Incorporation of a Company - ctconline.org -12.6.2014... · Incorporation of a Company Rules-...

Incorporation of a Company

June 12, 2014 Janak C. Pandya PCS © 1

Incorporation of a Company Section & Rules - As applicable

Section 2 - Definition - Private / Public / OPC

Section 153- 159- Related to DIN application

Section 3 - Formation of a Company

Section 4- Memorandum Of Association

Section 5- Articles of Association

Section 7- Incorporation of a Company- Pvt / Public / OPC.

Section 8 – Formation of companies with charitable objects

Section 12- Registered Office


Incorporation of a Company Rules-

Companies (Specification of definitions details) Rules, 2014.

Companies (Appointment and Qualification of Directors) Rules, 2014 (“DIR”) Rule 9 to 12

Companies (Incorporation) Rules, 2014 (“INC”)

DSC – instruction from C.A.


Incorporation of a Company Forms:

DIR.3 Application for DIN.

DIR.4 – Verification by the applicant of DIN

INC.1- Application for Reservation of name

INC.2- One Person Company. Application for Incorporation.

INC.3- OPC- Nominee Consent Form

INC.4- OPC- Change in Member / Nominee.



INC.5- OPC. Intimation of exceeding threshold.

INC.6- Application for conversion

INC.7 – Application for Incorporation of Company (Other than OPC).

INC.8 – Declaration by Professionals.

INC.9 – Affidavit from Subscribers and first directors.



INC-.10 – Verification of signature of subscribers.

INC.11- Certificate of Incorporation.

INC. 22- Notice of Situation or Change of situation of registered office.

INC.12- Application for Grant of Licence under section 8.

INC.13. Memorandum of Charitable companies.

INC.14- Declaration by profesional.


Incorporation of a Company INC.15- Declaration by persons making application for

licence.

INC.16- Licence under section 8(1). New companies

INC.17- Licence under section 8(5) existing companies.

INC.18- Application for conversion in to any other co.

INC/19- Notice by section 8 co for conversion.

INC.26- Advertisements to be published in news papers for Licence for existing companies.


Incorporation of a Company Definition

• 2(68)- private company “ means – Changes…

• Now, maximum number of members are 200 (from 50 earlier)

• Restriction for public issue. instead of “shares & debentures”word “securities used”

• No restriction on acceptance of deposits

• Loan only from Director – Deposit Rule

• Section 73(2) deposits acceptance from members only subjectto rules as specified by RBI and other conditions mentionedtherein


Incorporation of a Company 2(71) public company means :-

Clarified that a subsidiary is also be a public company even

though continue to be a private company as per articles.

Still not clear whether there is a need to change article of

such private company or other changes like members and

directors.

2(62) One Person Company

2(11) defines Body Corporate as it includes a companyincorporated outside India but does not include co-operativesociety and other body corporate as may be prescribed


Incorporation of a Company 2(42) Foreign Company: any company or body corporate

Incorporated Outside India has

(a) place of business in India, itself or through agent or physically or electronic mode;

(b) conduct any business activity in India.

Rule 2(h) on definition rules provided “electronic mode mean. B2B or B2 C, data Interchange and digital supply, online services, web based marketing telemarketing, all data communication, all advisory and financial services, supply chain management etc.


Incorporation of a Company Chapter II- Incorporation of Company and matters incidental

thereto.

Section 3 – Formation of a Company

Public company

Private Company , And

One Person Company. (“OPC’), a private company

Company can be limited by shares or Guarantee company or unlimited company

Incorporation of Sec. 8 companies.


Incorporation of a Company OPC- Who Can Incorporate

• S.3.1. ( c ) - to be a private company• R. INC 3 (1) - Only Natural Person, Indian Citizen and

Resident of India- Resident ship based on 182 days stay in India.

• R. INC 3(2) - Only One OPC can be incorporated by one person.

• R. INC 3(6) - Not to carry NBFC activity including Investment in securities.

• R INC. 3(7) - OPC not to voluntary convert in to other kind of companies before expire of two years unless legally required.


Incorporation of a Company OPC to nominate person in case of his death/ incapacity to

contract

Section 3 (1) and R. INC 4 (1) - to give name of nominee (with his consent) who in case of his death or in capacity will be a member

Filing of Form INC.2 for nomination with Form INC .3 -consent of such person

Any change in nomination, to be filed in Form INC.4 with consent of new nominee in Form INC. 3

In case of death / incapacity of sole member - nominee will be member and he has to nominate another person


Incorporation of a Company R.INC. 6 - Conversion of OPC in to private or public company. –Why Not Conversion in LLP?

R.6.(1) - Criteria of conversion are very low, with only Rs. 50 lakhs of capital or avg. turnover exceed Rs. 2 cr.

