In this post, we will discuss the procedure to incorporate your company in India. Once you have decided to set up your business you have to decide what would be the best structure for your start-up keeping in mind the nature of your business, your requirements and the long-term vision you have for your start-up. A company is incorporated and registered under The Companies Act, 1956 (hereinafter the “Act”). The Act provides for private and public companies.
According to Section 3(1)(iii) of the Act,
- A private company is a company limited by shares;
- The maximum number of shareholders in a private company is 50;
- No invitation can be made to the public for subscription of shares or debentures;
- A private company cannot make or accept deposits from the public;
- There are restrictions on the transfer of shares;
- The minimum number of shareholders is two;
- The minimum paid up capital at the time of incorporation of a private company is Rupees one lakh. There is no upper limit on the paid up capital and it can be increased any time, on payment of additional stamp duty and registration fee;
- A private company has “Pvt. Ltd.” at the end of its name after registration.
According to Section 3(1)(iv) of the Act,
- A public limited company is a company limited by shares;
- There is no restriction on the maximum number of shareholders;
- There is no restriction on the transfer of shares;
- There is no restriction on acceptance of deposits from the public;
- The minimum number of shareholders is 7;
- A public company requires a minimum paid-up capital of Rupees five lakh or higher;
- A public company has “Ltd.” at the end of its name after registration.
The procedure for incorporating both private and public company is the same. But there are a few extra steps involved in incorporating a public company.
STEP I: REGISTRATION
Director’s Identification Number (DIN) and Digital Signature Certificate (DSC) must be obtained. The Form to be filled is DIN 1.
STEP II: NAME
You have to decide the name of your start-up. Deciding the name is very important as it should be unique and give your start-up its identity.
You will first need to check if your chosen name and trademark is available. After that, Form 1A needs to be filed with the Registrar of Companies for name availability.
STEP III: E-FORMS
This step involves the filling up of 3 forms. Form 1 is an application for incorporation of a company. At this step, the Memorandum of association (MOA) [Section 2(28) of the Act] and the Articles of Association (AOA)[Section 2(2) of the Act], must be drafted.The MOA contains details of the company such as the name, registered office, objects of the company, and how the capital shall be used. The AOA is filed in the case of registration of private companies. The AOA is the framework of the laws and regulations that will govern the company.
Form 18 is the application to file the address of the registered office of the company. Form 32 is filed with the name of the directors and their details.
STEP IV: PAYMENT OF FEES AND STAMP DUTY
After all the necessary documents are filed, the Registrar’s fees must be paid along with the relevant stamp duty.
STEP V: CERTIFICATE OF INCORPORATION
After all the documents have been submitted, if the Registrar is satisfied, then the Certificate of Incorporation will be granted. Private companies can start working after obtaining this certificate, but for public companies to start functioning STEP VI has to be completed.
STEP VI: CERTIFICATE OF COMMENCEMENT (ONLY FOR PUBLIC COMPANIES)
Public companies need the Certificate of Commencement to start their business. To obtain this certificate the public company has to:
- Submit Form No.29 which contains the director’s consent to act as director of the company.
- Arrangement for payment of application and allotment money on shares already taken or agreed to be taken by the directors.
- File a statement in lieu of prospectus with the Registrar in Schedule-IV of the Act.
- File a declaration in Form-20.
The entire process of incorporating a company takes around 40 days. All forms can be found here.
Please do not hesitate to contact us with any questions or comments. Please note that the information on this blog post or in any other part of this site does not constitute legal advice to you for your specific circumstances. For actual legal advice, please be in touch and we will attempt to assist you or refer you to the appropriate advisor.