Introduction - Forming A Company In India:
The Companies Act of 1956 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:
· To represent the parent company or other foreign companies in various matters in India, for example, acting as buying/selling agents in India, etc.
· To conduct research work in which the parent company is engaged provided the results of the research work are made available to Indian companies
· To undertake export and import trading activities.
· 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.
Incorporating a Company - Approval of Name:
- The first step in the formation of a company is the approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the company will maintain its Registered Office.
- This approval is provided subject to certain conditions:
- For instance, there should not be an existing company by the same name.
- Further, the last words in the name are required to be "Private Ltd." in the case of a private company and "Limited" in the case of a Public Company.
- The application should mention at least four suitable names of the proposed company, in order of preference.
- In the case of a private limited company, the name of the company should end with the words "Private Limited" as the last words.
- In case of a public limited company, the name of the company should end with the word "Limited" as the last word.
- The ROC generally informs the applicant within seven days from the date of submission of the application, whether or not any of the names applied for is available.
- Once a name is approved, it is valid for a period of six months, within which time Memorandum of Association and Articles of Association together with miscellaneous documents should be filed.
- If one is unable to do so, an application may be made for renewal of name by paying additional fees.
- After obtaining the name approval, it normally takes approximately two to three weeks to incorporate a company depending on where the company is registered
Memorandum of Articles:
· 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 contain 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
Certificate of Incorporation:
- After the duly stamped Memorandum of Association and Articles of Association, documents and forms are filed and the filing fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorised person to make necessary corrections.
- Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence.
- It takes one to two weeks from the date of filing Memorandum of Association and Articles of Association to receive a Certificate of Incorporation.
- 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
The documents/forms stated below are filed along with Memorandum of Association and Articles of Association on payment of filing fees (depending on the authorised capital of the company):
· Declaration of compliance duly stamped.
· Notice of the situation of the registered office of the company.
· Particulars of Directors, Manager or Secretary.
· Authority executed on a non-judicial stamp paper, in favour of one of the subscribers to the Memorandum of Association or any other person authorizing him to file the documents and papers for registration and to make necessary corrections, if any.
· The ROC’s letter (in original) indicating the availability of the name.
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:
· A printed copy each of the Memorandum and Articles of Association of the proposed company filed along with the declaration duly stamped with the requisite value of adhesive stamps from the State/ Union Territory Treasury .
· Below the subscription clause the subscribers to the Memorandum should write in his own handwriting his full name and father's, or husband's full name in block letters, full address, occupation, e.g.,'business 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 Articles Of Association the subscriber should write in his own handwriting :
· His full name and father's full name in block letters, full address, occupation.
· The signatures of the subscribers to the Memorandum 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 by the subscribers e.g., 20 (Twenty) only. Mention date e.g. 5th day of August, 1996. Place- eg., 'New Delhi'.
· With the stamped copy, one spare copy each of the Memorandum and Articles of Association of the proposed company.
· Original copy of the letter of the Registrar of Companies intimating the availability of name.
· Form No. 18 - Situation of registered office of the proposed company.
· 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.
· Form No. 32 (in duplicate). Particulars of proposed, directors, manager or secretary.
· 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.
· No objection letter from the persons whose name has been given in application for vailability 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.
· 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.