Formation or incorporation of A Company – For the formation of a company, a company passes through the following three stages :-
1. Promotion Stage: The
stage of conceiving an idea and its working is termed as promotion of a
company. The person involved in this task is termed as “Promoter”.
There are certain important decisions which are taken before the
formation of the company. There first important matter to decide could
be either :-
(1) To start a new business altogether, or
(2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to dispose of that business to avoid huge losses. In such a case it may be better to acquire a running business with favorable terms and conditions and it may prove to be a good decision.
(2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to dispose of that business to avoid huge losses. In such a case it may be better to acquire a running business with favorable terms and conditions and it may prove to be a good decision.
The other important matters be decided before the formation of the
company could be the decision regarding the product to be produced, the
size of the company, the capital involved in the project, the sources of
the capital and whether it shall be a Private Company or a Public Company.
Any of the above decisions i.e., to start a new business altogether
or to acquire an already running business, along with the other matters
shall have to be taken by some person or persons who are at the helm of
the affairs. They are called PROMOTERS.
Where it has been decided to form a Private Company 2 persons and where it has been decided to form a Public Company
at least 7 persons shall subscribe their names to a Memorandum of
Association and they shall also comply with the other formalities in
respect of the registration of the company under the Indian Companies Act, 1956.
Document to be filed with the Registrar:
It is desirable to ascertain from the Registrar (Registrar of the State
in which the Registered office of the company shall be situated) of the
companies that whether the proposed name of the company shall be
approved if registration is sought for a new company with such name.
Where already a company with such name is existing, it shall not be allowed by the Registrar, because tow companies with the similar name cannot be registered.
But if he says yes, because no other
company is registered with that name, an application for the
registration of the company should be presented to the Registrar of the
State in which the Registered office of the company shall be situated.
The appl9ication along with necessary fee shall be presented along with
the following documents :
(1) The Memorandum of Association.
(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
(4) A statement of the nominal capital of the Company.
(5) A notice of address of the registered office of the company.
(6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
(4) A statement of the nominal capital of the Company.
(5) A notice of address of the registered office of the company.
(6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
(7) A declaration that all the requirements of the Companies Act have been complied with, shall also be submitted, which shall be signed by one nay of the following persons :
(i) An advocate of the Supreme Court or High Court, or
(ii) An attorney or a pleader entitled to appear before a High Court, or
(iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or
(iv) A person named in the Articles as a Directors, Manager or Secretary of the company.
(ii) An attorney or a pleader entitled to appear before a High Court, or
(iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or
(iv) A person named in the Articles as a Directors, Manager or Secretary of the company.
Where the Registrar of Companies
is satisfied that all the requirement have been complied with, he will
register the company and enter the name of the company in the Register
of Companies.
2. Incorporation Stage :
Where the Registrar of Companies is satisfied that all the requirements
have been complied with, he will register the company, and enter the
name of the company in the Register of Companies.
When a company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation
in which he certifies that the company is incorporated under his hand
and in the case of a limited company that the company is a Limited Company.
Legal FAQs -Effects of Registration / Incorporation of a Company
When a company is registered and a
Certificate of Incorporation is issued by the Registrar, it shall have
the following effects :
- The company shall become s Separate Legal Entity from the date mentioned on the Certificate of Incorporation, which is considered as date of birth of the company.
- The Company acquires Perpetual Succession. The members may come, members may go, but it goes for ever.
- The company becomes the owner of its property and the Promoters of Shareholders have the right to share in the profits of the company.
- The company can sue and can be sued in its own name.
How to Form a Company – Steps
Effects of Registration and Incorporation of A Company
Distinction Between A Public Company And a Private Company
Company Law – Tips for Lawyers and Layman
Legal FAQs -Distinction Between A Public Company And a Private Company
Distinction Between A Public Company And a Private Company – Following are the main points of difference between a Public Company and a Private Company :-
1. Minimum Paid-up Capital
: A company to be Incorporated as a Private Company must have a minimum
paid-up capital of Rs. 1,00,000, whereas a Public Company must have a
minimum paid-up capital of Rs. 5,00,000.
2. Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires at least 7 members.
3. Maximum number of members
: Maximum number of members in a Private Company is restricted to 50,
there is no restriction of maximum number of members in a Public
Company.
