The Procedure Of Incorporation Of The Company

The Procedure Of Incorporation Of The Company

In view of the existence of a company, incorporation of the company or Registration has an important. Separate and permanent existence is obtained by a company only after incorporation.

Formation of Company

Any seven or more persons together with may form a public company and two or more persons together with may form a private company. A Memorandum of Association of such companies is prepared which contains the signatures of the members forming company. Along with the names of members, the numbers of their shares are mentioned in it.



Incorporation of the company

A provision has been provided in section 7 of the companies Act, 2013 for the incorporation of the company. According to it-

There shall be crammed with the Registrar within whose jurisdiction the registered office of a corporation is proposed to be situated, the subsequent documents and knowledge for registration-

Memorandum of Association

In relation to the incorporation of a company, it is an important doctrine. The following shall be mentioned in the Memorandum of Association.

    • Name and address of members
    • Their business or occupation
    • Number of shares held by them
    • Details of the proposed registered office, etc.

The Memorandum of Association shall be signed by all members and will be marked by the seal of the company. The company cannot be incorporated without the Memorandum of Association. Actually, the Memorandum of Association is a charter of the company which determines the rights of the company under the act. The incorporation of a company can be done only on the basis of fundamental matters mentioned in the Memorandum of Association, otherwise not. The Memorandum of Association is required to be in Model drafts. Along with it should be divided into printed paragraphs, serially marked and signed by the members and attested at least by one witness. The Memorandum of Association is necessarily be stamped according to the stamp Act.



Section 7. Incorporation of the company Under Company law 2013:

  1. There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:
    • The memorandum and articles of the corporate duly signed by all the subscribers to the memorandum in such manner as could also be prescribed.
    • A declaration within the prescribed form by an advocate, a accountant, accountant or company secretary in practice, who is engaged within the formation of the corporate, and by a private named within the articles as a director, manager or secretary of the corporate, that each one the wants of this Act and therefore the rules made thereunder in respect of registration and matters precedent or incidental thereto are complied with.
    • An affidavit from each of the subscribers to the memorandum and from persons named because the first directors, if any, within the articles that he’s not convicted of any offence in regard to the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years which all the documents filed with the Registrar for registration of the company contain information that’s correct and complete and faithful the simplest of his knowledge and belief.
    • The address for correspondence till its registered office is established.
    • The particulars of name, including surname or surname, residential address, nationality and such other particulars of each subscriber to the memorandum alongside proof of identity, as could also be prescribed, and within the case of a subscriber being a body corporate, such particulars as could also be prescribed;
    • The particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as could also be prescribed; and
    • The particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the corporation in such form and manner as could also be prescribed.


  2. The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that subsection in the register and issue a certificate of incorporation within the prescribed form to the effect that the proposed company is incorporated under this Act.
  3. On and from the date mentioned within the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the corporate a company identity number, which shall be a distinct identity for the corporate and which shall even be included within the certificate.
  4. The company shall maintain and preserve at its registered office copies of all documents and knowledge as originally filed under sub-section (1) till its dissolution under this Act.
  5. If a person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he’s aware in any of the documents filed with the Registrar in regard to the registration of an organization, he shall be liable for action under section 447.
  6. Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of a corporation, it’s proved that the corporate has been got incorporated by furnishing any false or misinformation or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named because the primary directors of the company and thus the persons making declaration under clause (b) of subsection (1) shall each be responsible for action under section 447.
  7. Without prejudice to the provisions of sub-section (6), where a corporation has been got incorporated by furnishing any false or misinformation or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made there, on being satisfied that the situation so warrants.
    • Pass such orders, because it might imagine fit, for the regulation of the management of the corporate including changes, if any, in its memorandum and articles, public interest or within the interest of the corporate and its members and creditors.
    • Direct that liability of the members shall be unlimited.
    • Direct removal of the name of the corporate from the register of companies.
    • Pass an order for the completing of the corporate.
    • Pass such other orders because it may deem fit.
    • Provided that before making any order under this subsection.
    • The company shall tend an inexpensive opportunity of being heard within the matter.
    • Tribunal shall take into consideration the transactions entered into by the corporate, including the obligations, if any, contracted or payment of any liability.



Article of Association

Article of Association is also an important document like Memorandum of Association. It is also called the internal rules of the company. Articles of Association is necessary to be enclosed with the application to be presented for registration on the incorporation of the company. Rules and sub-rules relating to internal arrangements of the company are mentioned in the article of Association. These internal rules ensure the performance of activities and objects detailed in the Article of Association.

Here it is to mention that the presentation of Article of Association is not necessary for a public company limited by shares, it is optional. For the registration or incorporation of Private company unlimited and limited by shares or limited by guarantee, registration of Article of Association along with the Memorandum of Association is also necessary. Signatures of those persons who had signed Memorandum of Association are also necessary upon the article of Association.

