Companies Act 2013: Formation of Company

The formation of a company in India is a detailed process regulated by the Companies Act, 2013. This process involves various stages from planning and documentation to the final incorporation of the company. These steps ensure that the company is legally recognized and complies with all regulations before it starts operations.

The following are the key steps in the formation of a company in India:

1. Promoter’s Role

The first step in the formation of a company is the identification of a promoter or group of promoters. A promoter is responsible for bringing the idea of forming a company into reality and plays a key role in its initial planning and setup. The promoter’s responsibilities include:

• Identifying the business opportunity and outlining the objectives of the company.
• Arranging the necessary financial resources for the formation of the company.
• Deciding on the company’s name, structure, and location of operations.
• Ensuring compliance with the legal requirements for incorporation.

Once the initial groundwork is laid, the promoters move on to the formal registration process.

2. Obtain Digital Signature Certificate (DSC)

Since company registration is conducted online, each proposed director of the company must obtain a Digital Signature Certificate (DSC). The DSC is required to sign electronic documents during the company registration process. It is issued by certifying authorities authorized by the government.

The DSC ensures the authenticity and security of documents submitted during the registration process. It is valid for a specific period and can be renewed as needed.

3. Director Identification Number (DIN)

Before incorporating a company, the Director Identification Number (DIN) must be obtained for each director of the company. The DIN is a unique identification number allotted to an individual who intends to act as a director in one or more companies.

The DIN is applied for through the Ministry of Corporate Affairs (MCA) portal by filling out the SPICe form (Simplified Proforma for Incorporating Company Electronically), which includes details of the director’s identity, address, and other required information.

4. Name Approval

One of the most important steps in forming a company is obtaining approval for the proposed name of the company. The company’s name must be unique and should not conflict with any existing registered names or trademarks.

The promoters can propose up to two names using the RUN (Reserve Unique Name) service available on the MCA portal. The MCA will review the proposed names, ensuring they comply with the Companies Act, 2013, and other guidelines. Once approved, the chosen name is reserved for a period of 20 days, during which the company must proceed with incorporation.

5. Drafting the Memorandum and Articles of Association

The Memorandum of Association (MoA) and Articles of Association (AoA) are two critical documents that define the constitution of the company.

• Memorandum of Association (MoA): This document outlines the company’s objectives, scope, and business activities. It defines the relationship between the company and the outside world.
• Articles of Association (AoA): The AoA contains the rules and regulations governing the internal management of the company, such as the roles of directors, voting rights of shareholders, and meeting procedures.

Both documents must be prepared, signed, and submitted during the incorporation process.

6. Filing the Incorporation Form (SPICe)

Once the necessary documents are prepared, the next step is to file the SPICe (Simplified Proforma for Incorporating Company Electronically) form with the MCA. The SPICe form is an all-in-one form that allows the company to be incorporated, obtain a Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and apply for the Goods and Services Tax (GST) registration simultaneously.

The SPICe form must be submitted with supporting documents, including:

• The company’s MoA and AoA.
• Identification and address proofs of the directors and subscribers.
• The registered office address of the company.
• The promoter’s DSC and details of the company’s capital structure.

The Registrar of Companies (RoC) reviews the application and documents. If everything is in order, the company is approved for incorporation.

7. Certificate of Incorporation

After successful review of the SPICe form and the accompanying documents, the Registrar of Companies (RoC) issues the Certificate of Incorporation. The Certificate of Incorporation is an official document that confirms the existence of the company and includes its Corporate Identity Number (CIN).

The CIN is a unique number that identifies the company and must be quoted in all legal documents, financial statements, and official correspondence.

8. PAN, TAN, and Bank Account

Along with the Certificate of Incorporation, the company automatically receives its Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department. These are essential for complying with taxation regulations and for the company’s day-to-day operations.

After receiving the incorporation certificate, the company must also open a bank account in its name for conducting business transactions and managing finances.

9. Compliance with Post-Incorporation Requirements

After incorporation, the company must comply with various post-registration formalities, such as:

• Conducting the first board meeting within 30 days of incorporation.
• Appointing an auditor within 30 days.
• Filing declarations with the RoC stating that the company has a registered office and that all directors have subscribed to the shares.
• Issuing share certificates to the subscribers within two months.
• Complying with other legal, taxation, and statutory requirements as applicable to the business.