COMPANIES ACT, 2013

Definition of Company

By a company is meant a voluntary association of persons for profit, having a capital divided
into transferable shares, ownership of which is a condition for membership of the company.

Characteristics of Company

Formation :A company comes into existence only when it has been registered after completing
the formalities prescribed under the Indian Companies Act, 2013. A company is formed by the
initiative of a group of persons known as promoters.

A Joint Stock Company is an artificial person; it has a separate legal status.

Perpetual Succession: A company once formed continues to exist as long as it fulfills the
requirements of law.

Management: Joint Stock Companies have democratic management and control. Even though
the shareholders are the owners of the company, all of them cannot participate in the
management process. The company is managed by the elected representatives of shareholders
known as directors.

Limited Liability : A company may be limited by guarantee or limited by shares.

Company limited by shares means a company having the liability of its members limited by the
memorandum to the amount, if any, unpaid on the shares respectively held by them.

Company limited by guarantee means a company having the liability of its members limited by
the memorandum to such amount as the members may respectively undertake to contribute to the
assets of the company in the event of its being wound up;

Capital: A Joint Stock Company generally raises a large amount of capital through issue of
shares.
Transferability of Shares: The capital of the company is divided into parts, called shares. These
shares are freely transferable.
Kinds of Companies

Private company means a company having a minimum paid-up share capital of one lakh rupees
or such higher paid-up share capital as may be prescribed, and which by its articles limits the
number of its members to two hundred, except in case of One Person Company

Provided that where two or more persons hold one or more shares in a company jointly, they
shall, for the purposes of this clause, be treated as a single member:

Provided further that—

(A) persons who are in the employment of the company; and

(B) persons who, having been formerly in the employment of the company, were members of the
company while in that employment and have continued to be members after the employment
ceased,

shall not be included in the number of members; and

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

Public company means a company which—

(a) is not a private company;

(b) has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, 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

One Person Company means a company which has only one person as a member;

Distinction Between a Public Company and a Private Company

Minimum Paid-up Capital: A company to be Incorporated as a Private Company must have a

minimum paid-up capital of Rs. 1,00,000, whereas a Public Company must have a minimum
paid-up capital of Rs. 5,00,000

Minimum Number of Members: Minimum number of members required to form a private

company is 2, whereas a Public Company requires at least 7 members.

Maximum Number of Members: Maximum number of members in a Private Company is

restricted to 200, there is no restriction of maximum number of members in a Public Company.

Number of Directors: a minimum number of three director are to be there in case of a public
company, two in case of a private company and one in case of a one person company.

Commencement of Business: A Private Company can commence its business immediately after
its incorporation, whereas a Public Company cannot start its business until a certificate of
commencement of business is issued to it.

Issue of Prospectus: A Private Company is prohibited from inviting the public for subscription
of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free
to invite public for subscription i.e., a Public Company can issue a Prospectus

Prohibition of Large Partnership

Illegal association.  A company, association   or partnership consisting of more than    10
persons for the purpose of carrying on banking business and of more than 20 persons for the
purpose of carrying on any other business with the object of earning profits can be legally
formed only when it is registered under the Companies Act, or is formed in pursuance of some
other Indian law or is a Joint Hindu Family carrying on business as such. If the number of
members in an association or partnership exceeds this statutory limit and it is not registered
under the Companies Act, it is an illegal association and has no legal existence.
An association of more than 20 persons which exists not for acquisition of gain but for some
other purpose such as the promotion of art, charity, religion, science, etc., does not require
registration.

Formation of a Company

A company may be formed for any lawful purpose by—

(a) Seven or more persons, where the company to be formed is to be a public company;
(b) Two or more persons, where the company to be formed is to be a private company; or
(c) One person, where the company to be formed is to be One Person Company, that is to say, a
private company,

Apply for the DIN. Apply simultaneously for the Digital signatures of the Director (one director
is sufficient)

Select, in order of preference, at least one suitable name up to a maximum of six names,
indicative of the main objects of the company.

Ensure that it does not resemble the name of any other already registered company and also does
not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950) by
availing the services of checking name availability on the portal.

Now apply name approval form i.e., Form 1A, to be digitally signed by the director with the
filing fee of Rs 500. Usually it takes three to four working days to get the online name approval.

After name approval prepare one copy of MOA in the format as given in Table A, B, C, D, E of
Schedule I of Indian Companies Act, 2013 and AOA in the format given in Table F, G, H, I, J of
Schedule I and get it stamped.

The applicant can now apply for registration of the new company by filing the required forms
(Declaration of compliance - Form-1, Notice of situation of registered office of the company -
Form-18, Particulars and consent of the Directors, Manager or Secretary - Form-32) within 60
days of name approval.

Prepare power of attorneys on Rs 50 (Rs. 100 if 4 promoters) stamp paper preferably separate for
every director. Form 1 is to be printed on a Rs. 20 stamp paper.  Thereafter, scan the following
documents to upload on the MCA website.

1. Form 1 has to be scanned after taking print out

2 Power of attorneys to be scanned and shall be attached with Form 1.
3. Consent letter from the directors to be printed in simple language giving consent to be as
acceptance of becoming directors to be attached to Form 32.
4. Photos of the directors to be scanned and uploaded with Form 32.
5. Scan MOA & AOA and attach it with Form 1.

After upload of the papers on the website you have to deliver the printout of Form 1, Form 18,
Form 32, stamped copy of MOA and AOA and consent letters at the ROC.

The Registrar on the basis of documents and information filed shall issue a certificate of
incorporation and shall also allot a corporate identity number to the company.

