Incorporation or Registration of a Company
After Promotion, the second stage in the formation of a company is the registration or incorporation. The promoter of a company should perform the following functions for getting the company registered under the Companies Act.
1. Approval of the Proposed Name of the Company
Before the company is registered, it is essential to obtain the approval of the Registrar to its proposed name. There is a specific application form for this purpose. The promoter generally selects a few suitable names in order of preference and apply to the National Company Law Tribunal through the Registrar of the State in which the company is to be registered in Form No. 1A along with a fee of Rs.100. On hearing about the available name, the promoter has to decide the name for the company.
2. Documents to be Filed with the Registrar during registration
The promoter should then prepare and file the following documents with the Registrar of Joint Stock Companies. He should also pay the necessary filing and registration fees.
1. Memorandum of Association
The Memorandum should be printed and at least seven persons each agreeing to take at least one share must subscribe their names to Memorandum.
2. The Articles of Association
The Articles must also be signed by at least seven members. If a public company doesn’t prepare and file Articles, then it is deemed to have adopted Table A in Schedule I of the Indian Companies Act.
3. List of Directors
A complete list of directors, their addresses and occupations and age. If not separate list is filed, the subscribers to the Memorandum are deemed to be the first directors.
4. Consent of the Directors
When Directors of a Company are appointed by the Articles of Association or named in the prospectus, a written consent to act as directors and also a written undertaking to take up and pay for the qualification shares if any are mandatory in Incorporation of a Company.
5. Statutory Declaration
A statutory declaration by any one of the following persons stating that all the requirements of the Act regarding Registration have been duly complied with:
- An Advocate of the Supreme Court or High Court.
- An Attorney or Pleader who is entitled to appear before a High Court.
- A Chartered Accountant who is engaged in formation of the company and also practicing in India.
- Any individual who is named in the Articles of Association as the Company’s Director, Manager or Secretary.
6. Notices of the Address of the Registered Office
The notice for the address of the registered office of the company should be given within 30 days after its incorporation or on the date from which the company commences its business whichever is earlier.
7. A Letter of Authority for Making Necessary Corrections in Memorandum and Articles
A letter of authority on a non-judicial stamp paper of the requisite value signed by all the subscribers in favour of one of them or any other person for making necessary corrections, on their behalf, in the Memorandum and Articles and other papers is to be filed with the Registrar of Companies.
8. Letter of Registrar of Companies about the Availability of Name
Notarized original copy of Registrar of Companies stating the availability of the proposed name is mandatory while registering a company name. It should be filed with the Registrar of Companies. However, the requirements as given in points 3 and 4 above shall not apply to private companies.
3. Payment of Necessary Fees
Along with the above-detailed documents, the registration and filing fee as per the rates prescribed in Schedule X to the Companies Act, 1956 are to be paid.
4. Registration of the Company
The Registrar of Companies will then verify the documents submitted for registration. If there are any discrepancies found, concerned person was called to visit the Registrar’s office to rectify the errors in the documents. If the documents for registrations are found in order, the Registrar will register the company and a Registration number is allotted.
The Registrar under his hand and Seal of his office will issue a Certificate of Incorporation. The date given by the Registrar in the certificate will be the date of incorporation of the company. The company will be considered to be a legal entity from this date.
Certificate of Incorporation of the Company
After the above documents are filed with the Registrar and the prescribed fees are paid and the Registrar is satisfied that all the requirements of the Act regarding the registration have been complied with, he will register the documents and retain them.
The Registrar will then issue a certificate known as Certificate of Incorporation and enter the name of the company in the Register kept in his office. This Certificate of Incorporation entitles the company as a legal person. In other words, the company is born upon the issue of Certificate of Incorporation.
Conclusiveness of the Certificate of Incorporation
According to Companies Act, the certificate is conclusive evidence that all the requirements of the Act in regard to the formation and registration of the company have been complied with. The effects of the certificate of incorporation can be summed up as follows:
1. Neither the Court nor the Registrar can cancel the Certificate of Incorporation even if the company is formed for an illegal purpose.
2. The validity of the Certificate of Incorporation cannot be debated or argued upon on any grounds whatsoever.
3. When a certificate is issued, the new company is born. In other words, a legal person has come into existence through a legal process.
4. The date mentioned in the certificate is the date of incorporation of the company.
Even if the signatories were all infants, the certificate would be conclusive.
Specimen copy of Certificate of Incorporation
Capital Subscription Stage
A private company or a public company not having share capital can commence business immediately on its incorporation. Capital Subscription Stage and Commencement of Business Stage are relevant only in the case of a public company having a share capital. Such a company has to pass through these two additional stages before it can commence its business.
The capital subscription stage deals with the task of obtaining the necessary capital for the company. For this purpose, immediately after the incorporation, a meeting of the Board of Directors is conducted to deal with the following business:
- Appointment of the secretary. In most cases, the appointment made at the promotion stage is confirmed.
- Appointment of Bankers, Auditors, Solicitors and Brokers etc.
- Adoption of draft “Prospectus”/”Statement in lieu of Prospectus”.
- Adoption of underwriting contract, if any.
Besides the above mentioned business, the Board also decides as to whether-
- a public offer for capital subscription is to be made, and
- listing of shares at a stock exchange is to be secured.
After the above formalities have been completed, the Directors of the company file a copy of the prospectus with the Registrar and invite the public to subscribe into the shares of the company by putting the prospectus in circulation.
Applications for shares are received from the public through the company’s bankers and if the subscribed capital is equal to the minimum subscription amount as disclosed in the prospectus, and other requirements of a valid allotment are fulfilled, the directors of the company pass a formal resolution of allotment.
Allotment letters are then posted, return of allotment is filed with the Registrar and share certificates are issued to the allottees in exchange of the allotment letters.
No allotments can be made or money paid for the subscription of shares will be refunded if the total subscribed capital is less that the minimum subscription of if the company does not obtain the minimum subscription within 120 days from the issue of prospectus.
It may be noted that a public company having a share capital, but not issuing a prospectus has to file with the Registrar a Statement in lieu of Prospectus at least 3 days before the directors proceed to pass the resolution of first allotment.