Anyone who aims to build a successful startup must also know where to start from. While in practice you can start operating your business the minute you have an idea and a system and a team to execute it, a company or a startup is a legal entity and it must be registered with the government and have a proper, and legally-recognizable status. A company can achieve that by “incorporating” or formally registering itself as a commercial entity. However the process can be long, tedious or simply you don;t know the first thing about the formalities involved in incorporating your company.
The folks at company360.in came cross dozens of queries about what is the procedure to incorporate a company, how long it takes and so on. So, they made a quick but comprehensive compendium of the entire process of formation of a private limited company and various formalities that are required to be fulfilled. The entity in question here is a private limited company, a popular choice of a legal entity by startups.
Did you know, in year 2014-15, approx 272370 private limited companies were incorporated in New Delhi alone.
Let us start with basic requirements and characteristic of a Private Limited company:
- Minimum 2 Directors are required to incorporate a company, 1 director needs to be Resident of India (ROI).
- Maximum 15 Directors can be appointed, further can be appointed only after passing special resolution.
- Maximum 200 shareholders, subject to some certain condition.
- Prohibits any invitation to public to subscribe for any securities (shares).
- Restriction on Unsecured Loan.
Aforesaid basic characteristic need to be kept in mind before opting for a private limited company. As per current scenario we have two way out by government for incorporating a company, one is simple Form Inc-29(Integrated Form) whereas other goes in 2 Steps i.e. First- Inc-1( Reservation of Name) and Second- INC-7,INC- 22 and DIR-12.
We will here understand the simple INC-29 which is currently widely used. Now let’s step by step understand the process of incorporating a company.
1. Selecting the desired name
The very first thing that needs to be decided and also get approved from your consultant is name of the proposed company. The very first thing to be kept in mind that your proposed name should not be identical to already existing company or registered/pending trademark and not just that your proposed name should also fulfill the all criteria given in Rule 8 of Companies (Incorporation) Rules,2014. Your company proposed name should be properly verified by your consultant. And again, the name doesn’t always have to be the brand name. For eg. ANI technologies is the incorporated name of Ola cabs!
2. Application by a director to get a PIN and digital signature certificate
Any person intending to become the director in a company is required to make an application to MCA – Ministry of Corporate Affairs – for allotment of a unique identification, namely, Director Identification Number (DIN) and obtain a DSC – Digital Signature Certificate. At least 1 director should have DSC and a valid DIN number for filing INC-29.
3. Inc-29
Inc29 is a form/process through which the company name approval, application for a DIN and incorporation can be submitted altogether to the MCA portal. ( The Inc29 docket has a maximum limit 2.5 MB. So you must take care of size of all the documents and form.)
Let’s understand this form Inc-29 in brief
- Capital Structure of the Company
Starting a business definitely requires a capital. This is the amount that each shareholder will bring/deposit within the 30 days of incorporating of company in company current account (Bank Account). So, you need to decide the initial capital of your company and somehow this capital also decide your government fees of your company. Government has given the prescribed fees slab as per your capital of company.
- Registered Address of The company
The address of the company can be owned by director or can be a rented place. If you have already have a company office, you should have a rent agreement in name of the company and also a utility bill of same in name of landlord and also a NOC (No objection Certificate) must be taken from the owner/landlord. If owned by director, then also NOC is required from the director. In case of address, state also plays major role in incorporation of company, as stamp duty of each state varies.
- Whether the proposed name is based on the registered trademark or is subject matter of an application pending for registration under Trade Mark Act.
In case you have already applied for the trademark or registered trademark in name of proposed company, then you must declare its details here as it will help you in getting your desired name.
- Pattern of Director and Shareholder with individual details of each
Directors of company can also become shareholder too and shareholders may be other than Director also. So you need to finalize the shareholding pattern of the company and also directorship of the company and declare that too. A shareholder need not to have DIN but all director must hold DIN and same need to be applied here. If any proposed Director is already holding a DIN, then same shall also be declared . Thereafter all the necessary details to be filed in INC-29 of each shareholder and Director.
- Apply for PAN, TAN and ESIC
This part is optional here. If you wish to apply for the PAN, TAN and ESIC (Employee State Insurance Corporation) cards, you can apply for same through this form (Form-INC29).
4. Attachment of INC-29
The inc29 forms should include the following attachments:
- Memorandum of Association / MOA
MOA is a document that contains all the fundamental information which are required for the incorporation of the company. It Contains the Powers and objects of the company. It usually covers 5 major clauses of the Company (i) Name Clause (ii) Situation Clause (iii) Object Clause (iv) Liability clause (v) Capital Clause.
Details of above clause should be properly drafted under professional guidance. After that MOA ends up with table stating the details of Name, address and equity holding of the subscriber to company with respective signature and same needs to be verified by any witness also.
- Articles of Association / AOA:
This document shall contain the regulations for management of the company, and all the necessary rules and regulation as may be prescribed by Companies Act, 2013 which is binding on company to be followed as and when needed. AOA also ends up with table stating the details of Name, description and occupation of the subscriber to company with respective signature and same need to be verified by any witness also.
- Various Declaration by Subscriber/ Directors :
There exist various declarations that are required to be given by each subscribers/ Directors in the prescribed format by Companies Act, 2013. The declaration is to be given on stamp paper. The value of stamp paper may vary state to state. The declaration are (i) General Declaration, (ii) Form No. INC-8, (ii) Form No INC-9, (iii) Form No. INC-10(verification of signature of subscriber) (iii) DIR-2(Consent to act as director).The above declaration are to be duly notarized by notary.
- Documents :
The Document parts include ID proof, PAN and address proof of the all subscribers/directors. The address proof the registered address of the company. All documents should be self-attested and also be notaries by notary.
After all above things we are ready to upload the INC-29 at MCA portal after attaching all the discussed attachments. Upload INC-29, pay the fees and your company will be incorporated expectedly in 2 weeks in case objection raised by ROC (Registrar of Company)
Tada! Your new company, your startup is now ready to open shop, and your dreams are ready to take shape.
[About the author: Vivek is qualified CA, avid traveler and the founder of company360.in – a startup to provide complete protection to companies and corporations including their intellectual property needs from Trademarks to Patents. For more information he may be reached at [email protected] ]