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Benefits of Incorporation
Procedure for Incorporation
Types of Legal Entities
Options Available with Foreign Investors
Compliance For Companies
Conversion of (Section 8) Company
Section 8 Companies
FAQ on Incorporation of a Company
  1. What are different types of legal entities recognized under the Indian Law?

    There are 6 types of entities recognized under the Indian Law

    • Private Limited Company

    • Public company

    • Sole Proprietorship

    • One Person Company

    • Partnership

    • Limited Liability Partnership

  2. Which law governs and regulates companies in India?

    The law governing companies in India is the Companies Act, 2013.

  3. When was the Indian Companies Act was first enacted? How many amendments have been there to this act?

    The Companies Act was first enacted in 1913. The major amendments were introduced in the years 1960, 1962, 1963, 1964, 1965, 1966, 1967, 1969, 1974, 1977, 1985, 1988 and 1991. In 2008 Companies Bill was presented which is now the Companies Act, 2013.

  4. What are the highlights of the Companies Act, 2013?

    A few of the prominent changes brought in by the new act are:

    1. Concept of One person Company (S.2(62))

    2. Restrictions on acceptance of Public Deposit (S.73)

    3. Compulsory appointment of one woman director (S149).

    4. Compulsory Compliance with Corporate Social Responsibility (CSR) (S.135).

    5. Increase in the maximum number of members for Private Companies (S.2(68))

    6. Detailed provision relating to Private Placement (S.42.)

  5. What is Private Limited Company under Indian Law?

    A Private Limited Company is a company having minimum number two members and maximum two hundred members. The liability of the members is limited in a private limited company.

  6. How can a Private Limited Company be registered under Indian law?

    As per Section 2(68) of the Companies Act, 2013, a Private Limited Company can be registered by having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital. The minimum number of member required to incorporate A Private Limited Company are 2 and the maximum no. of members are 200. These companies are prohibited raise funds through issue of prospectus.. They are of three types:

    1. Company Limited by shares

    2. Company limited by guarantee

    3. Unlimited company

  7. What is a Public Limited Company under the Indian law?

    A public limited company can be formed with a minimum of 7 members. These companies are allowed to freely trade their securities in the market and issue prospectus to raise funds. They are accountable for more disclosure as compared to a private limited company.

  8. How can a Public Limited Company be registered under the Indian law?

    A Public Limited Company (other than a Public Sector Undertaking) There must be at least seven persons to form a public company. It is of the essence of a public company that its articles do not contain provisions restricting the number of its members or excluding generally the transfer of its shares to the public or prohibiting any invitation to the public to subscribe for its shares or debentures. Only the shares of a public company are capable of being dealt in on a stock exchange.

  9. Can a One Person Company be registered under the Indian Law / Companies Act 2013?

    It is a new concept brought in by the Companies Act, 2013 which allows an individual who can run its business as a company by limiting his liability to the extent of the shares held by him. Unlike Sole Proprietorship he will not be held liable personally for any losses.

  10. Can a one person company be converted into Private Limited Company?

    As per the Companies (Incorporation) Rules, 2014, One Person Company has to be compulsorily converted into a private limited company within 6 months of the date of which the threshold limit of the paid-up share capital increase INR 50 lakhs or the last date of relevant period during which its average turnover exceed INR 2 crores.

  11. What is a Partnership / Partnership Firm in India?

    The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all”. Partnership is an association of two or more persons who have agreed to share the profits of a business which they run together. This business may be carried on by all or anyone of them acting for all. The persons who own the partnership business are individually called ‘partners’ and collectively they are called as ‘firm’ or ‘partnership firm’. The name under which partnership business is carried on is called ‘Firm Name’. In a way, the firm is nothing but an abbreviation for partners.

  12. Is it compulsory to register Partnership Firms in India?

    According to Section 4 of The Indian Partnerships Act, 1932 “Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. It is registered under the said act by giving details of all the partners as necessary the partners of the firm will be held personally and severally liable for any losses incurred. They have unlimited liability. Registration of partnership is not compulsory but registering it gives advantages to the partnership.

