Formation of a company is one of the significant legal procedures to create and administer a corporate form. Under the Companies Act of 2013, this process has been simplified through particular requirements and steps toward making the registration procedure not very complicated and further facilitating corporate transparency. It provided a systematic legal structure to establish, carry on, and conduct the companies all over India. Whether it is a start-up, a private limited company, or a public company, such provisions need to be well understood by every entrepreneur.
The Companies Act 2013 lays an overall structure for the incorporation of a company that further elucidates the forms of companies developed, the company incorporation procedure, and steps followed by compliance for maintaining responsible corporate governance in the company. This act also makes easier the completion of online filing procedures regarding the incorporation of companies that can be made available to all types of businesses and organizations of varying sizes.
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Steps in the formation of a company
Company formation is a methodical procedure. The step starts by choosing the type of correct company to file the related documents. The entire steps of the Companies Act, 2013 provide all the legal requirements for easier management of any business enterprise.
Step 1. Choosing the form of company
It begins with the form of company to be incorporated. The Companies Act 2013 has categorized companies into various types, such as private limited, public limited, and one-person company (OPC). All have different legal formalities, tax effects, and running structures. Private companies prohibit shareholders to transferring the shares and provide a maximum number of shareholders, but a public company its shares are easily accessible in public.
Step 2. Reserving the Company Name
Reservation of an unique name for the Company is the second step of Incorporation Process. In India, MCA allows users to make a reservation online using its RUN service located on the website. In case, the proposed name is allowed, it means that all the naming requirements are complied with by that name and it is also not identical to the one in existence with any other Company. After making a name reservation, if the procedure is pursued within 20 days from the date the name has been reserved it will be valid.
Step 3. Paperwork in preparation for incorporation
To incorporate a company, it has to prepare and deposit main documents with:
Memorandum of Association: This document states about the objectives of the company-what kind of business, and what activities does the company intend to do?
Articles of Association: In this document, guidelines on the internal regulation, or rules and regulations as required for management and running a company are given
Signatures of subscribers, initially chosen members of the company will be required to hand the same over to ROC (Registrar of Companies) for registration.
Step 4. Digital Signature Certificates
Since all the documents are e-filed, DSC of all the directors and subscribers is compulsorily required. DSC is for authentication of the signatories through the process of e-filing.
Step 5. Director Identification Number (DIN)
The directors of the company should apply for the Director Identification Number. It is identification number, and an applicant can make application through the DIR-3 form MCA portal. Once applied, it has been once allotted for one director with the help of which DIN can be utilized to have the details maintained and follow up with respect to compliances at MCA Portal.
Step 6. Incorporation will be carried out as per SPICe+.
Above, we have a one-time single application for facilitating the process of incorporation of a company under the MCA scheme, namely, SPICe+. In its very single form, SPICe+ carries within an inbuilt facility the allotment of PAN as well as the TAN number, EPFO/ESIC registration and also the GST number. Form: The form for SPICe+ comes divided into two parts
one part carries with itself a name reservation as in-built and another for filing or provision of other services so that the company is thereby incorporated within itself.
It also reduces the paper work, cost, and time involved in the incorporation of a company as all services are integrated into one step.
Step 7. Declaration of Promoters and First Directors
The promoters and first directors of the company have to declare to the company that they have fulfilled all the statutory formalities. This declaration is filed in Form INC-9. The form states that no misleading information has been provided and that all the procedural formalities have been completed.
Step 8. Verification of Registered Office
The address through which official correspondence shall reach and where the registered office of the company shall be, must be stated by the company. Proof of such an address is to be filed in Form INC-22 within 30 days from incorporation.
Step 9. Issuance of Certificate of Incorporation
After attaining the satisfaction of all papers presented before it, ROC issues a Certificate of Incorporation to the company. It is a document upon which legal status depends, and the proof that suggests its incorporation lies in the CIN of the company.
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Type of Companies and processes to form them
There are several types of companies, namely, private, public, and one-person companies. Every type of company has a different formation requirement under the Companies Act. The different types of companies have varied benefits and structures for operating, which fit the requirements of different businesses.
