Incorporation of Companies

The Incorporation of a company is the legal process of forming a company or corporate entity recognized under the law. In India, this process is governed by the Companies Act, 2013, and regulated by the Ministry of Corporate Affairs (MCA) through the Registrar of Companies (ROC). Incorporation is essential for granting a company its separate legal identity, allowing it to function independently of its shareholders, raise capital, sue and be sued, and engage in lawful business activities.

Meaning of Incorporation:

Incorporation refers to the registration of a company with the Registrar of Companies (ROC) to bring it into existence as a legal entity. Once incorporated, the company becomes a juristic person — it can own property, enter into contracts, and is liable for its debts. The process ensures that the company follows all the statutory compliances and operates within the framework of the law.

Types of Companies That Can Be Incorporated:

Under the Companies Act, 2013, companies can be incorporated in various forms depending on the objectives, size, liability structure, and capital. The major types are:

1. Private Limited Company (Pvt Ltd)

   • Minimum 2 members and 2 directors

   • Maximum 200 members

   • Restricts transfer of shares

   • Cannot invite the public to subscribe to securities

2. Public Limited Company (Ltd)

   • Minimum 7 members and 3 directors

   • No maximum limit on members

   • Can offer shares to the public

   • Requires more regulatory compliance

3. One Person Company (OPC)

   • Single person acts as both shareholder and director

   • Suitable for small entrepreneurs

   • Limited liability protection

4. Section 8 Company (Not-for-Profit)

   • Formed for charitable, social, educational, or religious purposes

   • Profits cannot be distributed as dividends

   • Requires prior approval from the Central Government

5. Producer Company

   • Special type of company for farmers or agricultural producers

   • Governed by special provisions under the Companies Act

Advantages of Incorporation:

• Separate legal identity

• Limited liability of shareholders

• Perpetual succession

• Transferability of shares (in case of public companies)

• Access to capital through equity or debt

• Increased credibility and trust

Procedure for Incorporation of a Company in India:

The incorporation process involves several steps which must be completed online through the MCA21 portal (https://www.mca.gov.in/). The general steps are:

1. Obtain Digital Signature Certificate (DSC)

• A Digital Signature Certificate (DSC) is mandatory for signing electronic documents filed with the ROC.

• DSC is required for all proposed directors and subscribers.

• It can be obtained from government-recognized certifying agencies such as eMudhra or Sify.

2. Obtain Director Identification Number (DIN)

• DIN is a unique identification number for directors.

• It can be obtained through the SPICe+ form during incorporation.

• Proof of identity, proof of address, and photographs of the proposed directors are required.

3. Name Reservation (RUN or SPICe+ Part A)

• Choose a unique name for the company.

• Use the SPICe+ Part A form to apply for name reservation.

• The proposed name must comply with Companies (Incorporation) Rules, 2014, and must not be identical or similar to existing company or trademark names.

4. Preparation of Incorporation Documents

The following documents need to be prepared and submitted:

• Memorandum of Association (MOA): Outlines the objectives and scope of the company.

• Articles of Association (AOA): Contains the rules and regulations for internal management.

• Declaration by the directors (Form INC-9)

• Consent to act as director (Form DIR-2)

• Proof of office address

• Identity and address proof of subscribers/directors

5. Filing of SPICe+ (Part B)

• The SPICe+ form is an integrated form for incorporation.

• It includes applications for incorporation, PAN, TAN, GST (optional), ESIC, EPFO, and bank account.

• The documents prepared above are attached to this form.

• Payment of prescribed government fees and stamp duty is made online.

6. Issue of Certificate of Incorporation (COI)

• After verification, the Registrar of Companies issues a Certificate of Incorporation with the Corporate Identification Number (CIN).

• The COI is conclusive proof of the company’s legal existence.

Documents Required for Incorporation:

For Directors and Subscribers:

• PAN card

• Aadhaar card or Voter ID/Passport/Driving License

• Passport-size photograph

• Proof of current address (utility bill, bank statement)

For Registered Office:

• Electricity bill or property tax receipt

• Rent agreement (if rented)

• No Objection Certificate (NOC) from the property owner

Post-Incorporation Formalities:

After incorporation, the following activities are to be completed:

1. Open a Current Bank Account in the name of the company using the Certificate of Incorporation, PAN, and board resolution.

2. Commencement of Business (Form INC-20A)

   • Required for companies with share capital.

   • Must be filed within 180 days of incorporation.

3. Maintain Statutory Registers

   • Register of members, directors, share certificates, etc.

4. Appointment of Auditor

   • First auditor must be appointed within 30 days of incorporation.

5. Apply for Other Registrations (if applicable)

   • GST registration if turnover exceeds threshold or for inter-state trade

   • Professional Tax, Shops & Establishments license, etc.

Time Frame for Incorporation:

Typically, incorporation may take 7–15 working days, provided all documents are in order. Online processing has made the procedure faster under the MCA’s simplified system.

Key Legal Provisions Under Companies Act, 2013L

• Section 3: Defines the formation of a company

• Section 4: Naming requirements and restrictions

• Section 7: Procedure for incorporation and required documents

• Section 12: Registered office and related compliances

• Section 10A: Declaration for commencement of business

Role of Professionals:

While some businesses may choose to file forms themselves, it is advisable to seek assistance from Company Secretaries (CS), Chartered Accountants (CA), or legal professionals for accurate documentation, compliance, and legal structuring, especially for public companies or startups seeking investor funding.

Recent Reforms and Ease of Doing Business:

To improve India’s global ranking and encourage entrepreneurship, the government has introduced several reforms:

• SPICe+ form combines multiple registrations in one go

• AGILE-PRO form allows for GST, EPFO, ESIC, and bank account registration

• Online PAN and TAN allotment at the time of incorporation

• Zero MCA fees for companies with authorized capital up to ₹15 lakhs

These steps have simplified the process and made it more transparent, efficient, and cost-effective.