Author: Sangamithirai. V, Chettinad School of Law
INTRODUCTION
The Article “Registration and Incorporation of Companies” provides an in-depth discussion of the steps, prerequisites, and importance of establishing and incorporating a business. It functions as a comprehensive resource that covers a range of corporation formation topics, such as the makeup of shareholders, directors, and members for various company forms.
In addition to the discussion of the formation procedure, the document offers comprehensive insights into the significance of choosing a suitable and compatible company name, emphasizing the legal consequences and limitations associated with name selections. It also highlights how important it is to stay in compliance with national rules and keep clear of issues involving registered trademarks.The article also discusses the process of drafting important documents, including the Articles of Association (AoA) and Memorandum of Association (MoA).In addition, the article provides a detailed flowchart that describes every step of the registration process, including all of the forms, declarations, and paperwork that need to be turned in to the registrar. It also discusses the responsibilities that follow registration, such as the necessity of keeping lines of communication open and adhering to legal regulations. and the case laws has been disscussed all these infromation provided with respect to companies act 2013.
Keywords: Registration, company, Incorporation, MOA, AOA
Formation of company:
To form a company there must be adequate members and the limit should attain :
In case of one person company maximum one person.
In case of a Private company sec(68) of companies act 2013, there must be minimum 2 and maximum 200 members, minimum of two directors and two shareholders. The minimum paid up capital is 1 lakh.
In case of a Public company sec 2(71) of comoanies act 2013, there must be minimum 7 and maximum it si unlimited, minimum of three directors and seven subscribers for the company. The minimum paid up Capital is 5 lakh.
Naming of the company:
The company’s name must be chosen by the promoters. According to Section 4 of the Companies Act, a business’s name cannot be the same as or very similar to the name of an already-existing company.
Furthermore, the name must not look unpleasant to the national government, nor should using the name violate any national laws. For instance, the company’s name shouldn’t conflict with a registered trademark.
An organization gains the exclusive right to use a name once it registers it. After then, no other business may register under the same or a similar name. The company’s name is regarded as a vital component of its public image. A corporation may only alter its name with the Central Government’s prior consent, according to Section 13 of the Companies Act.
Documents to be prepared:
The MoA and AoA are the important documents to be prepared at the time of registration.
MoA memorandum of associations:
A company’s constitution is sometimes referred to as the Memorandum of Association (MoA). It establishes the range of what a business can do. The purpose of the company’s establishment, the authorized share capital that the business can raise, the level of liability that the members pay, and other details like the company name and registered office location are all stated in the Memorandum of Association.
A public company’s memorandum of association (MoA) must be signed by a minimum of seven individuals, but a private company’s must be signed by at least two. The people who sign the Memorandum of Association (MoA) are referred to as subscribers, and each subscriber is required to own a minimum of one share in the company’s capital.
AoA articles of associations:
A company’s regulations, or articles of association (AoA), specify how it will be run and managed. They stand for the promoters’ morals and principles. The AoA must be signed by each subscriber to the MoA. It is important to remember that the MoA is the document that overrides the AoA. Should there be any provisions inconsistencies between the AoA and MoA, the MoA would take priority. The purpose for which the company is founded is stated in the MoA, and the means by which the purpose is to be fulfilled is included in the AoA.
Procedure for Registration of Company:
Section 7 of Companies Act,2013[1] defines the technique to be followed for incorporating a company. It explains that
(1)While incorporation of company it must be filed to the registrar where the control falls as where the company is positioned. To incorporate a company the upcoming documents are needed to be proposed by the company.
a)Firstly the memorandum and articles of the association must be engaged by the persons who are the subscribers to the memorandum or article .
b)A pronouncement must be given by the an chartered accountant, by an advocate, cost accountant in a prearranged form given by the person such a manager, director of the company.
c)Each of the subscribers to the memorandum must give affirmation and the persons who are named as first directors in the article must state that they are not convicted by any offence which is interconnected to the materialization of the company, upgrade of the company or handling the company. And the persons must not be guilty of any offence or there must not be any kind of breach of duty happened while incorporating a company. And also the company must certify that all the documents proposed to registrar must be fair and given by them in knowledge
d)there must be address for communication till the new company is being amalgamated.
e)All the particulars of the person who is incorporating the company must be given such as surname,residential address, nationality must be mentioned. Also the person who contributed to the memorandum must also give their proof of identity.
f)Also the persons who are named as first directors must give their nationality,surname,residential address and also other particulars such as proof of identity, Director identification number must be succumbed.
g)The interested persons to the article of the company must submit their sufferance to act as a director in the company.
CASELAWS:
Moosha v Ibrahim [2]
A company was being incorporated and later it was found out that the company has contravened some of the rules and regulations while incorporating the company as the Memorandum of association was endorsed by the guardian of five members. Finally the court held that the incorporation certificate for the company is cogent.
Steps for incorporation of companies
- To discover a name for the company: A company can be identified by the name given to the registrar. The memorandum of the company consist the name of the company.
- The memorandum of Associations and Articles of Association must be prepared
The memorandum reside the objectives of the company, the field of the company.
The memorandum consists of different clauses.
- Name clause
- Registered office clause
- Object clause
- Liability clause
- Capital clause
The article is involve of the rights and duties of the members and it is binding on all the members of company.
3)The memorandum of articles must be printed and be stamped endorsed by the members. The articles must be endorsed individually in front of witnesses.
