08
Feb2016

Incorporation of Company in India

Company is a legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.

A company is a safer form of doing business. A company is a separate person than its shareholders/ members; it has its own personality and having power to assessed separately. The shareholders or members of the company are the real owners of the assets of the company. The company is doing business for the benefit of its stake.

Private Limited Company

As per Section 2(68) of the Companies Act, 2013 “Private Company” means a Company, which by its Article,-

(i) restricts the right to transfer its shares;

(ii) Limits the number of its members to 200; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

Public Limited Company

As per Section 2(71) of the Companies Act, 2013 “Public Company” means a Company, which-

(a) is not a private company;

(b) has a minimum paid-up share capital of Rs. 5 Lakh or more, as may be prescribed:

Provided that “A company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles”;

Incorporation / Formation of company involve a number of steps

Minimum Requirement of a Private Company:

  1. Minimum 2 Shareholders
  2. Minimum 2 Directors (The directors and shareholders can be same person)
  3. Minimum Authorised Share Capital shall be Rs. 100,000 (INR One Lac)
  4. DSC (Digital Signature Certificate) for all the Directors (for applying of DIN)
  5. DIN (Director Identification Number) for all the Directors.

Minimum Requirement of a Public Company:

  1. Minimum 7 Shareholders
  2. Minimum 3 Directors (The directors and shareholders can be same person)
  3. Minimum Authorised Share Capital shall be Rs. 500,000 (INR Five Lac)
  4. DIN (Director Identification Number) for all the Directors
  5. DSC (Digital Signature Certificate) for one of the Directors.

Note: The companies under the Companies Act 2013 are required to E-file annually the following documents with the Registrar of Companies (ROC) as follow.

Type of Document Type of E-Form Purpose of Filing of Form
Balance –Sheet & Profit & Loss Account Form AOC-4. Filing of Financial Statement & Profit & Loss Account with the ROC
Annual Return Form MGT-7. To be filled by Companies having share Capital. To give information relating to directors and shareholder for the period of Financial Year.

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