Saturday, 19 April 2014

Provision and issues relating to Incorporation Companies Act 2013 and Companies (Incorporation) Rules 2014

1.    Kinds of Companies that can be formed:

15 types of companies can be formed under the new Companies act 2013. They are broadly falling under the head Public, Private and One Person Company.

2.    One Person Company (OPC)



     1.    The person (sole member and nominee) should be:

a.    A natural person
b.    an Indian citizen and resident

     2.    Minor cannot be a member or nominee or hold share with beneficial interest


-          The Person (ONE PERSON) shall be a sole member / nominee in only one company
-          If the person becomes a member in another one person company then he shall within a period of 180 days meet the eligibility criteria specified above.


The OPC cannot be converted into a

o    company under Section 8. Ie. Charitable Companies
o    company carrying on Non- Banking Financial Investment activities.

Voluntary conversion not permitted within a period of 2 years unless its Paid up capital excees 50 lakhs or turnover exceeds 2 crores

a.      Compulsory Conversion:

The OPC shall voluntarily convert itself within 6 months into a public or a private company on satisfying the following conditions:

§  increase in the Paid up capital beyond Rs. 50,00,000/-
§  the avg. turnover during the period exceeds Rs. 2,00,00,000/-

Procedure for conversion:

                -          alteration of its MOA and AOA
         -    within 6 months from the date of applicability of the above conditions give a notice of its
         -    cessation as a OPC and conversion into such company to the registrar.

b.        Voluntary Conversion:

      -      OPC may voluntarily convert after complying with the provisions applicable for a Pvt. or a Public Ltd. Co.


Fine:extends to Rs. 10,000 + (Rs. 1000 for every day after the first day during which such contravention continues).

Conversion of Private Company into One Person Company

        - Paid up capital : Rs. 50,00,000 or less  OR  average annual turnover less than 2 crores

        - Resolution to be passed: special resolution.

        - No objection: to obtain a no objection letter from the member and creditors

    - Filing of documents with the Registrar: The OPC to file the spl. resolution along with the respective documents with the registrar within 30 days.

        - Issue of Certificate: The registrar on being satisfied shall issue new certificate of incorporation.


Nomination by the subscriber or member of OPC

-        The subscriber to the memorandum shall nominate a person after obtaining prior written consent of the nominee and the name of such nominee shall be mentioned in the memorandum of One Person Company.

Withdrawal of Nomination:

-        The nominee may withdraw his consent by giving a notice in writing to such sole members or to the OPC.

-      The sole member shall appoint another nominee within 15 days from the date of receipt of the notice of withdrawal.

Change of Nominee by sole member:

-          The subscriber or member of OPC may, by giving a intimation in writing to the company change the nominee nominated by him at any time for any reason.

Death of Sole Member:

On the death of the sole member the nominee shall become the member and he shall nominate a new member within 15 days from the date of him becoming a member.

ROC Filing:

c.    Form No. INC 2:           for filing the Nomination at the time of incorporation

d.    Form No.  INC 3:          for filing the consent of such nominee

                                                              i.      At the time or information or
                                                             ii.      within 30 days in case of any change

e.    Form No. INC 4:           notice of withdrawal of nomination or change in nomination on him becoming a member within 30 days

f.     Form No.  MGT 14:        special resolution

g.    Form No. INC. 6:          for conversion of Pvt Ltd Co. into OPC

3.    Memorandum of Association of the Company

Object clause:

The Objects clause is to provide the following:

     a.    Objects for which the company is proposed to be incorporated
     b.    Any matter considered necessary in furtherance thereof

Liability Clause:

All the companies to state the liability of members of the Company, be it limited or unlimited.

Name Clause:

-          No company shall be registered with a name

o    identical or too similar to any existing company’s name

o    containing the words or expressions which is likely to give an impression that the company is connected with the State or Central Government

o    such that, usage of such name will be an offence under any law in force

Violation of Act:

If a name had been reserved by providing false information and such offence is discovered:

       -          Before incorporation: the reserved name shall be cancelled and the applicant shall be liable for  penalty upto Rs. 1,00,000/-

        -          After incorporation, the Registrar may:

o    Direct The Company to change its name within 3 months after passing the ordinary resolution
o    Strike off the name of the company from the Registrar of Companies
o    File a Petition for winding up of the company.

Specimen format of Memorandum of association is given in Table A,B,C,D and E of Schedule I of the CA 2013.

4.      Articles of Association:

Articles to contain the regulations for management of the Company

o    The company may  have entrenchment provisions incorporated in its articles at its Formation  or by an amendment agreed by

§  all the members in case of a pvt co. ;
§  By a special resolution in case of a public co.

o    A notice on the entrenchment provisions on any incorporation in the articles is to be provided to the registrar.