4. Transerferability of shares
: There is complete restriction on the transferability of the shares of
a Private Company through its Articles of Association , whereas there
is no restriction on the transferability of the shares of a Public
company
5 .Issue of Prospectus :
A Private Company is prohibited from inviting the public for
subscription of its shares, i.e. a Private Company cannot issue
Prospectus, whereas a Public Company is free to invite public for
subscription i.e., a Public Company can issue a Prospectus.
6. Number of Directors :
A Private Company may have 2 directors to manage the affairs of the
company, whereas a Public Company must have at least 3 directors.
7. Consent of the directors
: There is no need to give the consent by the directors of a Private
Company, whereas the Directors of a Public Company must have file with
the Registrar a consent to act as Director of the company.
8. Qualification shares
: The Directors of a Private Company need not sign an undertaking to
acquire the qualification shares, whereas the Directors of a Public
Company are required to sign an undertaking to acquire the qualification
shares of the public Company .
9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.
9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.
10. Shares Warrants : A
Private Company cannot issue Share Warrants against its fully paid
shares, Whereas a Private Company can issue Share Warrants against its
fully paid up shares.
11. Further issue of shares
: A Private Company need not offer the further issue of shares to its
existing share – holders, whereas a Public Company has to offer the
further issue of shares to its existing share – holders as right shares.
Further issue of shares can only be offer to the general public with
the approval of the existing share – holders in the general meeting of
the share – holders only.
12. Statutory meeting :
A Private Company has no obligation to call the Statutory Meeting of
the member, whereas of Public Company must call its statutory Meeting
and file Statutory Report with the Register of Companies.
13. Quorum : The quorum
in the case of a Private Company is TWO members present personally,
whereas in the case of a Public Company FIVE members must be present
personally to constitute quorum. However, the Articles of Association
may provide and number of members more than the required under the Act.
14. Managerial remuneration
: Total managerial remuneration in the case of a Public Company cannot
exceed 11% of the net profits, and in case of inadequate profits a
maximum of Rs. 87,500 can be paid. Whereas these restrictions do not
apply on a Private Company.
15. Special privileges : A Private Company enjoys some special privileges, which are not available to a Public Company.
How to Form a Company – Steps Effects of Registration and Incorporation of A Company Distinction Between A Public Company And a Private Company Company Law – Tips for Lawyers and Layman
How to Form a Company – Steps Effects of Registration and Incorporation of A Company Distinction Between A Public Company And a Private Company Company Law – Tips for Lawyers and Layman
How To Form A Company
Formation or incorporation of A Company – For the formation of a company, a company passes through the following three stages :-
1. Promotion Stage: The
stage of conceiving an idea and its working is termed as promotion of a
company. The person involved in this task is termed as “Promoter”.
There are certain important decisions which are taken before the
formation of the company. There first important matter to decide could
be either :-
(1) To start a new business altogether, or
(2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to dispose of that business to avoid huge losses. In such a case it may be better to acquire a running business with favorable terms and conditions and it may prove to be a good decision.
(2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to dispose of that business to avoid huge losses. In such a case it may be better to acquire a running business with favorable terms and conditions and it may prove to be a good decision.
The other important matters be decided before the formation of the
company could be the decision regarding the product to be produced, the
size of the company, the capital involved in the project, the sources of
the capital and whether it shall be a Private Company or a Public Company.
Any of the above decisions i.e., to start a new business altogether
or to acquire an already running business, along with the other matters
shall have to be taken by some person or persons who are at the helm of
the affairs. They are called PROMOTERS.
Where it has been decided to form a Private Company 2 persons and where it has been decided to form a Public Company
at least 7 persons shall subscribe their names to a Memorandum of
Association and they shall also comply with the other formalities in
respect of the registration of the company under the Indian Companies Act, 1956.
Document to be filed with the Registrar:
It is desirable to ascertain from the Registrar (Registrar of the State
in which the Registered office of the company shall be situated) of the
companies that whether the proposed name of the company shall be
approved if registration is sought for a new company with such name.
Where already a company with such name is existing, it shall not be allowed by the Registrar, because tow companies with the similar name cannot be registered.
But if he says yes, because no other
company is registered with that name, an application for the
registration of the company should be presented to the Registrar of the
State in which the Registered office of the company shall be situated.
The appl9ication along with necessary fee shall be presented along with
the following documents :
(1) The Memorandum of Association.
(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
(4) A statement of the nominal capital of the Company.
(5) A notice of address of the registered office of the company.
(6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
(4) A statement of the nominal capital of the Company.
(5) A notice of address of the registered office of the company.
