Incorporation of Private Company – Basic information and steps.Disclaimer: This is an article of academic purpose only and not for practical application. Check all relevant updates with expert opinion before taking any steps.
Incorporation of a company is like giving birth to a child. It involves many painful steps with lots of care to incorporate a company and allowing it to grow. There is clear cut process defined to start a company with lots of legal processes and compliances. Companies Act 2013, contains elaborate provisions for incorporating a company along with rules framed there under. Once we decides to start a company and incorporate it, the first thing what we need to finalise it is, whether the company is limited company and whether private or public. This is because as per the company law, the liability of the members of the company is limited to the unpaid value of shares owned by them or the amount they specifically guaranteed by them to be paid at the time of winding up. If the nature of the company is decided as private company the procedures are as follows. Companies Act, 2013 provides for Form INC-32 for incorporating a company by electronically. The Form is also called as SPICE form means Simplified Performa for Incorporating Company Electronically. The procedures for incorporation under the above mentioned form are as follows.
1.Obtain Digital Signatures In this electronic era, the companies Act also provides electronic form in majority of the situations. Forms can be files electronically, signatures also can be done electronically. For signing electronically on behalf of the company, digital signatures are required. It is compulsory to obtain Class II Digital Signature Certificate for all subscribers of Memorandum of Association and Articles of Association and also by at least one director for signing the forms necessary for incorporation.
2.Director Identification number: Section 153 of the Companies Act stipulates that ever person who like to be appointed as director of a company shall make an application for allotment of Director Identification Number to the Ministry of Corporate Affairs. It is to be note that DIN is not required for filing incorporation application, and both can be applied together.
3.Name of the company: It is not guaranteed that the name selected by you will be available all the time. The name same name may prohibited or used by some other, in that case before filing the application for incorporation of a company it will be wise to reserve the name. This process is called Reserve Unique Name (RUN). For this an application need to be filed with Ministry of Corporate Affairs portal with a fee of Rs. 1000. If the name is allowed it will be available for 20 days and if the name is not allowed then a resubmission is available within 15 days of rejection.
4.Memorandum and Articles of Association of the company: Next most important step in the incorporation of the company is the preparation of Memorandum and Articles of Association of the company, where memorandum is the charter of the company and Articles contains the internal rules and regulations of the company. As these are the master documents of the company, it needs to prepare with utmost care and diligence. The outsiders dealing with or want to know more about the company will be looking on to these two documents to understand about the company.
5.Application for Incorporation: Now we are ready to file the application for incorporation and the application need to be filed in Form INC-32 (SPICE). The main aspects to be considered while filing the application are as follows: Name of the company: If the name is reserved with MCA the serial number of the reservation should be mentioned and if not reserved then an application for one name can be made in the same form, SPICE INC 32. Capital of the company: Section 2(68) of the Companies Act says there is no minimum or maximum bar for the Authorised or paid up capital of the company, but it should be noted that the registration fees and stamp duty is purely based on the capital of the company. Details of directors and subscribers to Memorandum and Articles of Association: All details as required has be submitted along with DIN, if already possess. If the person does not have a DIN, it should be applied. Additional details: Details like registered office, main activity and such other information as required need to be filed. Signing of Forms: the forms should be signed by at least one person digitally who is the proposed director and should be certified by a professional. Attachments with the application:
First subscribers and directors declaration in specified form.
Non acceptance of deposit declaration by first subscribers and directors.
Directors interest in other entities.
Directors consent to act as director in specified form.
Address proof of the premise with a utility bill.
Identity and address proof of the subscribers and directors, if they are applying for DIN along with.
NOC of the owner of the premise if it is on lease or rent. If all the documents are ready the application can be uploaded in the Ministry of Corporate Affairs Website. Conclusion The incorporation of a company is a work to be done by an expert. So it is always advisable to engage a professional like a Company Secretary to file the application on behalf of the company, so that we can avoid repeater errors and mistakes, also can save lot of time and energy also money.