STEP BY STEP FORMALITIES FOR FORMATION OF A NEW COMPANY
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Persons desirous of forming a company must adhere to the step by step procedure as discussed below:-
- Selection of type of the company.
- Selection of name for the proposed company.
- Apply for Directors Identification Number and Digital Signatures.
- Drafting of Memorandum and Articles of Association.
- Stamping, digitally signing and e-filing of various documents with the Registrar.
- Payment of Fees.
- Obtaining Certificate of Incorporation.
- Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in case of public companies) for obtaining the certificate of commencement of business.
- Obtaining Certificate of Commencement of business (in case of public limited companies).
1. Selection of the type of company
The Promoters of a company may be individual entrepreneurs or body corporate engaged in efforts to incorporate a company. They have the power of defining the object of the company and deciding various matters for the company proposed to be incorporated. It is depending upon, the purposes for which the company is to be incorporated, proposed scale of operations, capital involved, etc. The promoters can select type of the company as they wish to form themselves into viz. private company, public company, non-profit making company, etc.
2. Selection of name
Six names are required to be selected in order of preference after taking notes of numerous provisions, clarifications, circulars and rules made by the Ministry of Corporate Affairs, etc. In case key word is required, significance of each key word should be given in the e-Form 1A.
2.1 Applying for ascertaining the availability of the selected name
The promoters are required to make an application to the concerned Registrar of Companies to be submitted electronically to the Ministry of Corporate Affairs on the portal of MCA. An application shall be in e-Form 1A as prescribed by Notification No. GSR 56(E) dated 10th Feb., 2006 duly digitally signed by any one promoter or managing director or director or manager or secretary of the company along with the required fee for ascertaining whether the selected name is available for adoption by the promoters of the proposed company.
2.2 Approval of the name
After receipt of completed application in e-Form 1A, the Registrar shall intimate whether the proposed name is available for adoption or not. The confirmation of the name made available by the Registrar shall be valid for a period of six months.In case, if the promoters fail to submit all the required documents for incorporation within that period, then they are required to submit another application after payment of requisite fees.
3. Requirement for having DIN
As per proviso to section 253 of the Companies Act, 1956, inserted by the Companies (Amendment) Act, 2006, w.e.f. 1-11-2006, no company shall appoint or re-appoint any individual as director of the company unless he has been allotted a Director Identification Number under section 266B.
New section 266A has been inserted by the Companies (Amendment) Act, 2006 which provides that every individual, intending to be appointed as director of a company shall make an application for allotment of Director Identification Number (DIN) to the Central Government in the prescribed DIN Form. Therefore, before submission of e-Form 1A all the directors of the proposed company must ensure that they are having DIN and if they are not having DIN, it should be first obtained.
Specific care should be taken that a person cannot have more than one DIN, therefore, a DIN once obtained shall serve the requirement for all the companies in which he is a director or intended to be a director.
3.1 Requirement for having digital signatures
After 16th Sept., 2006, every documents prescribed under the Companies Act, 1956 is required to be filed with the digital signature of the managing director or director or manager or secretary of the Company, therefore, it is compulsorily required to obtain digital signatures of at least one director to sign the e-Form 1A and other documents. It may be noted that if the director or other persons covered are having digital signatures, their signatures may be used for the above said purpose and there is no need take new signature again.
4. Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA)
Drafting of the MOA and AOA is generally a step subsequent to the availability of name made by the Registrar. It should be noted that the main objects should match with the objects shown in e-Form. These two documents are basically the charter and internal rules and regulations of the companies. Therefore, they must be drafted with utmost care with the experts advise and the other object clause should be drafted in a very broader sense.