(6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
(7) A declaration that all the requirements of the Companies Act have been complied with, shall also be submitted, which shall be signed by one nay of the following persons :
(i) An advocate of the Supreme Court or High Court, or
(ii) An attorney or a pleader entitled to appear before a High Court, or
(iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or
(iv) A person named in the Articles as a Directors, Manager or Secretary of the company.
(ii) An attorney or a pleader entitled to appear before a High Court, or
(iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or
(iv) A person named in the Articles as a Directors, Manager or Secretary of the company.
Where the Registrar of Companies
is satisfied that all the requirement have been complied with, he will
register the company and enter the name of the company in the Register
of Companies.
2. Incorporation Stage :
Where the Registrar of Companies is satisfied that all the requirements
have been complied with, he will register the company, and enter the
name of the company in the Register of Companies.
When a company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation
in which he certifies that the company is incorporated under his hand
and in the case of a limited company that the company is a Limited Company.
Page Contents [hide]
- Legal FAQs -Effects of Registration / Incorporation of a Company
- Legal FAQs -Distinction Between A Public Company And a Private Company
- Rules applicable
- Filing Registering/Approving Authority
- Enclosures
- Fees
- Time-limit
- Practice Notes
- Declaration to be signed by
- Presented by
- Fee payable
- Penalty
- Person liable for default
Legal FAQs -Effects of Registration / Incorporation of a Company
When a company is registered and a
Certificate of Incorporation is issued by the Registrar, it shall have
the following effects :
- The company shall become s Separate Legal Entity from the date mentioned on the Certificate of Incorporation, which is considered as date of birth of the company.
- The Company acquires Perpetual Succession. The members may come, members may go, but it goes for ever.
- The company becomes the owner of its property and the Promoters of Shareholders have the right to share in the profits of the company.
- The company can sue and can be sued in its own name.
How to Form a Company – Steps
Effects of Registration and Incorporation of A Company
Distinction Between A Public Company And a Private Company
Company Law – Tips for Lawyers and Layman
Legal FAQs -Distinction Between A Public Company And a Private Company
Distinction Between A Public Company And a Private Company – Following are the main points of difference between a Public Company and a Private Company :-
1. Minimum Paid-up Capital
: A company to be Incorporated as a Private Company must have a minimum
paid-up capital of Rs. 1,00,000, whereas a Public Company must have a
minimum paid-up capital of Rs. 5,00,000.
2. Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires at least 7 members.
3. Maximum number of members
: Maximum number of members in a Private Company is restricted to 50,
there is no restriction of maximum number of members in a Public
Company.
4. Transerferability of shares
: There is complete restriction on the transferability of the shares of
a Private Company through its Articles of Association , whereas there
is no restriction on the transferability of the shares of a Public
company
5 .Issue of Prospectus :
A Private Company is prohibited from inviting the public for
subscription of its shares, i.e. a Private Company cannot issue
Prospectus, whereas a Public Company is free to invite public for
subscription i.e., a Public Company can issue a Prospectus.
6. Number of Directors :
A Private Company may have 2 directors to manage the affairs of the
company, whereas a Public Company must have at least 3 directors.
7. Consent of the directors
: There is no need to give the consent by the directors of a Private
Company, whereas the Directors of a Public Company must have file with
the Registrar a consent to act as Director of the company.
8. Qualification shares
: The Directors of a Private Company need not sign an undertaking to
acquire the qualification shares, whereas the Directors of a Public
Company are required to sign an undertaking to acquire the qualification
shares of the public Company .
9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.
9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.
10. Shares Warrants : A
Private Company cannot issue Share Warrants against its fully paid
shares, Whereas a Private Company can issue Share Warrants against its
fully paid up shares.
11. Further issue of shares
: A Private Company need not offer the further issue of shares to its
existing share – holders, whereas a Public Company has to offer the
further issue of shares to its existing share – holders as right shares.
Further issue of shares can only be offer to the general public with
the approval of the existing share – holders in the general meeting of
the share – holders only.
12. Statutory meeting :
A Private Company has no obligation to call the Statutory Meeting of
the member, whereas of Public Company must call its statutory Meeting
and file Statutory Report with the Register of Companies.
13. Quorum : The quorum
in the case of a Private Company is TWO members present personally,
whereas in the case of a Public Company FIVE members must be present
personally to constitute quorum. However, the Articles of Association
may provide and number of members more than the required under the Act.