R. 6 (2) - Conversion within 6 months.

R.6. (2) - Conversion as per section 18- however, section 18 mentioned the conversion by ALTERATION OF MoA and AoA AS PER THIS CHAPTER.


Incorporation of a Company Section 14 - as to alteration of AoA does not provide for

OPC conversion.? Only Private to Public or Otherwise

Name of OPC not in certificate or MoA / AoA.

Name disclosure only as per section 12 on all communication etc. use word “OPC’

Will it affect legality of OPC?


Incorporation of a CompanyConversion of OPC…..

R. 6. (2) - Alteration of MoA/AoA

R. 6 (6) – Conversion in to Private or Public after Increasing Members / Directors as applicable.

R. 6. (3) - Notice to RoC within 60 days in Form INC. 5 that OPC ceased to become OPC.



Status between notice within 60 days and actual conversion within 6 months.?

Any liability of OPC continue with one member / one director till converted at end of 6 months. ?


Incorporation of a Company Process of Incorporation- PVT / PUB /OPC

• Name Reservation

• Memorandum of Association

• Articles of Association

• Application for Incorporation and documents to be attached with MoA/AoA.


Incorporation of a Company Name Reservation

Section 4(2) and R. 8

Identical / or resemble too nearly with an existing company name.

use of name will be offence under any law. ?

if name is undesirable as per Central Government

Not to use words which gives impression of any government connection or patronage of the govt.


Incorporation of a Company Name Reservation. Cont….

Rule 8 (4)

• NoC, if name consist of some third person name , who is not a promoter or his close blood relatives.

• If name of proposed company is taken from name of any close blood relatives, proof of relation?

• Significance of name and coin word with proof thereof?



Rule 6. (5)

• Affidavit in affirmative or negative as to usage of name in last 5years in other business constitution like sole proprietorship,partnership, LLP, or incorporated/un incorporated entity

• If, yes, then NoC from such entities with a declaration as totaking over of such business or not?



Rule 6. (6)

Certain words not to be used, whether In English or any other language. Like, Board / Commission, National / Municipal etc.

Rule 6. (8)

Name freed on change of name shall not be allowed to be used by other company / group company for a period of 3 years. Unless in case of compromise, arrangement and amalgamation.


Incorporation of a Company Name Reservation. S. 4 (4) & Rule 9

• Application for name reservation in Form INC. 1

• Attachments of Form INC- 1.

• New Information in form

• S. No. 2. - Occupation of Applicant.

• S. No. 6. - In promoter information on promoters category like Individual / foreign company etc.

• S. No. 9 (a) - Promoters other business like partnership or sole proprietorship and Noc.

• Intention for taking over existing business.


New Information in Form.….

• name of blood relatives / other person name

• If yes, attaché NoC from other person or

• If yes, attach proof of blood relation

• Name include the word like Bank, Stock exchange etc. andapproval now or latter…



Incorporation of a Company Attachments (New)

• Registered trade mark / NoC or application made.

• Proof of relation.

• In principal approval of concerned authority.

• NoC – sole proprietorship./ Partnership/other associates / existing Co.

• Affidavit- if name includes “Electoral Trust”.

• Chapter XXI (Part I ) conversion, resolution


Name reservation –

• 60 days from the date of application. – Not from date of approval?

• Consequences:-

• Sec 5(ii). In case of name allowed based on wrong or incorrect information..

• If not incorporated, Punishment up to Rs. 1 lakh, Cancellation of name. Without hearing?

• If, Incorporated, after hearing, order for change of name / striking off name / petition for winding up



Incorporation of a Company Name Reservation. Cont…

• Consequences:-

• Sec 5(ii) In case of name allowed based on wrong or incorrect information.

• If not incorporated, Punishment up to Rs. 1 lakh, Cancellation of name. Without hearing?

• If, Incorporated, after hearing, order for change of name / striking off name / petition for winding up


Incorporation of a Company Memorandum of Association.

• Section 4 , Schedule 1, Table A,B,C & D

• Section 4()(a). Last word.. Limited, Private Limited, what about OPC?

• 4(1) (c ). Only Main objects and matter considered necessary in furtherance thereof;

• No separate MoA for OPC

• Whether multiple objects will be allowed?

• Whether change of objects will be allowed? S.13(8) & 13(9)


Incorporation of a Company Articles of Association

• Section 5(3) & 5 (6) Rule INC. 10 & 11

• Model Article- Table F,G,H,I & J

• Provisions for entrenchment allowed to put further conditions / restriction for certain articles then what allowed by way of special resolution.

• For article amendment to include entrenchment provisions, in case of private company all members must agree and for a public company, by special resolution.


Incorporation of a Company Articles of Association Cont….

• Sec. 5(5). Rule INC. 10 notice of any provisions of entrenchment to be given to RoC in Form INC. 2 or INC.7

• Existing Company to file Form INC. MGT. 14

• Forms to be filed at the time of Incorporation for new company and within 30 days from date of incorporation or change in AoA by existing company.

