The formation of an entity means in the company formation, branch office registration, liaison office, and many more. In India, there are two types of companies that fall under company formation services including:

Private Limited Company

• For a private limited company, these conditions must be followed:
• Minimum Numbers of Directors Two.
• The minimum number of shareholders is two.
• Maximum 50 excluding current and past employees of the company.
• Use the word Private Limited in its name.
• Prohibited to take public deposits unless allowed under the relevant law
• Must keep one board meeting in each quarter
• Must keep one Annual general meeting of shareholder within six months of the year-end.
• Must carry out an audit of accounts of the company
• Must file balance sheet and annual return every year

Some of the steps to form the Company comprises of the following:

• Obtaining Directors Identification Number
• Obtaining Digital Signature of Director
• Applying for the names of the Company
• Drafting of MOA, AOA, and other documents required for the formation
• Payment of the required government fees
• Obtaining Original Certificate of Incorporation

Public Limited Company

• A foreign company must fulfill the following conditions to form a public limited company in India.
• Minimum Authorized and Paid-up Capital of 5 Lac
• Minimum Numbers of Directors Three
• The minimum number of shareholders is Seven.
• Use the word Limited in its name.
• Prohibited to take public deposits unless allowed under the relevant law
• Must keep one board meeting in each quarter
• Must keep one Annual general meeting of shareholder within six months of a year-end.
• Must carry out an audit of accounts of the company
• Must file balance sheet and annual return every year

Essential steps for the formation of the company include the following:

• Obtaining Directors Identification Number
• Obtaining Digital Signature of Director
• Applying for the names of the Company
• Drafting of MOA, AOA, and other documents required for the formation.
• Payment of the required government fees
• Obtaining Original Certificate of Incorporation
• Preparation and filing of prospectus or statement instead of prospectus along with required forms
• Obtaining a certificate of commencement of business
• Company Formation in India – Private Limited

The following article discusses the process of forming a limited liability company in India. The laws relating to the registration of a limited liability company in India are in the Companies Act, 1956. Registrars of Companies (ROC), appointed under Section 609 of the Companies Act by the Ministry of Corporate Affairs (MCA), is vested with the primary duty of registering companies and ensuring that such companies comply with statutory requirements under the Act. A company can be registered with the ROC of the state under whose jurisdiction the proposed company’s registered office will be situated.

Pre- Registration Requirements

A Private Limited Company must have a Paid-up capital of INR 100,000, and a Public Limited Company must have a paid-up capital of INR 500,000. A Private Limited Company must have a minimum of two directors and two shareholders, and a Public Limited Company must have a minimum of three directors and seven shareholders.

The directors must have a valid Director Identification Number (DIN) allotted by the Ministry of Corporate Affairs. DIN is a unique identification number for an existing director or a person intending to become a company director. As per recent amendments to the Companies Act 1956, DIN has become mandatory for all directors. DIN is unique and specific to an individual; therefore, only one DIN is allotted per individual even if it serves as a director at multiple companies. Application for the allotment of Director Identification Number (DIN) can be obtained online on MCA’s website. Duly completed DIN Application Form must be mailed to MCA DIN Cell, along with a proof of identity and a proof of residence with colored photo. The photo affixed on the form and the proofs attached must be certified by a Public Notary or Gazetted Officer or any certified professionals. No fee is charged for issuing DIN. This process takes approximately 3 to 5 working days.

At least one of the directors should have a valid Digital Signature Certificate issued by the Certifying Authorities (CA) and approved by the Ministry of Corporate Affairs. The Information Technology Act, 2000 provides for Digital Signatures on the documents submitted in electronic forms to ensure the documents are filed electronically. Every document 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 at least one of the directors must have a digital signature. Any person may apply to the Certifying Authority for the issue of a Digital Signature in such form as may be prescribed by the Central Government. Digital Signatures are typically issued with one-year validity and two-year validity. The issuance cost varies depending on the CA. Digital Signatures can be obtained within an hour.

Name Approval

The first step in the formation process is the application for MCA’s approval of the desired name for the proposed company. Once, Company name is allotted, company registration documents are filed with the respective ROC for registration. Application for name approval can be made online via MCA’s portal MCA 21. Forms are available here.

The following particulars are required to complete the form.

• Name of the proposed company
• Location of the registered office of the proposed company
• Main Objectives of the business of the company
• Names of Subscribers to the Memorandum of Association
• Proposed Authorized Share Capital of the Company
• DIN & DSC

Select at least four names (a maximum of six names can be listed), and indicate the order of preference. Ensure that the company name is following the MCA guidelines and ensure the name is unique and does not resemble the name of any existing company in India. The company name must end with the words ‘Private Limited’ or ‘PVT Ltd.’ To have specific keywords in the name such as a corporation, International, Hindustan, Industries, India, etc., the proposed company should satisfy minimum authorized capital criteria. Duly completed Form 1A for name approval must be submitted to the concerned ROC along with a fee of INR 500/-.

The Registrar shall intimate, within two to three days, whether the proposed name is available or not. If the preferred name is not available, apply for a fresh name on the same application. The name made available by the Registrar shall be valid for a period of six months. If the company is not incorporated within this validity period, an application may be made for renewal of the name by paying additional fees. Otherwise, the name approval process must be repeated by submitting a new application after payment of requisite fees.

Preparation of Documents

After obtaining name approval from the ROC, the following documents must be prepared to incorporate the company:

Memorandum of Association (MOA)

Articles of Association (AOA)

Form 1 – providing details of promoters of the company

Form 18 – providing details of the registered office of the company

Form 32 – providing details Directors of the company

The Memorandum of Association is a document that sets out the constitution of the company. It contains, amongst others, the objectives and the scope of activity of the company and also describes the relationship of the company with the outside world.

The Articles of Association contain the company’s rules and regulations for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and goals. It also states the authorized share capital of the proposed company and its first/permanent directors’ names.

Professional help is to be sought in the drafting of the MOA and AOA, as it contains the governing policies, rules, and by-laws of the proposed venture. The promoters must carefully vet the draft before printing and stamping.

The MOA and AOA must be signed by at least two subscribers in his own hand, along with the father’s name, occupation, address, and the number of shares subscribed for and witnessed by at least one person.

Then the MOA and AOA are required to be stamped & filed with the ROC. Stamp duty is required to be paid on the MOA and the AOA. The stamp duty depends on the authorized share capital and varies between states. Details of applicable stamp duty can be obtained from here. eStamping facility is now available via MCA’s portal. The document preparation process may take five to seven days.

Submission of Documents

Submit the following documents to the ROC with the filing fee and the registration fee:

• The stamped and signed Memorandum and Articles of Association (3 copies).
• Form-1, 18 & 32 in duplicate.
• Any agreement referred to in the Memorandum & Articles.
• Any agreement proposed to be entered into with any individual for appointment as Managing or whole-time Director.
• Declaration of Compliance by an advocate or company secretary or chartered accountant or director, manager or secretary of the company
• Name availability letter issued by the ROC.
• Power of Attorney authorizing a person, on behalf of subscribers, any documents and papers filed for registration. A power of attorney should be given on a Non-Judicial stamp paper of appropriate value and shall be submitted to the Registrar.
• Payment of Registration Fees

The fees payable to the Registrar at the time of registration of a new company vary according to the authorized capital of a company proposed to be registered. Payment for the Registration and Filing Fee must be made by Demand Draft/Banker’s Cheque if it exceeds Rs.1000/.