14. Managerial remuneration
: Total managerial remuneration in the case of a Public Company cannot
exceed 11% of the net profits, and in case of inadequate profits a
maximum of Rs. 87,500 can be paid. Whereas these restrictions do not
apply on a Private Company.
15. Special privileges : A Private Company enjoys some special privileges, which are not available to a Public Company.
How to Form a Company – Steps Effects of Registration and Incorporation of A Company Distinction Between A Public Company And a Private Company Company Law – Tips for Lawyers and Layman
How to Form a Company – Steps Effects of Registration and Incorporation of A Company Distinction Between A Public Company And a Private Company Company Law – Tips for Lawyers and Layman
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 following annexes.
Document evidencing payment of fee.
Memorandum and Articles of Association.
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.
Form 18
Form 32(except for section 25 company).
Form 29 (only in case of public companies).
Power of Attorney from, subscribers.
Letter from Registrar of Companies making name available.
No objection letters from directors/promoters.
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
thefollowing 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 under the
following head,
Namely :-
|
Time-limit
It should be submitted before incorporation or within 6 mouths of the name being made available.
Practice 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 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 not only that the requirements of section 33(1) and (2) have
been complied with but be also satisfied that provisions relating to
number of sub scribes, 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 one subscriber holding 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 public; to use laser print besides offset printing for
submitting the memorandum and articles for registration of companies.
Where the executants of a memorandum of
association is illiterate, he shall give his thumb impression or marks
which should be described as such by the sub- scriber 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 endorse- ment on the
document to the effect that it has been read and explained to the sub-
scriber.
The Registrar of Companies will not
accept zerox copies of the memo ran dum and articles of association for
the purposes of registration of companies.
Declaration to be signed by
(i) An advocate of the Supreme Court or of the High Court or an attorney entitled to appear before the High Court, or
(ii) a secretary or a chartered accountant in wholetime practice in India, or
(iii) by a person named in the articles
of association of the proposed company as a director, manager or
secretary of the company.
Presented by
This declaration is to be presented by
the person signing the declaration or by his bearer at the counter of
the Registrar of Companies office.
With whom to be filed
With the Registrar of Companies of the State in which the company is to be registered.
Documents required to be submitted
(1) A printed copy each of the Memorandum and Articles of Association of the proposed company-filed along with declaration
duly stamped with the requisite value of
adhesive stamps from the State/ Union Territory Treasury(For value of
stamps to be affixed see Schedule printed in Part Ill, Chapter 23.)
below the subscription clause the
subscribers to the Memorandum, should write in his own hand-his full
name and father’s, or husband’s full name in block letters full address,
occupation,e.g.,’busidess executive, engineer, housewife, etc. and
number of equity shares taken and then put his or her signatures in the
column meant for signature.
Similarly at the end of the Artictes of
Association the subscriber should write in his own hand-7-his full name
and father’s full name in block letters, full address, occupation.
the signatures of the subscribers to
Mernorandum and the Article of Association should be witnessed by one
person preferably by the person representing the subscribers, for
registration of the proposed company before the Registrar of Companies.
Under column ‘Total number of equity shares’ write the total of the shares taken
Mention date e.g. 5th day of August, 1996.
Place-e.g. , ‘New Delhi’.
(2) With the stamped copy one spare copy each of the Memorandum and Articles of Association of the proposed company.
(3) Original copy of the letter of the Registrar of Companies intimating the availability of name.
(4) Form No. 18 – Situation of registered office of the proposed company.
(5) Form No. 29–Consent to act as a
director etc. Dates on the consent Form and the undertaking letters
should be the same as is mentioned in the
Memorandum of Association signed by the
director himself. A private company and a wholly-owned Government
company are not required to file Form No. 29.
(6) Form No. 32 (in duplicate). Particulars of proposed, directors, manager or secretary.
(7) Power of attorney duly typed on a
non-judicial stamp paper of the requisite value. The stamp paper should
be purchased in the name of the persons signing the authority.
(8) No objection letter from the persons
whose name has been given in application for availability of name in
Form No. 1-A as promoters/directors but are not interested at a later
stage should be obtained filed with the Registrar at the time of
submitting documents, for registration
(9) The agreements, if any, which the
company proposes to enter with any individual for, appointment as
managing or whole-time director or manager are also to be filed.
Fee payable
Cash or a bank draft/ pay order treasury
challan should be drawn in the name of the Registrar of Companies of
the State in which the Company is proposed to be registered as per
Schedule X.
Penalty
Imprisonment up to two years and fine.
Person liable for default
Person signing the declaration.