• Company may adopt all or certain articles of model AoA .

• If no provisions as to adoption / exclusion of model AoA, it shall apply to the extent as applicable

• Existing company AoA, shall continue unless amended?


Incorporation of a Company Articles of Association Cont….

• Sec 58…article may provide provisions as to restriction on transfer of shares as per contract or arrangement between two shareholders, even it is a public company.


Incorporation of a Company Application for Incorporation and documents to be attached with MoA/AoA

• Section 7. Rules INC. 12 to 17.

• S. 7(1) & Rule INC. 12. - Application for incorporation in form

INC. 2 for OPC and INC. 7 for other co.


Signing of MoA/AoA. -S.7(1) (a) and Rule INC. 13

• R. INC.13 (1) Signature by each subscribers with full details as to name, address, description and occupation.

• Witness to states that “ .. Signed in my presences… I have verified his or their Identity Details and satisfied myself….

• R. INC.13(4) in case of Body Corporate as subscribers- to be signed by director, officer or employee duly authorized.



Incorporation of a Company Signing of MoA/AoA. -S.7(1) (a) and Rule INC. 13…Cont…

• R. INC. 13 (4)- Authorized person of body corporate can not be a subscriber also- Two / seven different person require.

• R. INC. 13 (5)- Foreign national outside India. Signature and identity to be verified by Notary Notarization / Apostiliation / Indian Consulate


If foreign national in India- allowed if he or she has Business Visa.

R. INC.14- Declaration by professional Form INC.8

S. 7(1) (c ) & R. INC. 15. – Affidavits from Subscribers / Directors. Form INC. 9 “..Any breach of duty to any company…”



S. 7 (1)(d) address of correspondence till registered Office address. - INC. 7

S. 12 (1)on registered office states that from 15th day from Incorporation, company must have regd. Off.

S. 12 (2) & Rule 25 . Form 22. Notice of Situation of Regd Office.

Requirement. Proof of regd office like lease deed / rent agreement and rent receipt

Copies of utilities bill.

NoC for use if owned by other entity or person.




Regd Off. List of all companies having same address as regd office?. Who & How to verify?

Certificate by C.S.- Personally visited / is functioning for the business purpose of the company?

S. 7(1)(e) & R. INC. 16.- details of subscribers

R. INC. 16(1) (q)- Signature to be verified by banker or Notary with photograph. Form INC. 10


R. INC. 16(2)- In case of Foreign Subscribers

Corporate Identity Number

For foreign company- Board resolution with details of investment and authorized person who will sign

For LLP or partnership firm- resolution agreed by all the partners for investment and authorized partner to subscribe.

Copy of certificate of Incorporation and registered office address of foreign body corporate.

S. 7 (1) (f) & R. INC. 17- First Directors details with consent to act as director. Form DIR. 12



Incorporation of a CompanyRequirement for Foreign Subscribers

Application for Incorporation and documents to be attached with MoA/AoA. Cont….

• INC. 13 (5). - Subscription by foreign national outside India.

• for commonwealth country subscribers, all documents areto be notarized.

• Country under Hague Convention, all documents firstNotarized and then apostillied as per Hague Convention.

• Other countries, all documents Notarized andauthenticated by Indian Consular or Diplomat.


Incorporation of a Company• Certificate of Incorporation and Validity:

• S.7(2) & R. 2.15- Certificate to be issued in form INC 11

• S. 7 (3)- CIN to be issued

• S,7(4) – To maintain all documents permanently at registered office.

• S.7 (5)&(6)- Submitting false information / representation / suppressing material information attracts punishment for directors / subscribers /professionals U/S 447

• S. 7(7)- Tribunal on application may order for management of the company OR make liability of members unlimited OR removal of name OR winding up order.


Incorporation with Foreign Director / Subscribers

• Give indicative time line, documents require etc.

• Please follow the process chart and time line.

• Be clear with requirement of documents / information

and its execution.

• Obtain brief details as to business of foreign co.

• Obtain the details as to proposed activities and its FEMA requirements.


Incorporation with Foreign Director / Subscribers

• Please check wither foreign company is public / private / LLP / LLC nature of its structure

• Please send process of Incorporation of a company.

• Give details as to how to obtain DIN/DSC/PAN


Foreign Director / Subscribers Directors:

• Obtaining Director Identification Number (“DIN”)

• Obtaining Digital Signature Certificate (“DSC”)

• Obtaining PAN from Income Tax


Foreign Director / Subscribers

• Obtaining Director Identification Number (“DIN”)

• Sections- S. 153 to S. 157.

• Rule- the Companies (Appointment and Qualification of Directors) Rules 2014. “DIR”.


