Company registration in India |Complete Registration in 2020

Many founders and starters make a mistake while registering a company in India. With the changing economic times, the population is getting directed towards setting up their own business. Company form of business offers a large, built-in and dynamic potential market to explore and thus is the most favoured one.

In the words of professor Haney,

A company is an incorporated association, which is an artificial person created by law, having a separate entity, with perpetual succession and a common seal.

A registered company provides even more advantages. But the process of registration of a company sounds as the cumbersome legal procedure for many, and thus people restraint themselves from getting their companies registered.

First and foremost rule is, never use your private bank account to make a business transaction. You never know when this could bite you in future business expansion.

But it is not so, registering a company in India is very easy it only involves complying all the provisions and rules of The Companies Act, 2013. In the article, we will see the procedure of getting a company registered and also the documents required for registering a company.

Assuming that you have decided your company and business name and moving ahead to incorporate your company.

Types of Companies

Before registering a company, it is important to create a company. So let’s have a look on the various forms of company:-

1. One Person Company (OPC)

When coming to register a business in India, One Person Company or One Member Company is incorporated by a single person being the subscriber, owner, director, and the member of the company. The person in the company’s memorandum shows the name of his nominee, who shall in the subscriber’s death become the member of the company.

OPC encourages entrepreneurship and corporatization of business as it is a private company in nature with limited liability and has a separate legal entity. The procedural requirements for an OPC are much more simplified, and there are several exemptions enjoyed by OPC.

2. Non-profit Organization

Non-profit Organization is an organization traditionally dedicated to furthering a particular social cause. It is an organization using the surplus of its revenues to further its aim, rather than distributing its income to the organization’s shareholders or members.

Public confidence is a factor in the amount of money that a non-profit organization can raise. The more non-profit organisations focus on their mission, the more public confidence they will have, and as a result, more money for the organization.

Non-profit organisations are charitable organisations and thus fall in the category of tax-exempt, meaning they do not pay income tax on the money that they receive for their organization. They can operate in religious, scientific research, sports, charity, environment protection or educational areas.

Red Cross is a famous example of a non-profit organisation.

Also Read: 21 profitable Business ideas in India for 2020 with No investment

3. Private Limited Company

A Private Limited Company is a Company which offers limited liability and has a minimum of 2 members and a maximum of 200 members excluding its past and present employees. It can not invite the public to subscribe its securities and there is a restriction on transferring shares in a private limited company.

The Ministry of Corporate Affairs registers almost 93 per cent of the companies incorporated in India as Private Limited Companies. There is no minimum paid-up share capital required to form a private company.

It requires a Private Limited Company to mention the words “Pvt. Ltd.” in its name.

Google India Pvt. Ltd. is the largest private limited company in India.

4. Public Limited Company

A Public Limited Company has a minimum of 7 members and no restriction on the upper limit of members. It can invite public to subscribe to its securities and is no restriction on the transfer of shares in a public limited company.

We can divide a public limited company based on its feature of public offering into Listed and Unlisted company. A listed company is one which is listed on the recognised stock exchange. It requires a public limited company to have at least three directors and mention the word “Ltd.” in its name.

State Bank of India is a leading example of a public limited company in India.

5. Company limited by Shares and Guarantee

A limited company may be “private” or “public”.

“Limited by shares” means a company in which it limits the liability of the shareholders to the unpaid amount on shares held by them. Such liability of a member can be enforced during the existence of the company or during its winding-up period.

Companies like Reliance, Infosys and Tata are all public companies limited by shares.

A company limited by guarantee rarely has a share capital or shareholders but has members who act as guarantors of the company’s liabilities: each member contributes an amount or takes over an asset of the company as specified in the articles, in the event of insolvency or of the winding up of the company.

One of the largest companies limited by guarantee is Bupa, the healthcare company.

6. Joint Stock Company

A Joint Stock Company is a business entity in which shareholders can buy and sell shares of the company’s stock. Each shareholder owns company stock in proportion. Shareholders can transfer their shares to others with no effects to the continued existence of the company.

Corporations or Limited Companies are the other names of the Joint Stock Company.

Indian Oil Corporation Ltd. is one of the largest joint-stock company in India.

7. Unlimited Company

An unlimited company is a company incorporated with or without a share capital but where the legal liability of the members or shareholders is not limited. In such a company the liability of the member ceases when he ceases to be a member.

In such companies, members have unlimited liability or can be called to contribute only at the event of winding up of the company. So long as the company is a going concern, the liability on the share is the only liability the company can enforce.

GE India Company (private Company With Unlimited Liability) is an example of an unlimited company.

8. Cooperative Society

A Cooperative Society is essentially a voluntary association of persons having a common interest. The primary aim of a cooperative society is to provide services to its members, and its motto is “each for all and all for each “.

