Company Formation in India

Company Formation in India

In India companies are governed by Companies Act, 2013. It is the most preferred form of business entity and every year the number of companies are increasing by a substantial number. A company has separate legal entity that is different from that of its owners. It offers limited liability which means shareholders are liable to incur loss up to the amount of shares they hold. A company works on the principle of perpetual succession which means it stays in existence even if one or more of its shareholders, directors or promoters die. Company Formation in India, All these features make company the ideal form of entity to run a business.

A company can accept loans and deposits. It can lend money in its own name. Moreover, it can enter into contracts in its own name. It is also empowered to sue or get sued in its name. The procedure of company formation in India is done as per provisions mentioned in Companies Act, 2013 and rules mentioned in Companies (Incorporation) Rules, 2014. The process of company incorporation is quite easy and straightforward.

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The procedure for Company formation in India is similar for all states so whether it is company formation in Delhi or Bangalore or Mumbai etc. The Fees however may differ in different cases.

Minimum requirements for company formation in India

Minimum requirements to Incorporate a company are:

  • Minimum 2 shareholders for a private limited company and minimum 7 for a public limited company.
  • Minimum 2 directors for a private limited company where 3 for a public limited entity. Shareholders and directors can be the same persons.
  • Minimum paid up capital of Rs. 1 lac and Rs 5 lacs for private and public limited company respectively.

Obtain Director Identification Number (DIN)

The first step to company formation is application to obtain DIN for all the directors. The application is made electronically in Form DIR-3. The directors must affix their photo along with copy of PAN Card, ID proof and address proof. The documents must be verified and counter-signed by a company secretary, chartered accountant or cost and work accountant.

Apply for Digital Signal Certificate (DSC)

The second step is to apply for DSC for all the directors. It is mandatory to obtain digital signatures as all filings are done electronically and they are used to authenticate them. You also need to register a director’s name who will be authorizing all the filings and submissions.

Reservation of Name

The next step of incorporation process involves reservation of name of the company. For that you need to first propose 6 names as per Rule 9 of Companies (Incorporation) Rules, 2014 and section 4(4) of Companies Act, 2013. Before proposing the name to the Registrar you must check their availability at the MCA (Ministry of Corporate Affairs) website. If you are sure that the names are available, submit them in the order of preference in e-Form INC-1. The application must be digitally signed by authorized directors.

Along with the application you need to submit Object clause of the MOA (Memorandum of Association) and copy of Board resolution in which names are finalized and signatory authority is decided. Upon submission of application the ROC will deliberate within the next 60 days and approve it if it considers it to be appropriate. The name remains reserved for a maximum period of 60 days.

Draft MOA and AOA

Upon finalization of name by Registrar of Companies (ROC), you must draft your Memorandum of Association and Articles of Association (AOA) as per format prescribed by Companies Act, 2013. For instance, if your company is one that is limited by shares then it must follow Table-A as provided in Schedule-1 of the Act. The MOA and AOA must be signed by all the subscribers of the company.

Register a Private Limited Company in India image

File for incorporation

The last step in Company Formation in India is filing for incorporation. As per the Act and Incorporation Rules the application of incorporation must be filed in INC-7 accompanied with INC-22 and DIR-2 new forms Spice 32, Form 33 and Form 34 have been introduced. The forms must be submitted with the ROC under whose jurisdiction the registered office of the company is situated. The forms must be filed within 60 days of reservation of name. The forms must be digitally signed and applicable fees must be paid along with copies of MOA, AOA, PAN Card and address proof.

The ROC upon deliberation will issue certificate of incorporation in Form INC-1 post which you must apply for certificate of commencement of business in e-Form INC-21.

Clients availing the services of Company formation in Delhi can now open their Bank Account with or Partner banks.

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Types of Companies

Types of Companies

Types of Companies

Every person has a different requirement and wants a business entity that suits his needs. Some prefer partnership firms while other prefer companies. Undoubtedly companies are the best form of corporate entities and can be easily formed. To  incorporate a company you need to follow the provisions laid down by Companies Act, 2013. Today we discuss here many types of Companies.

There are a variety of companies that you can register as per your need. A company is a legal person with separate legal entity. It has perpetual succession and offers limited liability to its owners or shareholders. It can accept debt and get into transactions in its own name. The incorporation process of all the companies is same barring certain exemptions.

