PROCEDURE FOR INCORPORATING A COMPANY IN INDIA “A SNAP SHOT”

Incorporation of Companies in India and setting up of branch offices of foreign corporations in India are regulated by
the Companies Act, 1956. The Companies Act of 1956 sets down rules and regulations for the establishment of both
public and private companies in India.

For the purpose of incorporation in India under the Companies Act, 1956, the first step for the formation of a company
is the approval of the name by the Registrar of Companies (hereinafter referred as “ROC”) in the State/Union Territory
in which the company will maintain its registered office. This approval is subject to certain conditions. For instance,
there should not be an existing company by the same name. Further, the last words in the name are required to be
"Private Ltd." in the case of a private company and "Limited" in the case of a Public Company.

Foreign companies engaged in manufacturing and trading activities are permitted by the Reserve Bank of India to open
its branch offices in India. Application for permission to open a branch, a project office or liaison office is made via the
Reserve Bank of India by submitting form FNC-5 to the Foreign Investment and Technology Transfer Department of
the Reserve Bank of India. For opening a project or site office, application may be made on Form FNC-10 to the
regional offices of the Reserve Bank of India. A foreign investor need not have a local partner, whether or not the
foreigner wants to hold full equity of the company. The portion of the equity thus not held by the foreign investor can
be offered to the public.

The ROC generally informs the applicant within seven days from the date of submission of the application, whether or
not any of the names applied for is available. Once a name is approved, it is valid for a period of six months, within
which time Memorandum of Association and Articles of Association together with miscellaneous documents are
required to be filed. A company is formed by registering the Memorandum and Articles of Association with the
Registrar of Companies.

After the duly stamped Memorandum of Association and Articles of Association, documents and forms are filed and
the filing duly fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorized person to
make necessary corrections. The ROC will give the certificate of incorporation after the required documents are
presented along with the requisite registration fee, (Annexure A) which is scaled according to the share capital of the
company, which will be stated in its Memorandum of association. In case the Memorandum and Articles is to be signed
by any of the promoters out side India, then the signatures are required to be made in the presence of Consul of India at
the Indian Consulate.

Minimum number of Directors and shareholders: -

a) For incorporating a Private Limited Company a minimum of two directors are required and minimum two
shareholders.
b) For incorporating a Public Limited Company a minimum of three directors are required and minimum seven
subscribers.

Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence. It
takes about one to two weeks from the date of filing Memorandum of Association and Articles of Association to
receive a Certificate of Incorporation.

A private company can commence business on receipt of its certificate of incorporation. A public company has the
option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus,
which provides information about the company to potential investors. The Companies Act specifies the information to
be contained in the prospectus. The prospectus has to be filed with the ROC before it can be issued to the public. In
case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a
statement in lieu of prospectus with the ROC. On fulfillment of these requirements, the ROC issues a Certificate of
Commencement of business to the public company. The company can commence business immediately after it receives
this certificate.
To sum up, a company is formed by registering the Memorandum and Articles of Association with the Registrar of
Companies of the State in which the main office of the proposed company would be located. After the duly stamped
Memorandum of Association and Articles of Association, documents and forms are filed and the filing fees are duly
paid, the ROC scrutinizes the documents and, if necessary, instructs the authorized person to make necessary
corrections. The ROC grants the certificate of incorporation after the required documents are presented along with the
requisite registration fee, which is scaled according to the share capital of the company, as stated in its Memorandum.
Thereafter, a Certificate of Incorporation is issued by the ROC and the company officially comes in to existence w.e.f
the date shown on this certificate. It usually takes one to two weeks from the date of filing Memorandum of
Association and Articles of Association to receive a Certificate of Incorporation. As a recent development in
incorporation procedures, various forms and applications under Companies Act, 1956 and the Rules and Regulations
are being facilitated through e-filing which is projected by Ministry of Company Affairs.

PROCEDURE FOR INCORPORATING A COMPANY

IN INDIA
The Companies Act, 1956 stipulates rules and regulations for incorporation of companies in India for both private and
public companies. Minimum two directors and two shareholders are required for incorporating a private company
whereas minimum three directors and seven shareholders are required for incorporating a public company. Minimum
Paid- up capital of a private company at the time of incorporation should be Rs. 1 Lakh (INR 100,000) and it should be
Rs. 5 lakhs (INR 500,000) for a Public company. Those companies which are set up with Foreign Investment (FDI)
have to be so incorporated under the Companies Act with the Registrar of Companies (ROC). Once a company is
registered in India, it is guided by the Indian laws.

The first step in the incorporation of a company is the name approval by the Registrar of Companies. Not less than
three names should be selected which should be in sync with the main objects of the company and an application for
name approval in Form 1A is to be filed with the ROC of the state in which the company is to be incorporated. The
name of the company should not be same with the name of an existing company and must not violate the provisions of
Emblems and Names (Prevention of Improper Use) Act, 1950. Further, it is mandatory that the last words in the name
of the company should be ‘Private Ltd.’ in case of private companies and ‘Limited’ in case of public companies.

Within seven days from the date of submission of application, ROC informs about the availability of name. If the
proposed name is not available, the company can apply for a fresh name in the same application. Once the name is
accepted, it is valid for a period of 60 days, within which time the company can complete other formalities like drafting
of Memorandum of Association and Articles of Association and filing of various documents. Memorandum of
Association is the charter of the company which contains the basic clauses on which the company is to be incorporated.
The company is not formed unless Memorandum of Association and Articles of Association are registered with the
ROC.

After completion of the preliminaries the company has to file the following documents with the Registrar of Companies
of the state in which the company proposes to be incorporated:

• Memorandum of Association and Articles of Association duly stamped by the ROC and signed by the
subscribers.
• Any agreement of the company which the company proposes to enter.
• A Copy of the name approval letter by the ROC.
• Documents confirming payment of prescribed registration and filing fee.
• Documents confirming the directorship and situation of the Registered Office (Form 32 and Form 18) and
declaration of compliance with requirements of the Companies Act (Form 1 and Form 29) for giving consent to
act as Director in case of public company be also given. After filing of the above documents, the ROC
scrutinizes the documents and calls the legal representative for clarifications and modifications if any. With the
 help of e-filing procedures of Ministry of Company Affairs, the company can file all the forms online which
save the time of the corporations to visit the ROC offices.

Once the ROC is satisfied that the company has complied with all the formalities, it issues a Certificate of
Incorporation and finally the company comes into existence and can start its operations. After the receipt of Certificate
of Incorporation, a private company can commence its business with its own capital because a private company is
restricted to invite the public for subscription to its share capital. But a public company has the option to invite public
for subscription. Consequently, the company has to issue a prospectus. It is mandatory to file the prospectus with the
ROC before issuing it to the public. A statement in lieu of prospectus is to be filed with the ROC in case the company
decides not to invite public subscription. Thereafter, A Certificate of Commencement of business is issued by the ROC
to the Public Company.

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