Registration of a cooperative society is compulsory and after registration, it becomes a distinct body independent of its members. Any person can join or leave the society whenever he wishes to do so, but no outgoing member can transfer his shares to another person.

It utilises the profits of the cooperative society for the benefit of its members and the local community.

Amul is considered one of the largest co-operatives of India.

registering a company

Procedure for Registration/Incorporation of Company in India

Get Digital Signatures

The very first step in registering a company is to acquire the Digital Signatures also known as Digital Signature Certificate (DSC) of the members, directors and subscribers to the memorandum of association (MOA).

To register a company in INDIA many e-forms are required to be filed with the MCA after affixing the digital signatures of the authorised signatory such as digital signature is required for the application of DIN of the directors and digital signature of the subscriber is needed to file MOA and AOA. It nearly takes two days to get DSC after submitting the documents.

Get Director Identification Number

The second and important step in registering a company is to acquire Director Identification Number (DIN) as it is mandatory according to The Amendment Act, 2006. Every intending and existing director must have DIN, for this, they need to file the e-form which can be taken from the official site of MCA.

After the directors receive the DIN, they inform the company using DIN-2 form, and the company further intimates the Registrar of Certificates (ROC) about the same using DIN-3 form. Din is applied and allotted once in the lifetime and is as unique to directors as PAN card to any person.

DIN-4 form is used to initiate any changes regarding the personal details mentioned in the DIN of the directors.

Check Name Availability for proposed Company

Before registering a company, being a separate legal entity must have its own name with the purpose of its being identified.

Two or more names are proposed by the promoters of the company to the Registrar of the companies in the prescribed form.

The Registrar under the availability of the names accepts one name out of the proposed names. It usually takes 3-5 working days for the Registrar to accept the name.

While selecting a name for the company the following must be kept in mind:-

  • the name of the company shall not be identical with or resemble too nearly to the name of an existing company registered under The Companies Act.
  • the name should not contain any word or expression which is likely to give the impression that the company is connected anyway with the Central or any of the State Governments.
  • the name shall not be such that its use by the company makes up any offence under any law.

Preparation of  Memorandum of Association (MOA) and Articles of Association (AOA)

Memorandum of Association (MOA) of a company is a document that sets out a detailed description of the company. Every company should prepare its memorandum of association which contains name clause, registered office clause, objects clause, liability clause and share capital clause.

The memorandum of OPC shall also include any additional clause which is, nomination clause mentioning the name of the nominated person.

The Articles of Association are the rules and regulations of a company which are framed for the purpose of governing or managing the internal affairs and usual functioning of the company. The articles define the duties, the rights and the powers of the governing body and the company at large and the mode and form in which the business of the company is to be carried on.

Duty of Registrar to Scrutinize the Documents

After the above procedure is followed and documents are submitted with the Registrar of Companies (ROC), the Registrar carefully scrutinizes the documents for any discrepancy. If the application contains any mistake, the same is communicated to the promoters of the company and is asked to make a correction in the application, whereas if the application is correct the Registrar issues the Certificate of Incorporation to the company.

If the registrar finds out that any material fact is hidden deliberately by the promoters of the company then he may reject the application and the promoters responsible may be liable to punishment.

Certificate of Incorporation issued by the Registrar of Companies (ROC)

Based on the above documents and information filed by the company for its registration, the Registrar shall register all the documents and information in the register and issue a Certificate of Incorporation in the prescribed form to the effect that the proposed company which is incorporated under The Companies Act,2013.

On and from the date mentioned in the Certificate of Incorporation issued by the Registrar, the Registrar shall allot to the company a Corporate Identity Number (CIN) which shall be a distinct identity for the company and which shall also be included in the Certificate of Incorporation.

Documents Required for Registering a Company

  • Identification and address proof of the directors
  • Original copy of the letter issued by ROC regarding the availability of Company name
  • Memorandum of Association
  • Articles of Association
  • Details (containing name, surname, nationality, residential address) of every subscriber
  • Proof of the registered office. No-Objection letter from the Owner of Address to use the address of the registered office of the Company.
  • Declaration by the director, manager or subscriber of the company, stating that all the requirements of the Act have been fulfilled
  • The DIN (Director Identification Number) of every director of the company

Benefits of Company Registration in India

  • An incorporated company enjoys perpetual succession with the power to acquire, hold and dispose of property both movable and immovable, tangible and intangible.
  • A registered company has the right to contract and to sue and be sued.
  • From the date of registration, the company becomes a separate legal entity, distinct from its members. Thus the coming and going do not affect the existence of the company.
  • A registered company is considered more reliable and thus helps in easy capital generation and raising funding rounds.
  • A registered company can purchase shares of another company and thus become a controlling company.
  • The members/subscribers of a registered company enjoy limited liability.
Check out: How efficiently does Stock Market operate- [Updated 2020]

So what have you decided, finally? What business structure are you going for, and why? Let us know in the comments below.

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