Dr Shivanand

Sanmath
INCORPORATION OF A COMPANY UNDER THE
COMPANIES ACT, 2013

1. Reservation of Company Name:

First, the applicants are required to apply for a name in
Form No. INC-1. The fee for seeking a name approval
is Rs.1000/- as prescribed and 60 days are allowed for
incorporating the company. The name should not be
undesirable i.e.; identical, resembling, restricted or
prohibited.
2. Provision for Entrenchment (to establish solidly)
As per section 5(3) of The Companies Act, 2013, articles may
contain provisions for entrenchment to the effect that specific
provisions of the articles may be altered only if conditions or
procedures more restrictive than as applicable in case of special
resolution, are met or complied. Where the articles contain the
provisions for entrenchment, the company shall give notice to the
Registrar of such provisions in Form No. INC-2 for one person
company (OPC) or Form No. INC-7, as the case may be, along with
the prescribed fee at the time of incorporation of the company or
in case of existing companies, the same shall be filed in Form No.
MGT-14 within thirty days from the date of entrenchment of the
articles
3.Drafting of Memorandum and
Articles of Association:

The memorandum (MoA) should be drafted keeping in

mind the provisions of section 4 of The Companies Act

, 2013 and objects should not be contrary to those as per

Form No. INC-1.

The Model MoA as prescribed in Table

Mo A formate
MoA consists of the following clauses :
Name Clause: This clause specifies the name of the company. The name
of the company should not be identical to any existing company. Also, if
it is a private company, then it should have the word ‘Private Limited’ at
the end. And in case of public company public company, then it should
add the word “Limited” at the end of its name. For example, ABC Private
Limited in case of the private, and ABC Ltd for a public company.

Registered Office Clause: This clause specifies the name of the State in
which the registered office of the company is situated. This helps to
determine the jurisdiction of the Registrar of Companies. The company
is required to inform the location of the registered office to the Registrar
of Companies within 30 days from the date of incorporation or
commencement of the company.

Object Clause: This clause states the objective with which the company
is formed. The objectives can be further divided into following 3
subcategories:
Main Objective: It states the main business of the company
Incidental Objective: These are the objects ancillary to the
attainment of main objects of the company
Other objectives: Any other objects which the company may
pursue and are not covered in above (a) and (b)
Liability Clause: It states the liability of the members of the
company. In case of an unlimited company, the liability of the
members is unlimited whereas in case of a company limited
by shares, the liability of the members is restricted by the
amount unpaid on their share. For a company limited by
guarantee, the liability of the members is restricted by the
amount each member has agreed to contribute.
Capital Clause: This clause details the maximum capital that
a company can raise which is also called the
authorized/nominal capital of the company. This also explains
the division of such capital amount into the number of shares
of a fixed amount each.
AoA Formate
Details Contained In The Article of Association (AoA)
An Article of Association contains the rules and regulation
regarding the following matters:

Share Capital:
Subdivision of share capital, call on shares, forfeiture of
shares, transfer of shares, conversion of shares into stock,
surrender of shares etc.

Appointment of Directors:
Director’s appointment, remuneration, qualification,
powers and duties
Dividends and Reserves: Rules relating to distribution of
dividend and reserves among shareholders
Accounts and Audit: Provisions relating to maintenance of
books of accounts of the company and audit of the
company

Borrowing Powers: Powers of the company to borrow

funds from outside

Process of Winding Up of the Company: Provisions

relating to procedure for winding up of the company
Other Provisions:

An Article of Association also specifies the provisions

relating to general meetings and proceedings, notices for
meetings, voting rights of the shareholders by poll or proxy,
a lien on shares etc.
 4. Application for Incorporation of Companies
After obtaining availability of name (see sample name
approval certificate, applicants should file Form No. INC-7
for other than OPC and in Form No. INC-2 (for OPC) with
Jurisdictional Registrar of Companies (ROC) along with
required information in attachments and along with
prescribed fee.
5. Documents to be filed for Incorporation
Section-7 prescribes the various documents and information to be filed with
RoC for registration of a new company as under:
MoA and AoA duly signed and verified.
Declaration by Professionals INC-08 .
Declaration from Director, Manager or
Secretary.
Affidavit from each subscribers and first directors INC-
The address for correspondence.
Complete Details of Subscribers with proof of identity.
Complete Details of first Directors with proof of
identity.
6. Particulars of first directors of the
company and their consent to act as
such
The particulars of first directors of the company
and his interest in other firms or bodies
corporate along with his consent (Form DIR.2)
to act as director of the company shall be filed
in Form No.DIR.12 along with the prescribed
fee.
7. Notice of Situation of Registered Office:
The particulars of the registered office of the company
should be filed in Form No. INC-22.
8. Payment of Fee:
While uploading various documents prescribed fee can be
paid online including stamp duty for MoA.
9. Certificate of Incorporation:
After the RoC is satisfied that all documents and information
which is required has been filed in the prescribed manner and
along with prescribed fee, the Certificate of Incorporation shall
be issued by the Registrar in Form No. INC-11
 Every company must have a registered office from the day it
starts its business or within 30 days of getting the Certificate of
Incorporation, whichever is earlier. Memorandum of Association
must state the name of the State in which the registered office of
the company is situated.

 This clause is important as it mentions the residence for the

purpose of the communication with the company. It determines
the jurisdiction of the company and also mentions the place
 Object Clause

MAIN OBJECTS

Objects incidental or ancillary to the attainment of the

main objects.

OTHER OBJECTS.

Objects stated in the main objects are to be pursued by the

company immediately after incorporation or within
reasonable time thereafter.
 Liability clause
 This clause states that the liability of the members is
limited to the extent of the shares subscribed by the
member or shareholders if the company is formed
with share capital.

