Looking to register your business as a private limited company? Here is everything you need to know to help you get started.
Understanding Private Limited Company
The term corporation has been derived from the Latin word corpus, which means “body.” According to the law, a corporation is a body, a legally recognized entity. It can do business, trade property, make a contract and pay taxes. The most remarkable feature of a corporation is, that it protects its owners from personal liability for corporate debts and obligations to a large extent.
Below is the step-by-step procedure for incorporation of a Company under Companies Act, 2013:
A corporation is a legal entity created externally and artificially apart from those who created it and those who carry out its operations. According to Section 3(1) two or more persons can form a Private Limited Company to conduct any lawful business.
The three basic methods to form a Private Limited Company as per Section 3 (2) are listed below.
- A company limited by shares.
- A company limited by guarantee.
- An unlimited company.
A private limited company must have a minimum of two directors and can have up to a maximum of fifteen directors. The shareholders could be natural persons or companies, including foreign companies. Below listed are the step-wise procedures to be followed when registering a company.
A Chartered Accountant or a Company Secretary can take you through the legalities with ease.
- Procure Digital Signatures
Various documents prescribed under the Companies Act, 2013, are needed to be filed with the digital signature of the Managing Director or Director or Manager or Secretary of the Company, therefore, it is mandatory to obtain a Digital Signature Certificate from the authorized Digital Signature Certificate issuing authority for a minimum of one director to sign the E-forms related to incorporation like form INC.1 and several other documents.
- Procure a DIN (Director Identification Number), as per Section 153
Next step towards company incorporation is DIN. As per 153 of the Companies Act, 2013, each and every individual intending to be appointed as director of a company should apply for allotment of Director Identification Number in form DIR.3 to the Central Government in such form and manner and along with fees applicable. Therefore, before submission of e-Form INC.1 for the availability of the name, all the directors of the proposed company must be sure to procure a DIN if they don’t already have it.
- Check availability of name proposed for the company
Have you thought about the name you want to give your company? If not, now is the time. The name you have thought about must also be available and a procedure needs to be followed to check the availability of the name you have chosen. As per section 4(4) read with Rule-9 of Companies (Incorporation) Rules, 2014, application for the reservation/availability of name shall be in Form no. INC.1 along with prescribed fee of Rs. 1,000/-. In selection of Company name should be in according to the
As per section 4(4) read with Rule-9 of Companies (Incorporation) Rules, 2014, application for the reservation/availability of name shall be in Form no. INC.1 along with prescribed fee. Selection of the company name should be according to the guidelines given in Rule-8 of Companies (Incorporation) Rules, 2014.
MCA has prescribed certain rules for name availability so it is a must to check before applying for the name. Refer Rule-8 of Companies (Incorporation) Rules, 2014.
After approval of name Registrar Of Companies will issue a Name availability letter with reference to approval for the availability of name for a proposed company.
Validity of Name approved by Registrar Of Companies:
As per section 4(5), the maximum time for which name will be available has been prescribed in the law itself under section 4(5). The name will be valid for a period of 60 Days from the date on which the application for reservation was made.
The applicant is not allowed to start business transactions or enter into any agreement or contract in the name of the proposed company until a certificate of registration is issued by the registrar of companies as per the provisions of the Companies Act, 2013 and the rules there under.
- Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)
Drafting of the MOA and AOA is the next step to we worked upon if the name is available and approval letter is issued by the Registrar. It should be noted that the main objects should match with the objects shown in e-Form INC.1. The MOA & AOA are essentially the charters and internal rules and regulations of the company. Therefore, it must be drafted with care.
As per section 4(6) 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.
- Application for Incorporation of a Private Company
The next step would be application for the incorporation of a Private Company. As per Rule-12 of Companies (Incorporation) Rules, 2014, application for incorporation of a private and Public company, with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated, shall be filed in Form no. INC 7 [Rule 12 to 18] along with Form no. INC.22 for a situation of registered office of the company.
Here is a consolidated list of the requirements of this Act:
- Declaration in Form No. INC-8 by Professionals. (As per Rule-14 of Companies (Incorporation) Rules, 2014,
- A declaration in the prescribed form by an advocate, a CA, CMA or CS, who is engaged in the formation of the company.
- Proof of residential address (the address for correspondence till its registered office is established. For verification of signature of subscribers [Pursuant to rule 16 (1) (q) of companies (Incorporation) Rules, 2014 in form no. INC – 10.
