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Procedure of Incorporation of a Company

Procedure of Incorporation of a Company

Introduction

Procedure of Incorporation of a Company: Under the new Companies Act 2013, the Ministry of Corporate Affairs has mandated the procedure for the incorporation of company in India.

In this article, we will share the step-by-step process and information about the documents required for the incorporation of company in India.

Process of incorporation of a company

Reservation of company name under RUN or Spice:

The first and foremost step in the company registration process is reserving the name of the company. Once MCA approves a company name, it’s reserved for 20 days within which the applicant must complete all the remaining steps required for company registration. You can visit the RUN web service by the Ministry of Corporate Affairs.

Filling the Spice-32 form is another way to finalize the name, but you can give only one option and if it’s rejected, you will need to redo all documentation again.

Procuring Digital Signature Certificate (DSC):

Once the company name has been approved by MCA and registered, the next step is procuring a Digital Signature Certificate. Digital Signature for a registered company enables the authorized signatory to prove its identity and sign documents electronically. For e-Filing, Digital Signature Certificate is a mandatory requirement.

Applying for Director Identification Number (DIN):

Director Identification Number or DIN is the unique identification number for Directors of a registered company. Only once DIN is approved, the corporation documents can be filed under Registrar Form No.-DIR-3

Writing Memorandum of Association:

MOA is like the Constitution of the Company: It will highlight all the fundamental information about the company, its stakeholders, directors, and their relationship with the company

Writing Articles of Association:

Articles of Association or AOA is the document that enlists the purpose of the company, how its business will operate, how its Directors have been appointed, and more.

Application for the incorporation of company:

Once all these documents are ready and completed, the applicant may file for the incorporation of company, and under Section 7 of the Companies Act 2013, the application needs to be filed with the registrar under whose jurisdiction the company’s address is located. The application for company registration can be made via e-Form SPICe accompanied by SPICe MOA and AOA.

Once the due procedures are completed, the Registrar of Companies grants a Certificate of Incorporation, which is evidence of the company’s existence.

Advantages of Incorporation of a company

Some important advantages of incorporation of company are:

  1. Helps to generate capital:

Capital is the money needed to produce goods and services. A company has two forms of obtaining capital: equity, which means raising funds through the public and debt referring to bank loans or other forms of credit. When a company is incorporated, it is considered more reliable; hence it shall be easy to obtain capital.

2. Separate legal entity:

The company is a separate legal entity to the following stakeholders:

  • Promoter
  • Director
  • Shareholder

3. Limited liability:

Members are legally bound to pay only to the extent of their undischarged liability. In case of a company limited by shares, it is limited to the amount unpaid on their shares. While in a company limited by guarantee the liability shall be only the amount the members have agreed to guarantee. 

4. Transferability of shares:

Members are in a position to encash the shares at any time as they will. In a public limited company, the shares can be transferred freely. Whereas, in a private limited company, the share transfer is not frequent due to it being closely-held, but is not prohibited. Shares are considered at par with a movable property and hence transferable easily from one person to another. This aspect provides liquidity to the shareholders. 

Conclusion:

Hence, company incorporation means making a Company a legal person, making its own identity. If you have any doubt regarding this, you can solve your doubt by contact company suggestion

CS Shweta Sharma

CS Shweta Sharma having experience of three years under CS firm and also having degree of B. Com and M. Com. Having expert knowledge of ROC related work and other company related compliances with MCA.


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