FORMATION OF A

COMPANY
PRESENTED BY:
Sanjeev Saurav
COMPANY:-
 Is an Artificial Person created by Law.
 Company means an association of many persons
who contribute money or money`s worth to a
common stock and employed for a common
purpose.
 The common stock so contributed is denote in
money and is capital of a company. The person
who contribute it or to whom it belongs are
members.
 The proportion of capital to which each member is
entitled is his share. Share are always transferable
although the right to transfer is often more or less
restricted.
FORMATION OF COMPANY…
STEPS INVOVED:-

 Promotion
 Incorporation by registration.

 Commencement of Business

 Registration of Company.
INTRODUCTION..

 It may be noted that before a company is actually

formed, certain persons, who wish to form a
company, come together with a view to carry on
some business.
 Such persons have to decide various questions:

a) which business they should start

b) They should form a company
c) Which type of company they required
d) What should be the capital of company.
 There are various stages in formation of company.
STAGES IN FORMATION OF A COMPANY

Promotion of a Company : The promotion of a

company refers to all those steps which are taken
from the time of having an idea of starting a
company to the time of actual starting of the
company business.
Who is a promoter?
1. People who think of forming a company
and take necessary steps in its formation
are known as “Promoters” or “Company
Promoters”.
2. The person who conceives such an idea is
called “Company Promoter”.
FUNCTIONS OF PROMOTERS:

 To discover an idea for establishing a company.

 To make detailed investigations about the demand
for the product, availability of power, labour, raw
material.
 To investigate the idea and know whether the
formation of the company is possible and profitable.
 To find out suitable persons who are willing to act
as first directors of the company.
 To settle the name of company.
DUTIES AND OBLIGATION OF PROMOTERS
 The promoters must disclose fully all the material
facts regarding the formation of a company.
 The promoters must faithfully disclose all the facts
relating to the property which they want to sell to
the company.
 The promoters must not make an unfair use their
position.
 To disclose the liability and pay the secret profits
if promoters have earned.
 The prospectus of the company should contain the
true statements.
 Liability on statutory mistakes or frauds in the
property.
REGISTRATION AND INCORPORATION OF A
COMPANY:
 The second stage for establishment of a company
is to get the company incorporated or registered.
The promoters have to prepare and file a number of
documents with the registrar.
 1-The memorandum of association signed by at least seven
persons
 2-The articles of association signed by at least seven persons.
 3-Promoters have to file a prospectus or statement in lieu of
prospectus with the registrar.
 4-A list of directors and their willingness to act, duly signed by
each of them.
DOCUMENTS NEEDED :-
 MEMORANDUM OF ASSOCIATION
 ARTICLES OF ASSOCIATION

 LIST OF THE DIRECTORS

 CONSENT LETTER FROM DIRECTORS

 STATEMENT OF CAPITAL

 STATUTORY DECLARATION
MEMORANDUM OF ASSOCIATION

 Memorandum of association is the basic document

of a company.
 It is known as the charter of the company.

 It sets out limits outside which the company cannot

go.
 Defines powers of the shareholders, creditors and
all those who deal with the company.
CLAUSES (CONTENTS) OF
MEMORANDUM OF ASSOCIATION
1. Name Clause.
2. Registered Office clause.
3. Objective Clause.
4. Liability Clause.
5. Capital Clause.
6. Association Clause.
NAME CLAUSE:-
 A company adopts any name but it should not be
identical to the name of the existing company.
 The name should not be prohibited one.

 The name of the company must end with the word

limited so all the persons dealing with the company
must know that their liability is limited up to the
extent of their of shares.
 In the case of private limited company the word
private limited to be used as the last word of the
name.
OBJECTIVE CLAUSE :-
 It is the essence of memorandum. it clearly defines
the sphere of the company activities. It indicates a
series of objects for which the company is
established.
 HERE THE COMPANY SHOULD MENTION ITS
 MAIN OBJECTIVES
 SUBSIDARY OBJECTIVES
LIABILITY CLAUSE :-
 THE EXTENT AND NATURE OF THE LIABILITY
OF SHARESHOLDERS SHOULD BE STATED
LIKE
 LIMITED LIABILITY
 LIMITED BY GAURANTEE
 UNLIMITED
CAPITAL CLAUSE :-
 DIVISION OF CAPITAL INTO SHARES OF
DIFFERENT DOMINATIONS
 THE EXTENT OF EACH CAPITAL SHOULD BE
SPECIFIED
 A COMPANY IS NOT AUTHORISED TO ISSUE
ABOVE AUTHORISED CAPITAL
ASSOCIATION CLAUSE:-
 THIS CLAUSE CONTAINS DELCARATION OF
MEMBERS
 THE NAMES, ADDRESSESS AND OCCUPATIONS
OF THE SUBSCRIBERS SHOULD BE
MENTIONED
 THE SIGNATURES ARE TO BE ATTESTED BY
PROPER WITNESS
 SIGNING OF MEMORANDUM:
The memorandum must be:
Be signed by each member
 Who shall add his name and surname in full, any
former name or surname in full
 His occupation; and

