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What are the steps involved in the Formation of a Company?

After formation of the company, what are the processes to be carried out? Point out the steps included in Company formation.

The Companies Act, 2013 provides the description of a formation of company in India under its Section 3 (1). As per the said Section, a company can be formed for lawful purpose by seven or more persons if the proposed company is public company, or two or more persons for purpose of a private company or one person for establishing a One Person Company by subscribing their names or name in to Memorandum and complying other requirements of Act related to registration.

Subsection 2 of Section 3 states that a company can be of three forms under the Act, they are:

  1. A company limited by shares or
  2. A company limited by guarantee or
  3. An unlimited company.

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After making the decision on the type of company to be formed, the promoter of the company should apply for the availability of then Name of the company by submitting five suitable names for the company with the Registrar of Companies. The Registrar of Companies shall furnish the information about the availability of name within 7 days from the date of receipt of application.  The name of the company must end with “Limited” in the case of public limited company, “private limited” in the case of a private company.

The next step is the preparation of Memorandum of Association, which defines the constitution of the proposed company.  Memorandum should be in accordance with Table A, B, C, D and E of Schedule I of the Act.  It states the objects of the company, the business it undertakes, number of subscribers, authorized capital, number of shares, liability of the share holders, name of the state where the Registered office of the company situated and other important information of the company.  The other essential document is the Article of Association in which rules and regulations related to the internal affairs and management of the company is formulated, should be in line with Table F, G, H, I and J of Schedule I

Next step is the Incorporation of Company, for which, an application should be filed with ROC along with Memorandum of Association along with other documents such as

  1. declaration stating that all requirements for the incorporation of the company under Act has been made, duly signed by an advocate or Practicing professionals such as Chartered Account, Company Secretary or Cost Accountant in practice and a person named in director as Director, Manager or Secretary, to be filed
  2. Affidavits of all subscribers to Memorandum to be filed stating that she/he is not convicted for any offence with respect to promotion or formation of the company or management of the company, and is not found guilty of any fraud, misfeasance or breach of duty to any company over the last 5 years prior to the date of such application and same to be verified.
  3. Also, proof of address for correspondence of company, and particulars of all subscribers with their proof of identity to be filed.

Upon scrutinizing the documents, noticing the due compliance, shall issue the certificate of Incorporation for the proposed company, in which, ROC allots a corporate identity number, a distinct identity for the company, which also be included in the certificate.

Under Section 7(4) of the Act, the incorporated company should maintain and preserve all the copies of above documents and information at its registered office till its dissolution.

Adv. Anitha Gutti

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