It should be submitted before incorporation or within 6 months of the name being made available.

Notes: The declaration has to be signed by an advocate of Supreme Court or High Court or an attorney or pleader entitled to appear before the High Court or a secretary or chartered accountant in whole-time practice in India who is engaged in the formation of the proposed company or person named in the articles as director, manager or secretary. The Registrar of Companies has to be satisfied that not only the requirements of section 33(1) and (2) have been complied with but be also satisfied that provisions relating to number of subscribers, lawful nature of objects and name are complied with. The Registrar will check whether the documents have been duly stamped and also whether the requirements of other laws are met. Any defect in any of the documents filed has to be rectified either by all the subscribers or their attorney, or by any one subscriber holding the power of attorney on behalf of other subscribers. This form is to be presented to the Registrar of Companies within three months from the date of letter of Registrar allowing the name. This declaration is to be given on a non-judicial stamp paper of the requisite value. The stamp paper should be purchased in the name of the person signing the declaration. This declaration is to be given by all the companies at, the time of registration, public or private. The place of Registration No. of the company should be filled up by mentioning New Company therein. The Registrar of Companies will now accept computer laser printed documents for purposes of registration provided the documents are neatly and legibly printed and comply with the other requirements of the Act. This will be an additional option available to the public to use laser print besides offset printing for submitting the memorandum and articles for the registration of companies. Where the executant of a memorandum of association is illiterate, he shall give his thumb impression or marks which should be described as such by the subscriber or person writing for him. An agent may sign a memorandum on behalf of a subscriber if he is authorised by a power-of-attorney to do so. In the case of an illiterate subscriber to the memorandum and articles of association, the thumb impression or mark duly attested by the person writing for him should be given. The person attesting the thumb mark should make an endorsement on the document to the effect that it has been read and explained to the subscriber. The Registrar of Companies will not accept zerox copies of the memorandum and articles of association for the purposes of registration of companies.

Company Law India

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• Rules to safe and secure you trademark
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Nupur Thapliyal