 Father’s name; or

 In the case of a married woman or widow, her

husband’s name, in full
 His nationality of origin; and

 His usual residential address in full

ARTICLES OF ASSOCIATION
 After memorandum of association, Articles of
Association is the most important document to
prepare and present to registrar for incorporation or
registration.
 Articles of association is a legal document second
in importance to memorandum.
 The articles of association are regulations which
governs the internal organization and conduct of
the company.
 The articles of association describe powers of the
directors, other officers and shareholders as to
voting etc.
CONTENTS OF PROSPECTUS
1. Name and registered address of the company.
2. The main objects of the company.
3. Information regarding listing of shares on a
recognized stock exchange.
4. Particulars pertaining to different classes of
shares and extent of interest of holders.
5. The number of shares (if any) fixed by the
articles as the qualification of a director and the
remuneration of directors.
6. The date of opening and closing of the issue.
7. The names and addresses of auditors and
lead managers.
ISSUE OF CERTIFICATE
 AFTER THE RECEIPT OF THE ALL THE
DOCUMENTS , THE REGISTRAR WILL
SCRUTANISE THE DOCUMENTS .
 AFTER EVERYTHING IS SATISFIED , THE
REGISTRAR WIL ISSUE THE CERTIFICATE OF
INCORPORATION
 WITH THIS CERTIFICATE, THE COMPANY GETS
ITS RECOGNITION AS A BODY OF CORPORATE.
4.COMENCEMENT OF BUSINESS (S.11)
 COB (Commencement of business) refers to a
document required under the Companies Act before a
business can initiate its operations.
 COB in Companies Act, 1956 stated that private
company can commence their business immediately
after obtaining the certificate of incorporation. COB was
not mandatory for the private companies.
 Companies Act, 2013 stated that COB is mandatory
for both the private and public company to commence
their business. Without obtaining COB the company
cannot exercise its borrowing powers.

Note:- According to the resent amendment of the

Companies Amendment Act, 2015 which received the
assent of President on 25,May 2015 which omitted section
11 (COB) of Companies Act, 2013.
 MCA21
MINISTRY OF CORPORATE AFFAIRS 21
THE MCA 21 PROJECT’S OBJECTIVES…

For Business
Enabled to register a company
File statutory documents quickly and easily

For Public
To get easy access to relevant records
Effective grievances redressal

For Professionals
To be able to offer efficient services to their client
companies
Financial Institutions
To easily find charges registration and verification

Employees
To ensure proactive and effective compliance of
relevant laws and corporate governance
WHAT DOES MCA 21 PROVIDE YOU?

 Easy secure access

 Automated all process of compliance

 24 hours / 7 days from anywhere and any place

 No need to visit physical office of ROC

 Complaints can be on e-mode

 BUSINESS
FINANCIAL
INSTITUTION COMMUNI
TY

PUBLIC
GOVERNMENT
DEPARTMENTS

MCA21
PORTAL
PROFESSI MCA
ONALS
EMPLOY
EES

BANKS CREDITORS
KEY BENEFITS…
 Incorporation of Companies online

 Simplified and easy mode of filing

 ROC services online

 Better compliance management

 Total transparency

 Building-up a central database

 Inspection of public documents anytime any where

 Timely redressal of investor grievances

THE MCA PORTAL - THE GATEWAY TO CITIZENS AND
CORPORATE
STEP -1
STEP - 2
STEP - 3
STEP - 4
 Milestones in making
COMPANIES ACT,2013 enforceable…
• Companies bill Introduced in Lok sabha on 23rd October 2008 for the first
time, to replace 52 year old Companies Act , 1956
2008

• Companies Bill passed in Lok Sabha on 18th December 2012 at 10:46

pm
2012

• Bill passed in Rajya Sabha on 8th August 2013 at 5:16 pm

2013

• Enacted as Companies Act 2013, with President assent on 29th August

2013
2013
 STRUCTURAL COMPARISON

Companies Act Companies Act

1956 2013

13 Parts 29 Chapters

658 Sections 470 Sections

And And
15 Schedules 7 Schedules
 OLD COMPANIES NEW COMPANIES
CAPTION ACT 1956. ACT 2013.