Private Limited Company: As the minimum number of members, it can start from two, and can increase till 200. Two at least directors have to present in the board.
Public Limited Company: Minimum 7 members and 3 at least directors should exist in the company board; there is no limit set on the members number for public limited company
OPC: This contains just one shareholder; a point to be derived out from this is that a single person can initiate his /her company with OPC even if he doesn't wish to have a partner.
Read the history of company law in India.
Post-Incorporation Compliances
Compliance will be needed according to type with all companies, so in any type of company there exist mandatory annual filings, board meetings, and shareholder notifications, amongst other compliances.
Once formed, a company must satisfy many of its compliance requirements in order to carry on its business lawfully:
Commencement of Business: Under Section 10A, a company must present a declaration as regard commencement of business within the period of 180 days from incorporation day.
PAN and bank Account: A company acquires its Permanent Account Number and its respective bank account. But all financial transactions must be under that company's bank account.
Maintenance of Statutory Register: Companies must maintain various statutory registers on shareholders, directors, and company assets.
Annual Returns and Financial Statements: The ROC also mandates that companies submit annual returns and financial statements besides conducting regular board and shareholder meetings.
Know the features of Company Act 2013.
Recent amendments and digital initiatives under the Act
The Ministry of Corporate Affairs has brought about quite a few amendments and measures to ease compliance. Take the SPICe+ form that integrates various services to make company incorporation quicker and more efficient. For example, the "AGILE-PRO-S" form allows companies to be registered for all sorts of statutory requirements such as GST, EPFO, and ESIC along with the very process of incorporation.
Moreover, the MCA also introduced e-verification procedures and made compliance much less burdensome for small enterprises and startups in the bid to promote entrepreneurship.
Also, read the impact of foreign investment in India.
Company Formation and Compliance Challenges with Solutions
Company formation is always a problem for people. The problems include the reservation of names, accuracy of documents, and cost of compliance. Digital filing, expert consultation, and government schemes help overcome the problems efficiently.
Problem in naming: Companies face problems related to name reservations as there is a very strict regulation when it comes to the selection of names. Getting consulted by a company law professional can ease this problem to a great extent.
Preparation of documents: Drafting MoA, AoA, and statutory declarations, etc., can be rather cumbersome. Consultation through a lawyer or utilizing available templates from the MCA portal can assist in appropriate drafting.
Compliance Costs: These are legal fees, documentation, and compliance costs. These are probably to be very high for smaller businesses, but government subsidies, startup schemes, and consulting services might help to reduce them.
Conclusion
The company formation under the Companies Act 2013 initiates a legal business entity that is governed by the well-defined regulatory framework of the act. Every one of these steps from company type selection to Certificate of Incorporation, is vital in ensuring legal compliance and an easy run. Knowledgeable steps help business people come out with the proper step in forming their businesses.
It lays emphasis on transparency and accountability, not only in favor of businesses but also building investor confidence to create a more robust business environment in India. The digital advancements have made the process of forming a company under the Companies Act 2013 very efficient and accessible, enabling entrepreneurs to launch and grow businesses with ease within a regulated framework.
Formation of Company under Companies Act 2013 FAQs
Q1. What is the Companies Act 2013?
The Companies Act 2013 is an Act which deals with legal provision governing formation, management as well as dissolution of all the types of companies whether private or public or One person in India.
Q2. How to book name of my company through the companies act 2013?
You can register any name using the MCA facility named RUN- Reserve Unique Name service at its web portal so long as this complies with MCA nomenclature regulations
Q3. What does MoA and AoA signify in a company setup process?
MoA or memorandum of association provides information as to the objective or purview of business operation followed by the Articles of association which defines rules relating to management of a firm or a company.
Q4. What is SPICe+, and how does it simplify the process of forming a company?
SPICe+ is an online form issued by the MCA that integrates various registrations, such as PAN, TAN, GST, EPFO, and ESIC, into one application. It makes it a smooth process.
Q5. What is the difference between a public company and a private company under the Companies Act 2013?
A private company has very few transferable shares and also has a maximum of 200 members, whereas in the case of a public company, there is no limit to the members, and it can issue share invites to the public for purchasing shares.
