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Registration and Incorporation of a Company

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Last updated date: 24th May 2024
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An Introduction

In a legal world, it is best for a company to get registered after its incorporation. In a way, Incorporation and Registration go hand in hand as an unregistered business cannot claim many benefits like taxable claims. The company cannot even file a suit against any third parties.

 

Formation and Incorporation of Company 

We see an unregistered company faces many disadvantages, thus companies get registered under The Companies Act 2013 or any other recognized statutory act.

 

To register and incorporate a company, an application needs to be filed with the Registrar of Companies. The application is to be accompanied by the names of the members, memorandum of association and articles of association and other important documents. These are also required to be filed with the Registrar of Companies (ROC) of the state in which the company is proposed to be incorporated. 

 

The Mentioned Documents are to be filed with the Application for Registration and Incorporation:

  1. Memorandum of Association (MOA)

  2. Articles of Association (AOA)

  3.  The agreement, where the company agrees to enter into any appointment of managing or full-time director.

  4. A copy of the letter where the ROC intimates the availability of time

  5. The documents that mandate the payment of registration and filling of the fees 

  6. The documents that mention the directorship and location of the office of the company

  7. A declaration that the company has already complied with all the rules of the Companies Act.


When all these requirements have been complied, the Registrar of Companies (ROC) registers the company and issues a certificate of incorporation in regards to the company that brings the company into existence in the eyes of law, as a legal entity in India. This makes the company bound to all Indian laws and regulations as are applicable to other domestic companies.

 

Stages of Formation of a Company

There are a few leading steps in the formation of a company. The steps are as follows:

Step 1 – Promotion of a Company

The most important step is the forming of a company, here the promoter talks about the ideas and further business-building process.

 

 Step 2 – Registration of A Company

This is the legal part of the formation process as there is a lot of data, paperwork, relation with people, memorandums, declarations that must be involved.

 

Step 3 – Certificate of Incorporation 

After all the legal formalities, the company need to start functioning, and this validity is provided in this stage 

 

Step 4 – Certificate of Commencement of Business

After receiving the certificate of incorporation, they can now start their own business.

This summation of the formation of a company is a quick version of reality. However, this is the view of how a company is formed. 

 

Promoters 

“A promoter is the one, who undertakes to form a company with reference to a given object and sets it going and takes the necessary steps to accomplish that purpose,” Said by Justice C.J. Cokburn. A promoter devises an idea setting up a business in a given place. He performs various formalities which are required for starting a company. A promoter may be an individual, firm, association of persons (AOP) or a company. A corporate’s promoter is a firm or person who does the preliminary work (initial work) in relation to the formation of a company. This includes its promotion, incorporation and inviting people to invest money in the company, at the time of its formation. An investment banker, a stock promoter or an underwriter may, wholly or in part, perform the task of a promoter. Promoters generally guarantee a duty of utmost good faith, to not fraud any investors and disclose all facts about the company's business.

 

Types of Promoters

There are importantly three types of Promoters, which are mentioned: -

Occasional Promoters

These promoters are not engaged in the promotion work on a regular basis. They take up the promotion of companies and once it is complete, they resume their original profession.

 

Entrepreneur Promoters

They act as both promoters and entrepreneurs. They develop the idea of a new business unit, do the base work to build it and may subsequently become a part of the management.

 

Financial Promoters

Financial institutions, like investment banks or industrial banks, might take up the promotion of a company to find investment opportunities.

 

Promoter Activity

A promoter is the main creator of the business, Discovery of a business idea, Detailed Investigation, Assembling the factors of Promotion, entering into preliminary contracts are the duties of a promoter. A promoter starts a business from scratch. 

 

As in the first stage of company promotion, a promoter formulates new ideas and makes an assessment of the capability of a particular aspect of the business be it technical feasibility or financial feasibility. In a detailed investigation, he investigates the profitability and prospects of the growth of the proposed activity. Here, he may seek the help of specialists such as lawyers or accountants. If the business is promising, he undertakes the risk of forming the business, he takes steps to arrange various factors of production like the land, labour or capital. The promoter also may enter into legal contracts with third parties for the registration of a company. Even the promoter has to select a distinct, non-identical and specific name for the company.

 

Thus we see how the promoters are important for the company.

FAQs on Registration and Incorporation of a Company

1. What does Inc. mean?

Incorporated businesses carry this designation of Inc., Corp., or Ltd., these all indicate that the business is a separate entity from its owners and the owners' liability is limited in that company.

2. Are Company and Corporation the same?

No, Corporations are companies that have legally registered their firms under the Ministry of Corporate Affairs (as per the MSME Act and Factories Act, 2013). On the other hand, a company is simply an organisation of people who bring in their assets for commercial and business purposes.

3. Are a Promoter and a Director the same person?

No, promoters and directors may not always be the same persons for the company. A promoter is essentially who brings investors to the company by means of promotional activities. On the other hand, a Director is authorized personnel to manage all the business activities including day to day activities of the organisation. Promoters are often the ones who both own a company and have legal rights for the profits that the company makes.

4. What are the steps of registration of a company?

The steps for the rightful registration of a company are as follows:

  • The first step involves deciding the business name and a permanent office address for the same

  • In the second step, the name is registered with the Ministry of Corporate Affairs (MCA). If the business is supposed to be operated on the sole proprietorship basis (wherein a single person operates and authorizes all the business activities of the company), then it need not be registered with the MCA as there are other identifications (such as GST registrations) for it. However, some banks would still advise for registration of sole proprietorship.

  • For sole proprietorship firms, a license is needed to be procured for which the firm must register itself as Small and Medium Enterprise (under the MSME Act), which can be done easily through electronic meAns:

  • For other private limited companies, the process is dictated by the guidelines of the Companies Act, 2013 (Section 2 (68) of the Indian Constitution). The company has to obtain a Digital Signature Certificate (DSC), Direct Identification Number (DIN) and frame an MOA (Memorandum of Association) under the Ministry of Corporate Affairs, Government of India.

5. What is the difference between the terms “Corporation” and “Incorporation”, in the business world?

During the process of registration of a business, there are two major stages. These are the incorporation (first stage) and corporation (second stage). The differences between these stages are as follows:

  • Incorporation is the first step that is to be followed to legally register a company as Corporations. In this step, as discussed in this article, a company is registered with the Ministry of Corporate Affairs in India. Incorporation has many advantages. The first is that it is seen as an authorised firm and gains trust in the market. Also, due to this stage, there is a limited liability, which offers protection over the partner’s assets. There is the shielding of the personal assets against legal problems such as Taxes, Funds, Credits, Ownerships, etc. 

  • A corporation (often abbreviated as Corp.), on the other hand, is the term with which a business is referred to post-registration. A corporation can be of many types. They can be Educational, Business oriented, Private sector or Government Organisations, and essentially institutions of any type can be called a corporation. Once a company is registered along with the corporation’s name, it will gain access to engagement in all legal structures. In a business firm, the directors and other top officers are often seen to purchase shares for the sake of business. Corporations have their own unique tax structure. For a business, becoming a corporation can be a great step as it facilitates procuring of funds from various organizations and the general public, who will then be regarded as shareholders.