Foreign Director / Subscribers R. DIR. 9 Application for DIN allotment:

Application – Form DIR- 3 To fill up the form and to sign the same (New)

Documents require

Photograph

Proof of Identity

Proof of Residence

Verification by applicant- Form DIR- 4 Specimen signature to be verified.


Foreign Director / SubscribersObtaining DIN (as currently required)

• Proof of Residential Proof:

• Passport (if it has address?)

• Driving Licenses

• Electricity Bill

• Telephone Bill

• Bank account statement

• Others – Please specify. National Identity , Social Security etc.


Foreign Director / Subscribers

Obtaining DIN

• Verification in form DIR.4

• Additional Documents:

• Obtain a profile giving following additional information :-

• Giving Father’s name

• Educational qualification.

• Present Occupation.

• Place of Birth / details

• Nationality

• EMAIL ID, phone and Fax No.

• Details of other co. directorship and promoter


Foreign Director / SubscribersObtaining DIN

Process: cont…

• Obtain scanned copies of all information / documents

• Verify the profile as to Name, Father’s name, address etc.

• Ensure, that all information is as per proof given


Foreign Director / SubscribersObtaining DIN

Process: cont…

Send process for execution of all documents as notarized / apostilled / or authenticated by Indian consulate.

Obtain authority in your favour for uploading form DIR.3 OR

Use DSC of applicant but with authority for form filing.

Inform Applicant for DIN allocation.


Foreign Director / SubscribersObtaining DSC

• Same proof as for DIN for Identity and residence.

• Filing of DSC form of C.A.

• Follow the process as per CA.

• Use DSC with security like pen drive / software etc.


Foreign Director / SubscribersObtaining PAN

• Obtain same documents as require for DIN

• Obtain PAN application executed

• Obtain PAN application signed as per instructions

• Obtain duly Notarised and Apostile or Consularised proof of identity and proof of residence


Incorporation process with Foreign Director / Subscribers

• Name Application:

• Obtain six choices of names in order of preference

• Obtain Trademark related information, if any

• Group company in India and its NoC and board resolution

• Details of proposed Directors (including resident director)

• Details of first subscribers and their Shareholding pattern



• Name Application

• Obtain Board Resolution and authority covering the following points (when body corporate is a Company):

• proposed name / six preference

• proposed main object

• Share capital and no of shares subscribed

• Nominee if any and its detail

• Delegating authority to apply for name reservation


IIncorporation process with Foreign

Director / Subscribers Board Resolution Contd… Rule 16

Authority ONLY to Director / officer / employee of the foreign company.

Authority for power of Attorney Authority to engage other professionals / consultants for

incorporation.

Obtain Power of Attorney for subscription. Rule 16 If Body corporate is LLP, all partners has to sign the resolution and ONLY

partner can sign the MoA/AoA? All particulars of person signing subscription on behalf as per 7(1)((e)??

All the supporting documents coming from foreign subscribers has to be notarised and apostile or consularised in the country of execution



Name Application:

File application with documents received from foreign subscribers as required in the form

Follow up with respective ROC office for name approval

Obtain approval of name reservation application



• Drafting Incorporation documents:

• MoA

• AoA

• Directors details as to interest

• Other documents as may be required



• Drafting Incorporation documents:.. Cont.

• Obtain confirmation of clients on all docs including consentto use their DSC

• Finalized the documents

• Execute the documents either in India or out side India asper Board Resolution / PoA

• Obtain Filing fees from client



• Filing Application for Incorporation.

• Upload all forms as prescribed along with all necessaryattachments- Limit of 2.5 MB?????

• Follow up and view of Different RoC-

• Obtain Incorporation certificate (Electronically)


Incorporation of sec. 8 company. Name Reservation- same process as per normal company

formation.

R. 8(7) of INC.- Name shall include words like

foundation, forum, Association, Federation, Chambers,

Confederation, council, Electoral trust etc.


Incorporation of sec. 8 company R.20- Application in form INC.12 to RoC for licence.

Application with following documents;

MoA

Declaration by professional in form INC.14

Estimate of future income & expenditure for next three years

specifying source of the income and objects of expenditure.

For existing co. last two years financial or one year if operation is

only for one year.

Existing company to give list of assets / liabilities as of date or 30

days of preceding date.


Incorporation of sec. 8 company Certified copies of board / general meeting resolution.

Declaration in Form INC.15 by persons making an

application.

Within one week to publish notice in form INC.26

Notice in English and vernacular language.

Licence in form 16 or 17 as the case may be.

Incorporation process same as other cos. ONLY in INC.7

Licence No as to be mentioned as well as attached.


Incorporation of sec. 8 company Contravention of section 8-

Company to pay penalty of Rs. 10 lakhs to Rs. 1 crore.

Directors / officers. Imprisonment up to 3 (three) years OR fine Rs. 25,000/- to Rs. 25 lakhs.


Any questions?


Thank you


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