Law and You > Corporate Laws > Companies Act, 2013 > Procedure of Incorporation of a Company
According to Section 2(20) of the Companies Act, 2013, a “Company means a company incorporated under this Act or under any previous company law.” In this article, we shall discuss procedure of incorporation of a company, documents required for registration, and about one person company.
Every company formed under the Act may be either
- a company limited by shares; or
- a company limited by guarantee; or
- an unlimited company.
Section 3 of the Companies Act, 2013 lays down the procedure for the formation of a company as follows:
- Formation of a public company involves 7 or more people who subscribe their names to the memorandum and register the company for any lawful purpose.
- Similarly, 2 or more people can form a private company.
- One person can form a One-person company.
Section 7 of the Companies Act, 2013, details the procedure for incorporation of a company. Here is the procedure:
Documents Required:
An application must be submitted to the ROC of the State in which the registered office of the company is to be situated, along with the following documents.
- The Memorandum and Articles of the company. All subscribers have to sign on the memorandum in a prescribed manner;
- The person who is engaged in the formation of the company has to give a declaration (affidavit) regarding the compliance of all the requirements and rules of the Act. A person named in the Articles also has to sign the declaration. This declaration must be signed by an advocate of the Supreme Court or of a High Court or an attorney or pleader entitled to appear before a High Court or practicing secretary or chartered accountant, or a person named in the articles as a director, manager or secretary of the company.
- Each subscriber to the Memorandum and individuals named as first directors in the Articles should submit an affidavit with the following details: (a) Declaration regarding non-conviction of any offence with respect to the formation, promotion, or management of any company. (b) He has not been found guilty of fraud or any breach of duty to any company in the last five years. (c) The documents filed with the registrar are complete and true to the best of his knowledge.
- Address for correspondence until the registered office of the company is established.
- If the subscriber to the Memorandum is an individual, then he needs to provide his full name, residential address, and nationality along with a proof of identity. If the subscriber is a body corporate, then prescribed documents need to be provided.
- Individuals mentioned as subscribers to the Memorandum in the Articles need to provide the details specified in the point above along with the Director Identification Number and other prescribed particulars.
- The individuals mentioned as first directors of the company in the Articles must provide particulars of interests in other firms or bodies corporate along with their consent to act as directors of the company as per the prescribed form and manner.
- The particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as a director of the company in such form and manner as may be prescribed.
- With a view to fulfilling various formalities that are required for incorporation of a company, the promoters may execute a power of attorney in favour of one of them or an advocate or some other professional like the Chartered Accountant or a Company Secretary.
The Truthfulness of Documents:
It is to be noted that If a company is already incorporated but it is found at a later date that the information or documents submitted were false or incorrect, then the promoters, first directors, and persons making a declaration is liable for action for fraud under section 447. The Section provides for a jail sentence and a heavy fine for the offence.
The company must maintain and preserve copies of all information and documents at its registered office until the company is dissolved.
Issue of Certificate of Incorporation and CIN:
After going through the information and papers, if ROC is satisfied that the application for incorporation is in prescribed format, required documents are submitted in prescribed format and such company is authorized to be registered, he places the name of the company in the register of companies maintained by him and issues a Certificate of Incorporation in the prescribed form indicating the date of incorporation. The Registrar also allocates a Corporate Identity Number (CIN) to the company which is a distinct identity for the company. The allotment of CIN is on and from the company’s incorporation date. Thus the Certificate of Incorporation may be regarded as the birth certificate of the company because the company comes into existence on and from the date mentioned therein.
The legal effect of incorporation:
- From the date of incorporation, the subscribers to the Memorandum and all subsequent members of the company are a body corporate distinct from its members. The life of the company dates from the first moment of the day of incorporation. Also, a binding contract comes into existence between the company and its members as mentioned in the Memorandum and Articles of Association.
- A company has a perpetual succession and common seal. It is an immortal being. The death, bankruptcy or lunacy of any of its members does not affect the existence of the company. The company becomes a legal person separate from the incorporators from the date of incorporation. Until the company dissolves or the Registrar removes it from the register, it has perpetual existence.
- A registered company can exercise all functions of a company incorporated under the Act.
- A company can sue and be sued in its own name.
- A company has a right to hold and alienate its own property.
- The company’s debts and obligations are the liabilities of the company only and cannot be enforced against the individual shareholders.
Conclusiveness of the Certificate of Incorporation:
The certificate of incorporation not only creates the company but also is the conclusive evidence that all the requirements of the act regarding registration have been complied with. ‘Conclusive evidence’ means:
- that the fact of incorporation and existence of the company as a legal person cannot be challenged
- And that the company is duly registered.
- And that the company came into existence on the date mentioned in the certificate.
In Moosa Goolam Arif v. Ebrahim Goolam Ariff, ILR 1913 40 Cal 1 case, where, out of the seven subscribers to the memorandum of association of a company five were minors. The guardians of the minors made separate signatures for each minor on the memorandum of association. The Registrar, however, issued the certificate of incorporation. The validity of the certificate of incorporation was challenged. It was held that though the Registrar should not have issued the certificate but the certificate was conclusive for all purposes. Thus the suit failed.
In Peel’s (1867 2 C. App. 674) case, A proposed memorandum of the association after signatures and before registration had been materially altered without the authority of the subscribers. The company was subsequently registered and the Registrar issued the certificate of incorporation. It was objected that the memorandum of the association had not been signed by seven or indeed by any subscriber and that the provisions of the Act had not been complied with. To that Lord Cairns replied, “when once the certificate of incorporation is given, nothing is to be inquired into as to the regularity of the prior proceedings”
In Jubilee Cotton Mills Ltd. v. Lewis, (1923) 1 Ch 1 (CA) case, the memorandum, and articles of association of a company were accepted by the Registrar on January 6, 1920. The certificate of incorporation was dated January 6 but was not signed by the Registrar until January 8. The company allotted shares on January 6. It was objected that the allotment was void on the ground that it was made before the company came into existence. It was held that the allotment was valid. The certificate of incorporation was conclusive as to the date on which the company was incorporated.
In Maluk Mohamed v. Capital Stock Exchange (Kerala) Ltd. (1991) Co. Cases 333 Ker. Case, the Court held that a writ petition will also not lie to cancel the registration of a company.
In T V Krishna v. Andhra Prabha (P) Ltd., AIR 1960 AP 123 case, the Court opined that: “Thus the position is firmly established that if a company is born, the only method to get it extinguished is not by assailing its incorporation, but by resorting to the provisions of enactments, which provide for the winding up of the companies”. Thus the only remedy, in case of cancellation incorporation, is to wind up the company by Court order.
Commencement of Business:
W.e.f. 29/5/15, as per the Companies (Amendment) Act, 2015, Section 11 regarding the commencement of Business has been completely abolished from the 2013 Act, thereby all companies (private or public or OPC) can commence business immediately after obtaining the certificate of Incorporation.
Provisions for One Person Company (OPC):
The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Similar to a Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the company at the time of registration itself – who will become the owner of the OPC in case the death of the sole Director or he is disabled to make a contract. The written consent of the nominee is written in the prescribed format. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies.
Conclusion:
Procedure of incorporation mainly includes preparation of documents . The incorporation process formalizes the creation of a legal entity, providing benefits like limited liability, easier access to capital, and perpetual existence. However, it also introduces ongoing regulatory responsibilities such as compliance with corporate governance laws, tax filings, and public disclosure. Each step requires attention to legal detail to ensure compliance with the jurisdiction’s corporate law framework.