Additional steps to be taken for formation of a Public Limited Company

To obtain Commencement of Business Certificate after incorporation of the company the public
company has to make following compliance:

File a declaration in e-Form 19 and attach the prospectus to it.

Obtain the Certificate of Commencement of Business.

Memorandum of Association

The Memorandum contains the fundamental conditions upon which alone the company is
allowed to be incorporated. It lays down the area of operation of company. Its purpose is to
enable the share holder and those who deal with the company to know the area beyond which the
actions of the company cannot go.

The memorandum of a company shall state—

(a) The name of the company with the last word “Limited” in the case of a public limited
company, or the last words “Private Limited” in the case of a private limited company:
Provided that nothing in this clause shall apply to a company registered under section 8;
(b) The State in which the registered office of the company is to be situated;
(c) The objects for which the company is proposed to be incorporated and any matter considered
necessary in furtherance thereof;
(d) The liability of members of the company, whether limited or unlimited, and also state,—
(i) in the case of a company limited by shares, that liability of its members is limited to the
amount unpaid, if any, on the shares held by them; and
(ii) in the case of a company limited by guarantee, the amount up to which each member
undertakes to contribute—
(A) to the assets of the company in the event of its being wound-up while he is a member or
within one year after he ceases to be a member, for payment of the debts and liabilities of the
company or of such debts and liabilities as may have been contracted before he ceases to be a
member, and
(B) to the costs, charges and expenses of winding-up and for adjustment of the rights of the
contributories among themselves;
(e) in the case of a company having a share capital,—
(i) the amount of share capital with which the company is to be registered and the division
thereof into shares of a fixed amount and the number of shares which the subscribers to the
memorandum agree to subscribe which shall not be less than one share; and
(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite
his name;
(f) in the case of One Person Company, the name of the person who, in the event of death of the
subscriber, shall become the member of the company

Articles of Association

The articles of a company shall contain the regulations for management of the Company

Formation of a Company with Charitable Object (Sec. 8)

(1) Where it is proved to the satisfaction of the Central Government that a person or an
association of persons proposed to be registered under this Act as a limited company—
(a) has in its objects the promotion of commerce, art, science, sports, education, research, social
welfare, religion, charity, protection of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members
the Central Government may, by licence, allow that person or association of persons to be
registered as a limited company under this section without the addition to its name of the word
“Limited”, or as the case may be, the words “Private Limited”, and thereupon the Registrar shall,
register such person or association of persons as a company under this section.

Alteration of Memorandum
A company may, by a special resolution and after complying with the procedure specified in this
section, alter the provisions of its memorandum.

Change in Name Clause

Requirements for changing the name clause are:
1. Check with the ROC whether the new proposed name is available or not by filing Form
1A with the ROC
2. If the new name if available, then pass the Special Resolution of members at a duly
convened general meeting
3. In order to convene the general meeting it must be preceded by a Board Meeting
4. After the approval of members the approval of the Central Government, must also be
obtained.

5. The approval of the Central Government shall not be necessary when the name change is
merely to delete or add the word “Private” before the word “Limited” in the name consequent
upon conversion of the company from a public to a private company or vice versa;

6. The documents are required to be filed with the Registrar, who will then register the new
name in place of the old name of the company and issue a fresh certificate of incorporation in
the new name;
 7. The new name will be effective only on and from the date of issue of the new certificate
of incorporation by the Registrar as above.

Change in Registered Office

Change in the address of the registered office of a company, from one state to another
In order to change the registered office of a company from one state to another, following steps
have to be taken

1. Hold a Board Meeting for the purpose of calling a general meeting of the members of the
company in which the shifting of the registered office will have to be approved

2. The general meeting of the members will have to pass a special resolution approving the
change of address of the registered office

3. Make an application to the Central Government for getting approval for change in the
address of the registered office
3. A copy of the order of the Central Government approving the alteration shall be filed by
the company, with the registrar of each of the states and the registrars shall register the
same. The registrar of the state where the registered office is being shifted to, shall issue a
fresh certificate of incorporation indicating the alteration.

3. The change in address will be effective only after the issue of the fresh certificate of
incorporation by the Registrar of the state where the registered office is being shifted to.

Change of registered office from the jurisdiction of one Registrar to the other Registrar
within the same State: A change of registered office from the jurisdiction of one registrar to
another does not involve an alteration to the Memorandum of a company as the location clause in
the Memorandum merely states the name of the state, which is not changed by such relocation.
Therefore, change of registered office from the jurisdiction of one Registrar to the other
Registrar within the same State can be done by passing a special resolution. The notice of the
change of the situation of the registered office, shall be give to both the registrars within fifteen
days of the change, who shall record the same.

Change in Object Clause

A company, which has raised money from public through prospectus and still has any unutilised
amount out of the money so raised, shall not change its objects for which it raised the money
through prospectus unless a special resolution is passed by the company and—
(i) the details in respect of such resolution shall also be published in the newspapers (one in
English and one in vernacular language) which is in circulation at the place where the registered
office of the company is situated and shall also be placed on the website of the company, if any,
indicating therein the justification for such change;
(ii) the dissenting shareholders shall be given an opportunity to exit .

Change in Capital Clause

A limited company having a share capital may, if so authorised by its articles, alter its
memorandum in its general meeting to—
(a) increase its authorised share capital by such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into shares of a larger amount than its
existing shares
(c) sub-divide its shares, or any of them, into shares of smaller amount

Alteration of Articles

(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any,
a company may, by a special resolution, alter its articles
(2) Every alteration of the articles shall be filed with the Registrar, together with a copy of the
special resolution and the printed copy of the altered articles, within a period of fifteen days.