Foundations of all great buildings are usually a neglected construction but ensuring long life of the building. Subscription Sheet is one of the neglected areas of our discussions in corporate laws. With the introduction of eMemorandum of Association (SPICe MoA) and eArticles of Association (SPICe AoA), we usually consider it obsolete. No, it is actually not.
What is the foundation of the Companies? A company formation is basically and essentially a contract among its subscribers/ promoters to come together to do a well-defined business. The subscriber sheet is signature penal of the formal agreement forming a company. The introduction of eMemorandum of Association (SPICe MoA) and eArticles of Association (SPICe AoA) does not change the fundamental position of law. It merely suggests a new way to sign a contract of company formation from a paper contract to an electronic contract.
Section 4 and Section of the Companies Act, 2013 discuss a fundamental contractual document forming a company. Once, a fine tunes contract is ready to sign after all negotiations, discussion and drafting subscribing promoters turn to the subscriber sheet to sign it.
Some of us usually think shareholders’ agreement as a basic legal document of the company formation. It is not, the shareholders’ agreement is a private contract with no formal relationship with the company going to be formed and it is enforceable privately among parties unless it forming part of the Articles of Association of the company. For the company formation purpose, Memorandum of Association is a primary document thereafter comes Articles of Association as secondary and Shareholders Agreement as a tertiary document.
When Memorandum of Association and Articles of Association are ready, Section 7 of the Companies Act, 2013 and Schedule I of the Companies Act, 2013 governs the law relating to the manner of singing of the Contract of Company formation. Section 7(1) mandates, the memorandum and articles of the company duly shall be signed by all the subscribers to the memorandum in such manner as may be prescribed. Rule 13 of the Companies (Incorporation) Rules, 2014 discussed earlier here fully described the manner of the signing of the memorandum and articles.
It is interesting to note neither Section 7 nor Rule 13 clearly describe the manner of signing subscriber sheet using a digital signature. This is a correct and fundamental position. Any contract may be signed electronically as per the provisions of the Information Technology Act, 1999.
Schedule I of the Companies Act, 2013 contains formats of subscribers’ sheets in various tables which are essentially similar with slight differentiation based on how the company is limiting the liability of its members.
|Table Number Schedule I||Purpose of the Table and subscriber sheet|
|A||MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY SHARES|
|B||MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND NOT HAVING A SHARE CAPITAL|
|C||MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND HAVING A SHARE CAPITAL|
|D||MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY AND NOT HAVING SHARE CAPITAL|
|E||MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY AND HAVING SHARE CAPITAL|
Rule 38(1) which enables subscribers to sign subscriber sheets electronically simply say the application for incorporation of a company under this rule shall be in FORM No INC-32 (SPICe) along with e-Memorandum of Association (e-MOA) in Form No INC-33 and e-Articles of association (e-AOA) in Form No INC – 34. This does not in any manner make subscriber sheet redundant but make it electronic format.
It clarifies in second proviso that in case of incorporation of a company having more than seven subscribers or where any of the subscribers to the MOA/AOA is signing at a place outside India, MOA/AOA shall be filed with INC-32 (SPICe) in the respective formats as specified in Table A to J in Schedule I without filing form INC-33 and INC-34. [Additional read at this point – Notarised- Apostilled Documents ]
Now, the question comes into mind whether subscribers signing and personally witnessing the forms understand the impact. The Formation of a company is generally a harmless contract for any subscriber due to separate personality give to the company. however, we can never rule lifting of the corporate veil. This is the duty of the signing parties to understand what they are singing digitally. This is the duty of professionals assisting in the process of incorporation to either have a backup subscriber sheet on paper or ask subscribers to insert a digital signature token and sign the form themselves.
Unfortunately, this is digital signatures which are getting required seriousness by the business community. The Informational Technology law, even after 20 years, is much ahead of its time.
- Aishwarya Mohan Gahrana
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