Private Limited Company

A private limited company is one which is privately owned and has limited number of shareholders who cannot transfer their shares. To incorporate a private limited company you need to invest a minimum paid-up capital of Rs. 1lac. It requires at least two members and can have as many as 200 members. It uses Private Limited as its suffix. For instance, Valuetech Private Limited.

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Public Limited Company

A public limited company is a company that is owned by the public. It is a company that is listed on a recognized stock exchange and its shares are traded over it. It uses Limited as its title. For instance, Idea Cellular Ltd, Tata Motors Ltd. Public limited companies require minimum of 7 members for incorporation and can have unlimited members. You need a minimum paid up capital of Rs. 5lacs to start a public limited company.

One Person Company

The concept of One Person Company came into existence with effect from 1st April, 2014. It was introduced by Companies Act, 2013. One person company of OPC is formed only formed with one member, one director and one nominee. The member and director can be the same person. Thus it requires only two people to incorporate an OPC. The nominee is appointed to carry forward the business in event of death or insanity of the member. You need a minimum paid-up capital of Rs. 1lac to start an OPC.

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Post Incorporation Compliances of OPC

Post Incorporation Compliances of OPC

Post Incorporation Compliances of OPC

An OPC or One Person Company is formed with a single member who can also be the director of the company. Apart from this there is only one mandatory appointment that needs to be done as part of the incorporation process. It is appointment of a nominee. A nominee is a person who will look after the business in case of death or incapacity of the member. An OPC has far lesser compliances than a private or public limited company but there are certain mandatory post incorporation compliances of OPC that must be complied with.

Obtain PAN Card

It is essential to obtain a PAN card in the name of the OPC. One Person Company has a separate legal entity and the tax returns will be filed in its name, that is, separate from its member’s. The first thing that must be done post incorporation is to register with Income Tax Department and obtain PAN.

Bank Account

Every business entity needs an account to transact. Post incorporation open a current account in a bank in the name of the OPC. The documents required to open a bank account are Copy of Certificate of Incorporation (COI), Memorandum of Association (MOA), Articles of Association (AOA), board resolution to open a bank account in the concerned bank, proof of registered address like telephone bill, electricity bill, PAN Card copy, TIN number and ID proof of director.

The above mentioned documents must be duly signed by the authorized signatory and Company’s seal.

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Appointment of auditor

According to the provisions of Companies Act, 2013 every company must appoint its first auditor within 30 days of its incorporation. In an OPC director appoints the first auditor.

Hold Board Meeting

Every company is required to mandatorily hold a board meeting within 30 days of its incorporation. But if an OPC has only one director then there is no need to hold a board meeting. He is allowed to pass resolutions and enter them in the Minutes Book. He is also required to send a copy to members of the company.

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Is One Person Company Required to file Less Compliance than Private Limited Company?

Is OPC Required to file Less Compliance than Private Limited Company?

Is OPC Required to file Less Compliance than Private Limited Company?

One Person Company (OPC) came into existence from 1st April, 2014 onwards since the introduction of Companies Act, 2013. The concept is new in India but it has already been adopted by many countries around the world. An OPC is a company that is formed with one member only. That member can also be the director. Also, the member needs to appoint a nominee who shall take over the company after death or incapacity of the member. Is OPC Required to file Less Compliance than Private Limited Company?

An One Person Company is the only form of company that is formed according to the number of members. OPC allows a single person to start his own company with a minimum paid-up capital of ₹1 lac.

Legal Compliances

An OPC uses private limited company as its title. However, the promoter must mention One Person Company below its name. An OPC has to follow all the compliances of a private limited company except for some. The Ministry of Corporate Affairs (MCA) and Companies Act, 2013 are quite particular about these compliances. They must strictly be followed. They must file tax returns regularly.

They should also file the requisite documents with MCA and the Registrar from time to time. However, Companies Act provides certain exemptions to OPC and lessens the compliance burden.

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Exemptions

First, an OPC need not hold an Annual General Meeting (AGM) as its a company with only one member. The date on which the resolution is communicated and entered into minutes book will be deemed as the date of AGM.

Secondly, an OPC needs to conduct only one board meeting every six months and the consecutive board meetings must be held at least 90 days apart from each other.

Another exemption OPCs earn is maintenance of quorum in board meetings as per provisions of Section 174 of the Act. The provision is not applicable on OPCs having only one director on the Board. It is also not required to hold board meetings in case of one director. OPCs are also exempt from mandatory rotation of auditors as required by Section 139(2) of the Act.

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