  13. Can a Limited Liability Partnership firm (LLP) be incorporated under the Indian law?

    Yes an LLP can be incorporated under the Limited Liability Partnership Act, 2008 in India. Unlike a Partnership Firm, the partners in an LLP have limited liability and cannot be held accountable for the acts of other partners. There is no requirement for minimum capital contribution.

  14. What are the benefits of incorporating a company in India?

    Following are some of the advantages of incorporating a company:

    1. The company can buy, sell and hold property in its own name.

    2. The company can sue and get sued in the law of court without personal involvement of directors.

    3. Ownership of the company is easily transferable.

    4. There is no liability of its member as it is a separate entity. e. The company has a common seal

    5. It provides perpetual succession to the company. This means it continues in the long run and death of any director does not affect the running of the business.

    6. It provides benefit on the taxation front as individuals pay income tax and companies avail the benefit of corporate taxes.

  15. What is a Digital Signature and a Digital Signature Certificate (DSC)?

    Digital Signature is a digital code created for the purpose of affixing them on digital documents and proving equal authority as of the handwritten signature. Digital Signature Certificate is a prima facie evidence of the signature which validates the authenticity of the signature.

  16. How can a Digital Signature and a Digital Signature Certificate (DSC) be obtained in India?

    The Office of Controller of Certifying Authorities (CCA), issues Certificate only to Certifying Authorities which are the trusted entities who are responsible to issue Digital Signature Certificate to end-user.

  17. What is Director Identification Number (DIN) and how do we acquire it under the Indian law?

    According to the MCA website DIN is a unique Identification Number allotted to an individual who is appointed as director of a company and it is compulsory for every director to have this number so as to create a database of the incorporated companies before they can get a company registered according to section 153 & 154 of the Companies Act, 2013.

  18. How do we acquire a Director Identification Number (DIN) under the Indian law?

    A Director Identification Number (DIN) can be obtained by filing the a requisite form and a prescribed fees with the Ministry of Corporate Affairs India (MCA)

  19. How can one obtain a Permanent Account Number (PAN) in India?

    PAN or Permanent Account Number is a mandatory documents which an individual has to obtain for taxation purposes. It may be obtained through e-filing on the website of Department of Income Tax.

  20. How can one obtain a Tax Deduction Account Number (TAN) in India?

    TAN or Tax Deduction Account Number is to be obtained by the person responsible to deduct tax, that is, the deductor. Application for new Tax Deduction Account Number can be done through online Form 49B by Income Tax Department.

  21. What is Memorandum of Association and what are its contents?

    Memorandum of Association (MOA) is considered as the supreme document of the company and is submitted to registrar at the time of incorporation. The purpose of this is to lay down clear objectives of the company and the business that they tend to carry out under this company. It is advisable for a company to take legal help while drafting the Memorandum of Association. It has the following clauses:

    1. Name clause

    2. Registered Office Clause

    3. Object Clause

    4. Association Clause

    5. Capital Clause

    6. Liability Clause

  22. What are Articles of Association?

    Articles of Association is a document containing all the rules and regulations that governs a company. This document has to be submitted to Registrar at time of incorporation of a company.

  23. What is share capital?

    When total capital of a company is divided into shares, then it is called share capital. In other words, the capital for the running of the business collected by company is known as share capital. Share capital is the total amount of capital collected from its subscribers or shareholders for the purpose of achieving objectives of the company.

  24. What is authorized Capital?

    According to Section 2(8) it is the capital as authorized by the memorandum of a company to be the maximum amount of share capital of the company.

  25. What is paid-up capital?

    According to Section 2(64) it means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.

  26. What is the difference between authorized and paid-up capital?

    Authorized capital is the capital limit authorized by the registrar of companies upto which shares can be issued to public. The paid-up share capital is the paid up portion of the capital subscribed by the shareholders.

