How a company is incorporated?

The promoters or the sponsors take the initiatives to incorporate a company under the Companies Act.  A three stage process is taking place in regard to incorporate of a company, such as 1. Promotion 2. Incorporation/Registration and 3. commencement of business.

Promotion Stage : The process by which a company incorporated or put into shape as a corporate body or floated by issuing shares is the promotion part. In this stage out of several informal/formal meetings, a meeting which is called meeting of the promoters of the proposed company is require to take decision on the following matters and to have a Memorandum of Understanding (MOU) among the promoters or a Joint Venture Agreement :

a.        Name of the Proposed Company

b.       Objectives of the Company

c.        Name of the first Directors

d.       Name of the first Chairman and Managing Director

e.        Name of the subscriber along with shares intended to subscribe

f.        Proposed registered office Address

Incorporation/Registration stage : When a company is formed, the promoters need to get registered with Registrar of Joint Stock Companies and Farms. The minimum and maximum number or members fixed for them in the case of a private limited company is 2 (two) and 50 (fifty) respectively, while for a public limited company it is seven as the minimum with no maximum set. After completion of this stage the company shall be awarded by a certificate named “Certificate of Incorporation” which is a vital document for the company and important for the Company Secretary. From the date of incorporation the company having a legal entity and corporate personality and will have its existence, continuous and perpetual unless liquidated.

To obtain Certificate of Incorporation or get registration from/of RJSC there are some preparation and filing of certain documents as mentioned below :

1. Required name clearance certificate of the proposed or desired name of the company from RJSC. In this regard have to be taken care of sub-section 1-5 of section 11 of the Companies Act.

2. If name is accepted by RJSC the following  documents have to be filed with the RJSC within the stipulated time mentioned in the name clearance certificate for registration along with prescribed fees:

i.                     Memorandum of Association – according to section 5 and 6 of the Act which defines the objects and confines the powers of the company

ii.                    Articles of Association – according to section 17 and 18 of the Act which contains rules and regulations for internal management of the company

iii.                  Intimation of address of the Registered Office as per section 77(2)

iv.                  Consent of the Directors to act  – as per section 92(1)(a)

v.                   A contract of the Directors to take qualifying shares {section 92(1)(b)}

vi.                  A statutory declaration by an Advocate of the High Court or by the Directors, Manager or Secretary of the Company that all the requirements of the Companies Act 1994 in respect of registration have been compiled with {section 25(2)}

vii.                List of Directors and their particulars – as per section 92(2) and 115(2)

viii.               Encashment Certificate from local bank for Foreign Investors (Subscribed amount).

3. The Registrar will issue a certificate called Certificate of Incorporation. The names of the subscribers of the memorandum shall there upon be entered as members in the company’s book known as Register of Members.

Commencement of Business Stage :  After such registration, every private company and every company not limited by shares can straightway commence their business. But public companies limited by shares cannot yet commence business or exercise any borrowing power without obtaining another certificate called “Certificate of Commencement of Business” according to section 150 of the Companies Act 1994.

In this regard, the company has to

1. Issue a “Prospectus” or file with the RJSC a “Statement in lieu of prospectus”.

and fulfill the following condition :

1. Minimum subscription must be subscribed as per section 150(1)(a)

2. Directors must have paid for the shares to the same extent as public {section 150(1)(b)}

3. The Company Secretary or a Director must filed with RJSC a declaration that such conditions have been compiled with according to section 150(1)(c)

After consideration of the above documentation the Registrar if satisfied will issue Certificate of Commencement of Business, after which the company will be entitled to start its business. For registration of foreign companies have to follow section 378 & 379 of the Companies Act 1994.