Declaration Form

The promoters of the company shall have to declare with this intention along with the application that no other company is in existence alike or nearest to the proposed name of the company.

In addition to this, a declaration within the prescribed form by an advocate, a accountant, accountant or company secretary in practice, who is engaged within the formation of the corporate, that each one the wants of this act and therefore the rules made thereunder in respect of registration and matters precedent or incidental thereto are complied with.

Name and address of the Office for Incorporation of the company

The name and address of the Registered office of the proposed company shall be mentioned in the application form for the purpose of correspondence.

Details of Directors

Following information about the Directors will be given along with the application form of incorporation or registration:

  1. Name and address of Directors,
  2. Their consent
  3. Their signature
  4. Name, address and signatures of witnesses
  5. Determines eligibility
  6. Directors Identification Number, etc.

Other pieces of information

Information about the following shall also be given along with application form-

  1. Management agent,
  2. Secretary
  3. Treasure, etc.

Fee for Incorporation of the company

Prescribed ‘ fees’ is also to be deposited with the Registrar along with with the above all documents etc.

Certificate of Incorporation of the company

On completion of all formalities, a certificate will be issued by the Registrar which will be evidence of this that the company has been incorporated. Such certificate will be called Certificate of Incorporation. Signatures of the Registrar and seal of Registrar’s office will be marked on the certificate. In the case of a limited company, it will be clearly mentioned in the certificate by the Registrar that it is a ‘ Limited Company ‘.

On registration of the company, it will get the status of Incorporation Body. It will be now an unbroken institution. After incorporation company will get legal personality which will be altogether different from its members.

In the case of Ashok Marketing Limited vs Punjab National Bank 1990, 4 SCC 406, it has been held by the Supreme court that on issuance of certificate of incorporation, the persons signing on Memorandum of Association of company and the persons holding the membership of company, from time to time, assume the form of Body Corporate which acts as incorporated company and existence of that is immortal.

The legal importance of certificate of Incorporation of the company

The certificate of incorporation of a company has it’s own legal importance. It is conclusive evidence of the fact that all the requirements of the companies act have been complied with and that everything is in order as regards registration and that company is a validly incorporated company.

In the case of Moosa Goolam Ariff vs Ebrahim Goolam Ariff, ILR 1913 40 Calcutta P.C it has been propounded by the privy council that once the certificate of incorporation is issued by the Registrar then there is no necessity to think over that therein some irregularities in registration. The certificate of Incorporation is conclusive evidence of the fact that all the requirements regarding registration have been fulfilled and that the company has now become an incorporated company.



Status prior to Incorporation of the company

 Since the company is a non-entity before its incorporation,  it is not liable for contracts which were made before its incorporation.  Similarly,  the company cannot sue against a person for contracts which were made before its incorporation and such contracts cannot legally be recognized by recommendations.  In such cases, the person himself who did the contract will be responsible.  Kelner vs Boxtter 1866 LR 2 PC 174.

In the case of Inleck Investment (P.) Ltd. Vs DyanamaticHydarulics Limited 1989,3 Comp LJ 221 CLB it has been held that shares cannot be acquired in the name of the company before its incorporation.  A transferring firm is, therefore, liable to be rejected where the Transfer is made in the name of a company which is proposed to be formed.

Commencement of Business by the Company

A provision has been made under section 11 of the Companies act 2013 that each private company will commence its business only from the date of its incorporation. But a public company cannot commence business even after its incorporation unless it obtains a certificate to commence business from the Registrar of companies.  To obtain such certificate certain formalities are to be fulfilled.

It has been said in the case of  In Re Otto Electrical Company  1960, 2 CH 390 that where a person has supplied certain goods or rendered some service to the company which has not been issued a certificate to commence business,  then, in that case, he cannot sue the company for damages Or loss sustained by him.

 Section 11. Commencement of business, etc. Under Company act 2013:

  1. A company having a share capital shall not commence any business or exercise any borrowing powers unless—
  2. a declaration is filed by a director in such form and verified in such manner as could also be prescribed, with the Registrar that each subscriber to the memorandum has paid the worth of the shares agreed to be taken by him and therefore the paid-up share capital of the corporate isn’t but five lakh rupees just in case of a public company and not but one lakh rupees in case of a personal company on the date of creating of this declaration; and
  3. the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
  4. If any default is formed in complying with the wants of this section, the corporate shall be susceptible to a penalty which can reach five thousand rupees and each officer who is in default shall be punishable with fine which can reach one thousand rupees for each day during which the default continues.
  5. Where no declaration has been filed with the Registrar under clause (a) of subsection (1) within a period of 1 hundred and eighty days of the date of incorporation of the corporate and therefore the Registrar has reasonable cause to believe that the corporate isn’t carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the corporate from the register of companies under Chapter XVIII.

 

 

 

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