  27. What is minimum paid-up capital for private and public companies in India?

    Minimum paid-up capital for Private Companies is INR 1 lakh and Public Companies is INR 5 lakhs.

  28. What are the maximum and minimum number of members essential for a company to be registered?

    Minimum number for Private Company are 2 members and for Public Company number are 7 and the maximum number for Private Company is 200 members and for Public Company there is no restriction.

  29. How can a company be incorporated under the Indian law?

    The following steps have to be followed to for incorporation of a company:

    1. Application for obtaining Director Identification Number from the Ministry of Corporate Affairs.

    2. Search for a company name – This steps requires checking the availability of names and such availability can be checked on the MCA website.

    3. Application of the proposed names with alternatives in the order of priority to be submitted to the Registrar of Certificate.

    4. Drafting a MOA and AOA – These are the few supreme documents that have to be accurately submitted to the registrar.

    5. Filing of forms with the Registrar is an essential step requiring filing of Form –INC 7 and Form INC-22 and Form DIR-12.

    6. Fees and Stamp duty of the state to be paid.

    7. Thereafter, documents filed with ROC will be verified with the registrar.

    8. Pursuant to the verification of documents, a certificate of incorporation is issued.

  30. How can a company name be registered in India?

    For the purpose of registration of a company, the company has to first obtain a registered name for which they have to submit the application to the registrar for checking the availability or similarity to a previously registered name. With the application they also have to submit alternative names in the order of priority in case of the rejection of the proposed name. Once the registrar is satisfied then the name is registered.

  31. How can one avoid the rejection of registration of the company name in India?

    According to the MCA guidelines these are the few things on the basis of which a name falling in the categories mentioned below will not generally be made available:

    1. If it is not in consonance with the principal objects of the company as set out in its memorandum of association. This does not necessarily mean that every name should be indicative of its objects. But when there is some indication of business in the name then it should be in conformity with its objects.

    2. If the Company / Companies main business is finance unless the name is indicative of that particular financial activities. Viz. Chit Funds / Investments / Loan, etc.

    3.  If it includes any word or words which are offensive to any section of the people.

    4. If the proposed name is the exact Hindi translation of the name of an existing company in English especially an existing company with a reputation.

    5. If the proposed name has a close phonetic resemblance to the name of the company in existence for example, J.K Industries Ltd., Jay Kay Industries Limited.

    6. If the name is only a general one like Cotton Textile Mills Ltd., or Silk Manufacturing Ltd., and not specific like Calcutta Cotton Textiles Mills Limited or Lakshmi Silk Manufacturing Company Limited.

    7. If it includes, the word “Co-operative”, Sahakari or the equivalent of word “Co-operative” in the regional languages of the country.

    8. If it attracts the provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950 as amended from time to time, i.e. use of improper names prohibited under this Act.

  32. What is a certificate of incorporation and certificate of commencement and how can they be obtained?

    Certificate of Incorporation is a certificate which sanctions the existence of the companies once the registrar has scrutinized all the documents and have made necessary changes in MOA and AOA. Certificate of Incorporation is given to both Public and Private Companies. Certificate of Commencement is given after obtaining the Certificate of Incorporation and a Public Company having share capital cannot commence its business without this certificate. Whereas this is not necessary for commencement for Private Companies which can commence its business after receiving the Certificate of Incorporation.

  33. What is Stamp Duty?

    Stamp Duty is payable under Section 3 of the Indian Stamp Act, 1899. Stamp duty is a nominal amount paid for legal recognition of the contents of a document. It is required to be paid at the time of the registration of the company.

  34. How can a stamp duty be calculated in any Indian state?

    Generally every state in India has its own Stamp Act on the basis of which stamp duty rates are calculated and for the states that do not have any stamp act, there is a centralized act known as The Indian Stamps Act,1899 governing them.

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