 Amount of capital with which the company is to

be registered and its division into shares of a fixed
amount must be stated in the MOA of a company.

 The capital with the company is registered

is called “Authorized capital” or “Registered
Capital”.
 Article of Association
 Defines the responsibilities of the directors, the
kind of business to be undertaken, and the
means by which the shareholders exert control
over the BOD.

 Contains the rules & regulations for the

internal management of the company.

 AOA needs to be filed with the Registrar of

Company.

 AOA can be altered from time to time.

 Contents of AOA
 Share capital
 Payment, calls, transfer, lien, conversion, transmission,
forfeiture etc. Of shares
 Share certificate & warrants
 Rights of shareholder
 Meetings
 Appointment, remuneration, qualification, powers etc. of
Board of Directors
 Accounts & Audit
 Payment of dividends
 Winding up
 Indemnity
 Alteration of Article of
Association
 It can be altered with special resolutions.

 Approval of the central government for conversion of

company from public to private.

 AOA should not violate provisions of MOA and company

law board.

 Special resolution passed or approved by central

government must be filed with the Registrar within 1
month.
 Limitations of Article of
Association
 The alteration cannot be made so as to increase the
liability of members without his/her written consent.
 Limit the number of members to 200.
 Prohibit any invitation to the public to subscribe for any
share in, or debenture of the company.
 Restrict the right to transfer shares.
 Approval of central government: -
 Appointment or re-appointment of Director
 Increase in remuneration of Director
 MEMORANDUM OF ASSOCIATION ARTICLE OF ASSOCIATION

 It is a charter of a company  It contains rules & regulations regarding

determining constitution and
internal management of the company.
activities of the company.

 Every must have a  Public companies limited by shares may or

company may not have articles.
memorandum.

 Alteration of Memorandum is much  Articles can be easily altered by a

special difficult and strictly regulated. resolution.

 Prior permission is required.  No need for permission(in some

cases)

 Defines the relationship between  Defines the between

relationship company & outsiders. management &
shareholder.
 Membership of a Company
 Who is a member of a company: -
 The subscriber to the memorandum of a company shall be
deemed to have agreed to become members of the company and
on its registration, shall be entered as members in the register of
the members.
 Every other person who agrees in writing to become a member of
a company and whose name is entered in its register of
members, shall be a member of the company.
 Every person holding equity share capital of the company.
 Other ways:
1. Succession
2. Insolvency of a member
3. Beneficial owner
 Who can be a Member

 Minor
 Company
 Trust
 Partnership Firm
 Society
 Non-Resident
 Rights of a Member
 To receive notices of all general meetings.
 To attend and vote at general meetings, appoint
directors and auditors of the company.
 To receive copies of accounts of the company.
 To transfer his/her shares.
 To receive share certificate.
 To receive dividends in case of preference shares.
 To make an application to the central government
for ordering investigation into the affairs of the
company.
 To be registered as a shareholder in company books.
 To present a petition to the court for winding up of
the company.
Prospectus
1. Company Prospectus
2. A document described or issued as prospectus and includes any
notice, circular, advertisement or other document inviting deposits
from the public or inviting the offers from public for subscription or
purchase of shares or debentures of a company.
3. MEANING: legal requirements of prospectus.
 types of prospectus.
 contents of prospectus
 formalities in issuing company prospectus
 statement in lieu of a prospectus.
 rules of public deposits.

4. MEANING Company prospectus is released by company to inform

the public and investors of the various securities that are available.
These documents describe about mutual funds, bonds, stocks and
other forms of investments offered by the company. A prospectus is
generally accompanied by basic performance and financial information
about the company.
5. A Prospectus is required to be issued only after the
incorporation of company. The prospectus must contain
all the particulars, listed in the schedule II of Companies
act.

The prospectus must be dated. Before a prospectus is

issued, a copy of it must be registered with the registration
of companies.

Prospectus shall be issued within ninety days of its

registration .

6. ABRIDGED PROSPECTUS.
DEEMED PROSPECTUS.
SHELF PROSPECTUS.
RED HEARING PROSPECTUS.
7. GENERAL INFORMATION – It contains (i)Name and address of
registered office of company. (ii)Name of stock exchange where
application for listing is made. (iii)Date of opening of the issue. (iv)Date
of closing of the issue. (v)Name and address of companies manager and
managing directors
8. CAPITAL STRUCTURE OF COMPANY---
i. Authorized, issued, subscribed, and paid-up capital.
ii. ii.Size of the present issue giving separately reservation for
preferential allotments to promoters and others.
PARTICULARS OF THE ISSUE-
i.Objects.
ii.Project cost.
iii. Means of financing.
9. OUTSTANDING LITIGATION – Relating to financial matters or
criminal proceedings against the company or directors under Schedule
XIII. CERTAIN PRESCRIBED PARTICULARS- In regard to the company
and other listed companies under the same management, which made
any capital issue during the last 3 years.
10. Every prospectus issued by or on behalf of a company must be
dated and that date shall unless the contrary is proved, be
regarded as the date of its publication.(section 55) A copy of the
prospectus signed by every director or proposed director or by his
agent must be delivered to the registrar on or before the date of
publication. The prospectus issued to the public should mention
that a copy of the prospectus along with the specified documents
have been filed with the register.
11. Continued…………….. A prospectus must not be issued more
than 90 days after the date on which a copy thereof is delivered for
registration. If a prospectus is so issued it will be deemed to be a
prospectus a copy of which has not been delivered to the registrar.
12. A public limited company, 1. which has not issued a
prospectus.2.which has issued a prospectus, but has not
proceeded to allot any of the shares, offered to the public for sub
scripti