For starting up any kind of business in India, it is important to give that business a legal recognition.
In India, there are various different types of legal structures like sole proprietorship, Partnership firm, Limited Liability Partnership, Company, etc available to choose from and selection of the form of business entity is one of the important decisions before starting a business.
Let us assume that after considering pros and cons of each of the legal structure available, you are intending to set up your business in form of a Company, the next big question that will arise is as to how to form a company?
With this article let us understand the flow and process of forming and incorporating a company.
Know the Authority
Knowing whom to approach and where to apply is very important and crucial step. Just like when you want to apply for a Driver’s Licence you immediately approach the respective RTO, similarly, when you intend to apply for the formation of a company, an application is made to the Registrar of Companies.
The Companies Act, 2013 is the act that is applicable to companies incorporated and the Ministry of Corporate Affairs (MCA) is the regulatory body that regulates the affairs of the company through the Registrar of Companies (ROC).
All Application for incorporation of a company is made online to the ROC of the Particular state which is routed through Central Registration Centre (CRC) department of the MCA.
No Company can come into existence without a Certificate of Incorporation issued by the Registrar of Companies.
Know more about MCA here http://www.mca.gov.in/MinistryV2/homepage.html
Understand the basic structure of a company
A Company as a form of legal business structure can further be divided into 4 different types as follows:
1) Private Limited
2) Public Limited
4) Section 8 (NGO)
As an applicant, understanding the structure of these above types of a company becomes a very important factor not only from the point of view of choosing the right type that will work for you but also with respect to the actual process of incorporation of your company.
|Minimum Shareholders Required|| |
|Maximum Shareholders Required||50||Unlimited||Cannot have more than 1|
|Directors Required||Min 2||Min 3||Min 1|
|Capital Required||No Minimum requirement||No Minimum requirement|
No minimum requirement
Pre-requisites before making an application
It is essential for an applicant to have a Digital Signature certificate in place for all the subscribers i.e shareholders that will be willing to invest in the company. The subscribers will require a class 2 DSC and it is easily procured by making an application to any MCA recognized Certifying authorities.
The Actual Process
So now that you have decided upon the type of company you want to incorporate and managed to gather the shareholders and person willing to be the directors and accordingly procured the DSC, the company formation process will flow as per the following steps:
1) Create MCA Account: The First step will be to register yourself with the MCA Portal since all the applications will be required to be made online. Creating an account is very simple and involves zero cost.
You can register and create your account here http://www.mca.gov.in/mcafoportal/login.do
2) Apply for a name and reserve it: The second step will be to apply for the name to the Registrar of the Company. This can be done in 2 ways:
a) Through RUN Portal of MCA
b) Directly Through the Incorporation form
While applying for the name, you can propose 2 different names. However, an apparent check must be done for the similarity of the name with other company and trademark as these are the common reasons for the ROC to refuse to approve your name application.
You can check for the name availability here http://www.mca.gov.in/mcafoportal/showCheckCompanyName.do
The name approved shall be valid for 20 days.
3) Filing of Incorporation forms: The last but not the least step is submitting the incorporation forms online with the MCA along with paying statutory fees.
Forms to be filed:
a) SPICe Form or INC 32 wherein Basic details regarding the Shareholders, Directors, and Place of the registered office and Capital are to be mentioned in this form.
b) SPICe MOA or INC 33 is e-Memorandum of Association of the Company wherein the State in which the company will be registered along with capital of the company and the main activity of the company is mentioned.
c) SPICe AOA or INC 34 is e-Articles of Association of the Company. The Form contains standard format applicable to the company however, you can alter the clauses as per your requirements.
The documents required to be attached in the SPICe form are as follows:
1) Declaration in form of INC-9 from all the Subscribers
2) Consent from Directors in form of DIR-2
3) Proof of Registered office like Electricity Bill/Telephone Bil/Water Bill/Gas Bill along with a No Object letter from the owner to use the premises as the registered office of the company.
4) Identity Proof of Subscribers and directors (PAN Card and Either Passport/Voter’s ID/Driving Licence)
5) Address Proof of Subscribers and Directors (Latest Electricity Bill/Mobile Bill/Bank Statement)
6) A Declaration of the Practising Professional which forms part of the above Three forms.
7) Other Documents required by ROC specifically.
Fees to be paid:
The Fees required to be paid will depend upon the capital of your company and also the state in which the company is being incorporated.
Find the forms here http://www.mca.gov.in/MinistryV2/companyformsdownload.html
4) Scrutiny of ROC and getting the Certificate of Incorporation: After forms are filed with the MCA and the applicable fees are paid, the ROC will check your forms and if the ROC feels that the application are complete with all respects, he will issue the Certificate of incorporation and voila your Company is incorporated.