INCORPORATION OF COMPANY

UPDATE: on 30^th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Section 7, 8 of Companies Bill 2012 Act, 2013

In my last blog post “Formation of Company”, I discussed the formation of company and its foundation documents; Memorandum, Articles and proposed/changed Name.  In This post we will discuss, Incorporation of Company including incorporation of non- profit company.

INCORPORATION OF COMPANY (SECTION 7):

All document related to incorporation shall be filed be filed before the registrar, in whose jurisdiction registered office of a company is proposed to be situated. A Registrar may have jurisdiction over several states or only a part of a state. Following documents are to be submitted:

(a)  The Memorandum and Articles of the company duly signed by all subscribers;

(b) A declaration by

1. an advocate or Practicing professional (CA, CS, CA) who is engaged in incorporation, and
2. a person named in director as Director, Manager or Secretary,

 That all requirements related to incorporation has been complied with;

(c)  an affidavit from each subscriber and from each person named as first director in the articles that;

1. he is not convicted if any offence in connection with promotion, formation or management of any company,
2. he is not been found guilty of any fraud or misfeasance or of any breach of duty to any company during preceding five years, and
3. all the documents filed with the Registrar contain correct, complete and true  information to the best of his knowledge and belief;

(d)  the address for correspondence till its registered office is established;

(e)  the particulars of every subscribers along with proof of identity;

(f)   the Particulars of first directors along with proof of identity; and

(g)  the particulars of interests of first directors in other firms or bodies corporate along with their consent to act as directors.

The registrar shall issue Certificate of Incorporation and also allot a Corporate Identity Number (CIN).

The company shall maintain and preserve at its registered office copies of all documents and information as originally filed at the time of incorporation till its dissolution under this Act.

FORMATION OF COMPANIES WITH CHARITABLE OBJECTS ETC (SECTION 8):

Where a person or an association of person proposed to be registered as a limited company –

(a)  has in its object the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b)  intends to apply its profit or other income in promoting its objects; and

(c)  Intends to prohibits the payment of any dividend to its members;

The Central government by license issued and on specified condition allows that person or association of person to be registered as a limited company without addition to its name of the word “Limited” or Private Limited. The registrar shall on application, register such person or association of person as a company.

The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.

A firm may be a member of the company registered under this section.

A company registered under section 8 shall not alter its memorandum or articles except with the previous approval of the Central Government. A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.

An existing limited company may convert to a company registered under this Section.

The Central Government may, by order, revoke the license granted to a company registered under this section if the company contravenes any of the requirements of this section or any of the conditions subject to which a license is issued or the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company or prejudicial to public interest, and without prejudice to any other action against the company under this Act, direct the company to convert its status and change its name to add the word “Limited” or the words “Private Limited”. No such order shall be made unless the company is given a reasonable opportunity of being heard. Sub – section (6) to (9)  and (11)  has provisions in this matter.

A company registered under this section shall amalgamate only with another company registered under this section and having similar objects.

EFFECT OF REGISTRATION (SECTION 9):

From the date of incorporation such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name.

EFFECT OF MEMORANDUM AND ARTICLES (SECTION 10):

The memorandum and articles shall, when registered, bind the company and the members to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

All monies payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

FALSE AND INCORRECT INFORMATION ETC. AT INCORPORATION (SECTION 7):

Yes, I am talking about Section 7 once again.

If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.

Additionally; at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declarations shall each be liable for action under section 447. Please note, only first directors and subscribers.

Additionally, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants –

(a)     Pass such order as it may think fit including changes in its memorandum and articles; or

(b)     Direct the liabilities of the members shall be unlimited; or

(c)     Direct removal of its name from the register of companies; or

(d)     Pass an order for the winding of the company; or

(e)     Pass such other order as it may deem fit.

Please note, it is established law that “or” include “and” unless court think otherwise, which may not be a case here.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.