There are maximum of There are maximum number of 200

50 members. members.
Members

The concept of one person company

Does not exists. was introduced to form a private
limited company.
One person
Company

It can be treated has It cant be treated has conclusive

conclusive evidence. evidence because action can be
taken even after incorporation.
In-
corporation
CAPTION OLD COMPANIES NEW COMPANIES
ACT 1956. ACT 2013.
It consists of name clause, It consists of all the clauses
situation clause, object but in object clause the sub-
clause, subscription clause, clause named other
Memorandum of etc.,. objectives is excluded.
association
It has companies limited by
share, limited by guarantee & No changes have been
unlimited companies. done in this regard.
Articles of
association
 OLD NEW COMPANIES
CAPTION COMPANIES ACT 2013.
ACT 1956

Inspection of documents
No such provision in electronic form is
existed. made.

E-governance

It is acceptable It is applicable to whole

whole India except India.
in Sikkim has they
has their own
Applicability of law company’s act.

Max. no of Number increased to 15.

directors are 12
not beyond them
Maximum no. of without approval of
Directors central govt.
REGISTRATION OF COMPANIES
 43

STEPS TO REGISTER A NEW COMPANY

 An application for the reservation of a name shall be made in Form INC-1 along
with the fee as provided in the Companies (Registration offices and fees) Rules,
2014.
 Form INC-7 or Form INC-2 : Form INC-7 for Application for incorporation of a
company (Other than OPC) or Form INC-2 for Application for Incorporation of
OPC along with Memorandum and Articles of Association of the company duly
stamped and signed by each subscriber to the Memorandum.
 Form INC-8 : A declaration by an Advocate/CA/CS/CMA in practice shall be in
Form INC-8
 Form INC-9 : An Affidavit shall be submitted by each of the subscribers to the
Memorandum and each of the first directors named in the Articles in Form INC-9
 Form INC-22 : Notice of situation or change of situation of registered office based
on the option chosen in Form INC-7.
 Form INC-22 is to be filed within 30 days from the date of Incorporation of OPC
(If the registered address is different from the address given in Form INC-22) or
other than OPC (if not filed earlier).
 Form DIR-12: The particulars of each person mentioned in the articles as first
directors of the company and his interests in other firms or body corporate along
with his consent to act as a director of the company shall be filed in Form DIR-12
along with the fee as provided in the Companies (Registration offices and fees)
Rules, 2014.
 44

 In order to register Part I Company, applicant is

required to file Form INC-1 for name availability. After
approval of the same, applicant is required to file Form
No. URC-1 along with filing e forms INC-7, INC-22 and
DIR-12 or e-forms INC-7 and DIR-12 as the case may
be.
 To register a section 8 company, applicant is required
to file Form INC-1 for name availability. Once the name is
approved/made available, there is a further requirement
of obtaining a license for a Section 8 Company, for which
Form RD-1 is to be filed in order to obtain a license for
such company. After obtaining license number, applicant
can proceed further to incorporate a company by filing e
forms INC-7, INC-22 and DIR-12 or e-forms INC-7 and
DIR-12 as the case may be.
 45

FEES PAYABLE FOR REGISTRATION OF A COMPANY

 Fees payable for registration of a company having share capital
depends on nominal share capital and varies from Rs 4,000 to Rs
2,00,04,000. [Rs two crore and four thousand], as follows –
Nominal share capital Registration fees Rs
(Authorised Capital)
Not exceeding Rs One lakh 4,000
Above Rs one lakh and upto 4,000 plus Rs 300 for every Rs 10,000 or part
Rs five lakhs thereof above Rs one lakh
Above Rs five lakhs and upto 16,000 plus Rs 200 for every Rs 10,000 or part
Rs fifty lakhs thereof above Rs five lakhs
Above Rs fifty lakhs and upto 1,06,000 plus Rs 100 for every Rs 10,000 or
Rs One crore part thereof above Rs fifty lakhs
Above Rs one crore and upto 1,56,000 plus Rs 50 for every Rs 10,000 or part
Rs 397.96 crore thereof above Rs One crore
Rs 397.96 crore and above Rs two crore and Rs 4,000 (2,00,04,000)
 46

REGISTRATION OF FOREIGN COMPANY

 Any foreign company can establish its place of business
in India by filling Form FC-1 (Documents delivered for
registration by a foreign company). The E-Form has to be
digitally signed by authorized representative of the
foreign company.
 There is no need to apply and obtain DIN for Directors of
a foreign company but the DSC of the authorized
representative is mandatory, which again is not required
to be registered on MCA Application.
47