4)For the incorporation of the company the promoter will take on the power of attorney as the person who has take on as power of attorney will be given the authority to act on behalf of the company. Also the person prearranged as power of attorney have the authority to make changes in the memorandum.
5)the declaration must be made by the members as per the essentials of Company act.
6)During the course of incorporation of the companies the recommended amount must be paid to the registrar.
8)After all the process and commended are fulfilled the company will receive a certificate for the known as “incorporation certificate”
Post Registration:
- Based on the type of company or business undertaken the licence for the company will be postulated.
- The company incorporated must have a positioned office in India. It have access to all kinds of transactions.
- The board of directors and shareholders meetings must be conducted as an when needed.
- The companies must affirm records of accounts and ts Financial status and it must comply with the rules and regulations as prescribed by the act.
- The newly incorporated company must register for GST registration when the business is related to goods and services supply.
- The company may protect its copyrights,patents,trademarks,trade secrets by registering for Intellectual Property protection.
Principle of Registration of company:
The registration and incorporation of company is set up , the registered company has
- Separate legal entity[3]
- Transferable of shares
- Limited liability
- Suing and flexibilty
- When a company is being registered it will get apparent legal identity. And the believability of the companies gets increased it attracts more investors, clients and even customers.
- The company gets limited liability fortification when it is being registered. As it considered as a separate legal entity the company’s liability is not on shareholders and on directors. This is profited in a way that the personal asset cannot be taken when the company becomes bankrupt.
- When a company is registered it has better access to funding resources such as angel investment ,banking, venture capital.
- A company which is enumerated has a perpetual succession which means that the company is not dependent on the founders or representatives of the company. If in case the company existing memberships change or new membership add on to the company the management of the company is unremitting.
- For a registered company the shares of the company is easily exchangeable is laidback for the existing members to exist and also magnetizes new potential investors.
- For the enhancement of the economic growth the government provides tax incentives for the registered company.
Disadvantages of registration of company:
- There is lot of legal complex techniques to be followed and there is high expense while incorporating a company. This may disuade the persons from incorporating a company.
- As the company is a legal entity it will not be apparent and it will not disclose any kind of information to the low-members of the company. There are always circumscribed to give certain access.
- The small company shareholders have no authority over the company like making decisions for the company. There is split up of control from ownership.
- If it is a enlarges incorporated company they have a burden of contributing to the society and they must follow the rules and regulations stringently.
- There will be advanced tax rate imposed when it is a huge incorporated company.
In Gilford Motor Co. v. Horne[4], the court held that a firm could not take encounter where its primary shareholder was liege to a covenant of restraint and had formed a company solely to get around the restriction.
Difference between Registration and Incorporation of companies:
Registration does not conclude in having a separate legal entity. The furthest step of registration is Incorporation of companies. For incorporation of company the company will be known as a separate legal entity and it contains its own assets and own debts in the name of the company.
Non compliance to Statutory authority
- The penalties enforced for the companies which have been incorporated various on its jurisdiction as to where the company is registered.
- The statutory authority will entail monetary penalties when there is any breach transpired while incorporating the company.
- If the company is involved in repeated violations. Or noncomplying with the rules and regulations inflict legal action can be taken against the companies or the members of the company can be held accountable for the breach done.
- In a company if a director has done any kind of breach of duty it may lead to the ineligability of the directors from the company.
- In some cases due to the non-compliance of authority the court may order the company to windup .
- By not obeying the rules and regulations the company may subject to loss of Limited liability protection ie. When the company is being dissolved or insolvent the debts can be paid off from the owners of the company.
- Due to continuous breach of duty the company may loss its character with the clients, investors,stakeholders etc.
Pre incorporation contract:
A firm is not subject to lawsuits based on per-incorporation agreements when it first forms. In English and Colonial Produce Co., Re., a lawyer[5] produced the company’s documents and expended time and money registering it at the promoters’ request. However, the business was not found to be obligated to cover those costs and services.
Agents may be held personally liable: The agents hired by a proposed business may be held personally liable. In Kelner v. Baxter[6], the plaintiff’s wine was bought by the organizers of a proposed hotel business. The corporation was founded, however it entered liquidation before making a payment. The plaintiff held them personally accountable.
CONCLUSION & COMMENTS:
The process of registering and incorporating a company is essential to creating a legal entity with rights, responsibilities, and credibility. Following the rules outlined in the Companies Act of 2013 guarantees that businesses function within a framework that encourages responsibility, transparency, and investor trust. Companies can establish a strong basis for their operations by carrying out the required processes, such as establishing a company with the right number of members, choosing a distinctive and legal name, and drafting the key documents like the Memorandum of Association (MoA) and Articles of Association (AoA).
A few benefits of registration and incorporation include: distinct legal company status; limited liability protection for shareholders; financing source access; perpetual succession; and improved share marketability. It is essential to remember that the registration and incorporation processes can be difficult and expensive. Nevertheless, these difficulties are outweighed by the long-term advantages and legal safeguards provided to registered companies.
In summary, registering and incorporating a business gives it legal recognition, credibility, development potential, and the ability to draw in clients and investors. Through adherence to legislative mandates and meeting post-registration responsibilities, businesses can function within a regulated environment that promotes stability, accessibility, and sustainable business methods.
[1]requirements of incorporation of company
[2] 26 June 1912
[3] salomon v.salomon & Co. Ltd. (1897)Established the principle of separate legal entity for a properly incorporated company.
[4] Gilford Motor Co. v. Horne (1993) ch 935
[5] (1906) 2 Ch.435
[6] [1866] LR 2 CP 174