- A declaration in the prescribed form 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 there under with respect of registration and matters precedent or incidental thereto have been complied with.
- Affidavit from each of the subscriber to the Memorandum in Form No. INC-9 as per Rule-15 of Companies (Incorporation) Rules, 2014, (an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if there are any, in the articles that he is not convicted of any offence with reference with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or breach of duty to any company under this Act or any former company law during the previous five years and that all the documents filed with the Registrar for registration of the company contain correct and complete information that stands true to the best of his knowledge and belief.
- No Objection Certificate is needed in case there is change in the promoters (first subscribers to MOA).
- Proof of Identity, like the particulars of name, last name or family name, address, nationality and such other particulars of every subscriber to the memorandum, and the particulars of the individuals mentioned in the articles like the first directors of the company along with proof of identity, as may be required, and in the case of a subscriber being a body corporate, such particulars as may be prescribed.
- Articles of Association, if there are any.
Note: Where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such provisions in Form No. INC.7, as the case may be, along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 at the time of incorporation of the company.
- Certified true copy of board resolution/consent by all the partners authorizing to subscribe to MOA.
- PAN Card for an Indian national.
- Copy of certificate of incorporation of the foreign body corporate and proof of registered office address.
- Optional attachments, if there are any
As per Rule-17 of Companies (Incorporation) Rules, 2014, the particulars of each person mentioned in the articles as first director of the company and his interest in other firms or bodies corporate along with his consent to act and hold the position as director of the company shall be filed in Form No.DIR-12. This along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014.
Along with the above details in the Form no.INC.7, Form no. DIR 12 to be filed with the following attachments:
- Declaration by first director in Form INC-9 is compulsory to attach in case of a new company.
- Declaration of the appointee Director, in Form DIR-2.
- Interest in other entities of director it is compulsory to attach in case number of entities entered is more than one.
- Optional attachments, if there are any.
Form no. INC 22:
As per Rule 25 of verification of the registered office.
Section 12(2) of the Companies Act, 2013 states that the Company shall furnish to the Registrar, verification of its Registered Office within a period of thirty days of its incorporation in the prescribed manner and form.
Section 12(4) of the Companies Act, 2013 states that Notice of every change of the situation of the registered office, verified in the prescribed manner, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall maintain record of it.
Along with the above details in Form No. INC.7, Form no. DIR.22 to be filed with the following attachments:
- Copies of the utility bills as mentioned above for eg: the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, which is not older than two months(not older than two months).
- Proof of Registered Office address for eg: Rent Agreement/Conveyance/Lease deed along with the rent receipts, or the notarized copy of lease /rent agreement in the name of the company along with a copy of rent paid receipt not older than one month; or the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office.
- List of all the companies (specifying their CIN) having the same registered office address, if there are any.
- Optional attachments, if there is any.
Please follow these pointers:
- User is required to file E-Form INC-7 for incorporation of Company other than OPC within sixty days from the date of application of reservation of name in E-Form INC-1.
- It is suggested that E-Form DIR-12 and E-Form INC-22 should be filed together at the time of filing of E-Form INC-7 when address for correspondence is the address of registered office of the company.
- In case the address for correspondence is not the same as address of the registered office of the Company, user is required to file INC-22 within 30 days of its incorporation.
- Stamp duty on E-Form INC-7, MOA and AOA can be paid electronically through the MCA portal and in such case submission of physical copies of the uploaded E-Form INC-7, MOA and AOA to the office of Registrar Of Companies is not required.
- Payment of stamp duty has to be made electronically through MCA portal is mandatory in respect of the States which have authorized the Central Government to collect stamp duty on their behalf.
- Now e-Stamp duty payment is to be made online through MCA portal for all the states.
- It is compulsory for the user to scan the photographs of each and every subscriber with MOA and AOA.
- Minimum authorized capital of Indian Rupees 100,000 is required to form a private company in India. There is no ceiling to it.
Usually time taken for incorporation a Private Limited Company in India from 2 to 6 weeks. The speed of registration will depend on submission of relevant documents by the client and speed of government approval. To ensure speedy registration, one must try to choose a unique name for the Company and ensure you have all the required documents in place prior to starting the registration process.
Once a Company is duly incorporated, it will remain active and in-existence as long as the annual compliance are lawfully met in a regular fashion. In case of non-compliance, the company will become dormant and maybe unlisted from the register after a certain period of time.
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