Sunday, January 9, 2011

How to Form a Company in India

The following steps are required to form a company (private or public) in India.

Get ‘name availability’ from Registrar of Companies (ROC).
Draft and execute Memorandum & Articles of Association and other documents.
Pay duties and fees
File Memorandum & Articles of Association and other documents with ROC
Represent with ROC for any reservations or comments he may have
Procure incorporation certificate from ROC.
Subscribe to the agreed share capital of the company
Obtain commencement certificate (for public companies)
How to get Name Availability

Company law requires that the name of each company should be unique. As such, the proposed name of the company to be formed has to be approved by the Registrar of Companies and blocked till registration. The following is the process to get availability of name.

Promoters have to file an application in Form 1A giving the following particulars: Names and addresses of promoters
Proposed name of the company
Alternative names of the proposed company. This is required if the proposed name is not available.
Type of company - Private or Public
Brief objects of the company
Proposed Directors and their addresses
Proposed address of the company
Authorised Share Capital (Authorised capital is the one upto which company can issue shares. The paid up capital can be lower than this).
Details of Group companies, if any
Details of fees paid for name availability
Note about significance of the proposed name. This is because regulations have some criteria based on which names are to be allowed.
A fee of INR 500 is to be paid along with the application.
Typically it takes 4 working days for the ROC to confirm availability of name/s. There may happen iteration with the ROC to get the desired name.
If the proposed names are not approved, more alternative names have to suggested.
On approval of name, the Registrar will issue a name allotment letter and will block the name.
Memorandum & Articles of Association – Facts to Remember

The following are some critical facts to remember in executing M&A of A.

1. The promoters in their own handwriting have to give the following details in the Memorandum and Articles of association of the company:

Name
Occupation
Father’s/husband’s name
Complete Address
Number of Shares subscribed

The Memorandum and Articles have to be signed by all the promoters and witnessed. The person/s witnessing has/have to give the following details in their own handwriting:

Name
Occupation
Father’s/husband’s name
Complete Address
Signing outside India

In case the Memorandum and Articles is to be signed by any of the promoters out side India, then the signing should be done in the presence of Consul of India at the Indian Consulate.

Share Capital

The minimum authorised share capital for incorporating a Private Limited company is

INR 100,000.

The minimum authorised share capital for incorporating a Public Limited company is

INR 500,000.

Number of Promoters

For incorporating a Private Limited Company a minimum of two promoters are required. For incorporating a Public Limited Company a minimum of seven promoters are required.

Number of Directors

For incorporating a Private Limited Company a minimum of two directors are required. For incorporating a Public Limited Company a minimum of three directors are required.

Fee Structure

The following is the fees required to be paid to the ROC for incorporation of the company.

Authorised Capital Incremental capital Fee / incremental fee (INR)
Upto INR 100,000 4,000
From INR 100,000 to INR
500,000

For every INR 10,000 @ 300
From INR 500,000 to INR
5,000,000

For every INR 10,000 @ 200
From INR 5,000,000 to INR
10,000,000

For every INR 10,000 @ 100
Over INR 10,000,000 For every INR 10,000 @ 50
Commencement of Business

A commencement of business certificate has to be obtained from the ROC in case of Public

Limited Companies before any business activity can be taken up.

Information Required for Name Approval

The following information is required for seeking name approval.

Name of the applicant which should be one of the promoters
Address of the applicant - this is where all communication will be sent by Registrar of Companies (ROC)
Proposed name of the company Alternative names
Significance of the first word of the proposed name. This makes it easier to get a desired name.
Names of the proposed first directors – minimum 2 in the case of a private company and in the case of a public company
Addresses, dates of birth, father’s/husband’s names of the proposed directors
Authorised Share Capital – minimum INR 100000 in the case of a private limited and INR 500000 in the case of a public company
Objects of the company in brief.
Address of Registered office of the proposed company. If a place is not finalized, this information can be given at the time of incorporation.
Application fee for approval of name of INR 500 has to be remitted in cash.

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