Incorporation is the process of creating a legal business. The procedure of incorporation of a company translates an idea into a recognized company governed by the law; it is not the same as its owners but has its own identity. Incorporation is vital for any business that aims at scalability and credibility for such reasons as limited liability, continuity, and the possibility of raising capital.
Meaning of Incorporation of a Company
Incorporation is the legal process wherein a business files with a government authority and becomes an established corporation under the Companies Act. The registration will give the company an identity different from that of the shareholders and afford limited liability, or the members' personal properties are shielded from the liabilities of the firm.
The company may be private, public, or non-profit, and each of these types has certain conditions and regulations in filing and compliance.
Stages of Formation of a Company
The formation of a company is a process of several key steps that are required to be undertaken to change an idea into a legally recognized entity. Below is a brief overview of the major stages involved:
1. Promotion Stage
The business idea is conceived by promoters.
Promoters carry out feasibility studies and make necessary resources available.
Preliminary documents like Memorandum of Association (MoA), Articles of Association (AoA), etc. are drawn up.
2. Incorporation Stage
The company submits an application for name approval on the MCA portal.
The SPICe+ forms, MoA, and AoA are submitted by the promoters with the ROC.
3. Obtain DSC and DIN.
After getting approval, the ROC issues a Certificate of Incorporation that registers the company.
4. Capital Subscription Stage (For Public Companies)
Public companies issue a prospectus that invites people to apply for shares.
They satisfy the SEBI guidelines, and they possess shares that are traded in the stock exchange.
The minimum subscription must be collected before the business is commenced.
5. Commencement of Business Stage
Private companies are allowed to begin business operations directly from the incorporation stage
Public companies are expected to file a declaration showing that the minimum subscription is satisfactorily achieved.
The business process begins when the Certificate of Commencement of Business is issued to the company.
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Types of Companies
Companies can be categorised into various types. The company categorisation is done based on ownership, liability, purpose, and size. These categories provide businesses as well as stakeholders with the options of company structures for smooth running as well as meeting the law. Each of the company types has special characteristics, benefits, as well as regulatory compliance requirements.
1. Private Limited Company (Pvt. Ltd.)
The company is owned by a private individual, not more than 200 members.
Shares cannot be issued to the general public and traded on the open market. This aspect ensures the owners have greater control and fewer regulatory requirements.
2. Public Limited Company (Ltd.)
Shares are quoted on the stock exchange; hence, they are available to the public.
A minimum of seven members and more regulatory compliance.
3. One Person Company (OPC)
Owned by one person, for small companies.
Lends feature of sole proprietorship combined with the benefit of limited liability protection.
4. LLP (Limited Liability Partnership)
Hybrid structures have the strength of both company and partnership.
Partners have limited liability, safeguarding personal assets from business liabilities.
5. Non-Profit Company (Section 8)
Established for purposes of charity or not-for-profit, such as education or social welfare.
Earnings are plowed back into the company's objectives rather than distributed to members.
6. Government Company
51 percent of shares are owned by the government.
Aims at providing governmental services, like energy, railways, or infrastructure
7. Foreign Company
Registered abroad but operates its businesses in India.
Has to respect both Indian and foreign laws for its operation.
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Procedure of Incorporating a Company
Company formation involves many steps, and all legal formalities with documentation are made to ensure complete transparency. The following sections describe the procedure step-by-step with respect to each clause.
Step 1. Selecting the Business Type and Name
Select the company type: a private limited, public limited, LLP, etc.
Search for the name availability on MCA portal
Book the name through RUN (Reserve Unique Name).
Step 2. Preparation of Legal Documents
The following are the key documents to be drafted and filed-
Memorandum of Association (MoA): this encompasses specifying the field of operations, name, and business objectives.
Articles of Association (AoA): It consists of rules and regulations governing the internal affairs of the company.
Step 3. Clauses in MoA
The Memorandum of Association encompasses all the following clauses:
Name Clause: This clause provides the name of the company.
Registered Office Clause: This shows the location of the registered office.
Object Clause: This clause states the objectives that the company will adopt.
Liability Clause: Membership liability is defined here to be limited or unlimited.
Capital Clause: It provides the authorized share capital.
Association Clause: It says that founding members have an intention to form the company.
Step 4. Procuring of Digital Signature Certificate (DSC) & Director Identification Number (DIN)
DSC are compulsorily required to e-filing the forms on the MCA portal
Every director has to obtain his DIN by filing his Form DIR-3
Step 5. Filings with ROC
Forms with the Registrar of Companies
Form SPICe+ (Simplified Proforma for Incorporating Company Electronically): For the registration of a company along with PAN and TAN applications.
Form INC-9: Declaration by the directors and subscribers in respect of compliance with legal requirements.
Form AGILE-Pro: For GST, EPFO, ESIC, etc. registration,
Step 6. Payment of Fee and Stamp Duty
Depending upon the authorized capital of the company, the registration fee and stamp duty payable need to be paid.
Step 7. ROC Verification
The ROC scrutinizes all documents and forms filed by the company.
If the filing is proper, the ROC issues a Certificate of Incorporation.
Step 8. Corporate Identification Number
A unique Corporate Identification Number is marked at the top of the Certificate of Incorporation for identification of the company.
Conclusion
A company registration creates a legal entity with its own rights and liabilities. The process includes a basic procedure like name identification, Memorandum and Articles of Association drafting, and filing documents with the Registrar of Companies. Official recognition of the business occurs only when a Certificate of Incorporation is obtained, so the company can work legally, utilize limited liability, and avail better access to capital. Proper incorporation processes promise to comply with all the stipulated rules; offer a good platform for future growth and credibility in the market, and are important to businesses that want to succeed in the long run.
Procedure for Incorporation of Company FAQs
1. How long does it take to register a company?
7-15 days, depending on the completion of documentation and approval by ROC.
2. Can a proposed company name be rejected even after incorporation?
Yes. Any name that is too alike with an already existing one or contravening the trademark law would get rejected.
3. How many members are required for the incorporation of a company?
Two members are the minimum requirement.
A private limited company requires at least two members, whereas a public limited company needs seven.
4. What are the post-incorporation compliance requirements?
Companies registered after incorporation have to prepare annual returns, audits, and statutory registers.
5. Can a company modify its MoA after incorporation?
Yes, in case of modification of MoA, it can be done through a special resolution in the general meeting and is to be filed with ROC.
