Wednesday, 8 June 2016

INCORPORATION OF THE COMPANY


New Corporate Laws Treatise ("NCLT") provides information related to legal and corporate laws and acts in India. The NCLT.in aims to provide complete information about Indian corporate laws  like Companies Act 2013, Companies Act, 1956 and other corporate laws and forms, circulars, notification, rules, orders, guidelines, etc.
INCORPORATION OF THE COMPANY
In general the term company is an association of both natural and artificial persons. The Companies' Act 2013 provides for the different kinds of company which can be registered under the said act. As per section 3,of the Companies Act a company may be formed for any lawful purpose by subscribing their names to the memorandum and complying with the requirements of this act in respect of registration -
Public company
Seven or more persons
Private company
Two or more persons
One person company
One person

The company formed under section 3 (1) it may be further-
          A.    Company limited  by shares
          B.     Company limited by guarantee or
          C.     Unlimited company

Characteristics of a company-
  Ø  Corporate personality
  Ø  Limited liability
  Ø  Perpetual succession
  Ø  Separate property
  Ø  Transferability of shares
  Ø  Common seal and capacity to sue and be sued
  Ø  Limitation of action
  Ø  Separate management
  Ø  Voluntary association for profit.
INCORPORATION AND THE CONSEQUENCES
The first step in the formation of the company is to prepare a document called the memorandum of association which is a vital document and one of the most crucial pre-requisite for incorporating a registered company under the act. It contains the essential conditions upon which the company can be incorporated. A company which is being registered and being formed for a lawful purpose may by subscribing their names to a memorandum and complying with the other requirements in respect of the registration, may form an incorporated company, with or without the liability.
Hence the object clause of the memorandum is two- fold
1.      Firstly, shareholder must know the risk involved and the purpose.
2.      Secondly must know the capacity of the company.
It is compulsory for the company to add the object clause in the memorandum as it sets out the object and the purpose for which the company has been formed.
The incorporation of the company is based on the two basic principles that is
Ø  Lifting of the corporate veil- It is still the basic principle which is being followed on which the law of corporations is being based. As the separate personality of the company it is a statutory privilege and must be used for a legitimate business purposes only.
In the case of Salomon v. Salomon&co. ltd[1] it was held that normally courts are reluctant or are at least cautious to lift the veil of corporate personality to see the real persons who are behind it.
Ø  Doctrine of ultra vires-This term signifies that whatever is not being stated in the memorandum, the company is being probhited from doing so as the object and the powers to do so, as a result, an act which is being ultra vires is void and does not bind on the company, neither the company nor the contacting party can sue to it.
 It is a general rule which is being followed is that the act which is being ultra vires cannot be ratified even if the member assents to do so.

The company which is being incorporated must be file with the registrar within whose jurisdiction the registered office is being situated, the following documents and the information is being prescribed for the registration-
·         The memorandum and the articles must be signed by the subscribers.
·         A declaration must be made and must be attached with the affidavit from the subscribers to the MOA and the first directors acting.
·         Correspondence address till the registered office is being established
·         Particulars of name, residence address, nationality etc.
·         Particulars of the persons whose name is mentioned in the articles of the first directors.
·         Particulars of the interested persons mention in the articles
·         After all the submissions of documents and the information the registrar shall register and issue a certificate of incorporation and allot a corporate identity number.
·         All the information and the documents must be preserved till the dissolution of the company.
·         If any false information is being furnished the person will be liable for such action under section 447.
·         If the tribunal thinks that a company has been incorporated by furnishing the false information , then the tribunal on an application may pass such orders as it deems fit or direct that the liability of the members shall be unlimited or removal of name of company from the register of companies or , order for winding up may be passed.





[1] 1897 AC 22

Also Read 

Indian Company Incorporation made Quick and Easy 



Ministry of Corporate Affairs (MCA) introduced SPICE (Simplified Proforma for Incorporating Company Electronically) w.e.f. 02.10.2016 in e-Form INC-32
Highlights of INC-32
1. This form can be filed even after approval of INC-1. This facility was not provided in INC-29.
2. Memorandum of Association (MOA) has been provided in Electronic Mode INC-33.
3. Articles of Association (AOA) has been provided in Electronic Mode INC-34.
4. In the new e-MOA & AOA there is no need of signatures of subscribers to MOA and AOA, instead of physical signing by subscribers the digital signatures (DSC) of subscribers can be affixed on MOA & AOA.
5. In the new e-MOA & AOA there is no need of signatures of witness, instead of sign of witness, the DSC of witness can be affixed on MOA & AOA eform.
6. Information in the eform has been increased in comparison of earlier eform INC-29
The change in procedural requirements for incorporation of Companies in India would facilitate ease of doing business in India and are especially aimed at reducing the time lines for setting up business in India. 


For more information on Companies Act, 2013 logon to New Corporate Laws Treatise www.nclt.in or write email to cs@nclt.in  

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