The company may adopt all or any of the regulations contained in Table F,G,H,I,J of Schedule I of the Company Act 2013.

Note: It shall not prohibit the company from including such additional matters in its articles as it may consider necessary.

            5.    Alteration of Memorandum of Association (MoA):


Alteration of MoA can be done only by passing a Special Resolution

a.    Name Clause:

       -        Any change of name of the Company should comply with regulations relating provisions of name for new companies  u/s 4(2)

       -        No name change will be allowed if the company is default in filing its annual returns or financials statements or any documents

   -   The process of change in name shall be complete only on obtaining Fresh Certificate of Incorporation from the Registrar

b.    Shifting of Registered Office within Same State:

       -          Application for confirmation of shifting to be filed with RD

       -          Atleast one month before such filing, :
a.    Publish notice in one English and one vernacular newspaper
b.    Send individual notice to all creditors & deposit holders

       -          Any objection shall be considered if received within 21 days.

       -           In the absence of any objections raised, it is deemed to have received the consent of all the       members, creditors, debenture holders and others.

       -          No shifting shall be allowed if any inspection/ investigation/inquiry has been initiated

c.    Shifting of registered office from state or union territory to another state:

       - Resolution: Passing a special resolution and altering the MOA of the Company

   - Filing of Documents: Filing all the required documents along with the fee with the Central Government

     - The details of creditors and debenture holders shall be enclosed with the application

     - An affidavit from the directors that no employee shall be retrenched as a consequence of shifting of the registered office shall also form part of the application.

    -  Acknowledgement copy of the service of the application with the complete annexure shall be sent to the registrar, chief secretary or the state government or union territory where the registered office is situated at the time of filing the application.

d.      Object Clause:

     - if a Company which has raised money from Public through a prospectus, and some part of such money is still leftover (unutilised) then,No Change in object clause is permitted unlessit is approved by a special resolution;

      - Such resolution along with details is to be published in one English and one vernacular newspaper and the dissenting shareholders are given an opportunity to exit.

      -The notice to be made available on the website also.

Any amendment to the MoA shall come into effect only after registration of such alteration with the Registrar.

            6.  Alteration of Articles of Association (AoA)

   - Alterations to AoA of a Company can be made only through a Special resolution passed at a General Meeting of members of  the Company

    -  Any alteration shall come into effect only after registration of such alteration with the Registrar

Notification of alterations in the MOA and AOA:Every Alteration made in Memorandum and / or Articles shall be notified in all copies of Memorandum and / or Articles, as the case may be.

MOA and AOA made available to members:

Copies of Memorandum, Articles and specified (under Sec 117) to be provided to members on request, subject to payment of fees (as prescribed)

           7.    Charitable Companies:

Object clause:

Promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object.

Alteration of memorandum / Articles:

Prior approval of the Central Government is required to alter the memorandum/ Articles of such a Company.

Effect of Violation of the Act:

The Central Government may

-          Revoke the license
-          Order winding up of the company
-          Order Amalgamating it with another company having the SIMILAR OBJECTS.

            8.    Incorporation of Companies:


An application for incorporation of the company shall be filed with the registrar within whose jurisdiction the registered office of the company is proposed to be situated.

Signing the memorandum and articles:

  - Indian subscriber/ partner/ director: The subscribers to the memorandum/ directors/ partners as the case may be shall sign on the memorandum on adding his address, description and occupation as may be required in the presence of atleast one witness who shall also provide his information as provided by the subscribers.

   - Foreign national: their signatures on the MOA and AOA along with their Identity proof shall be notarized by such persons as may be required.

o    If the subscriber is forming part of

§  The Common wealth: notarized by Public notary in that part of the Commonwealth

§  The Hague Apostille Convention: notarized before the notary of the country of his origin and be duly apostilised in accordance with the Hague Convention

§  Outside the Commonwealth and not a party to the Hague Apostille Convention: before the notary of such country and the certificate of the notary shall be authenticated by a diplomatic or consular office empowered or such officials mentioned in sec 6 of the commissioners of oaths.

   - On his visit to India: If he had visited India and is intending to incorporate in India then they should hold a valid business visa

   - If he is a person of Indian origin or overseas citizen of India then the business visa is not required.

Affidavit from subscribers and first directors:

Affidavit shall be submitted by each of the subscribers and first directors named in the articles.

Filing of information with the registrar:

The particulars of every subscribers and directors to filed with the registrar at the time of incorporation.

Issue of certificate of incorporation:

The registrar on satisfaction shall issue a certificate of incorporation.

            9.  Commencement of Business:

Commencement of business or exercising any borrowing powers:

    -  A Company having share capital cannot commence business or exercise borrowing powers until it has filed a declaration containing the following with the registrar within 180 days from the date of incorporation.

o    Declaration to be filed by the directors that the shares that have been taken by the subscriber to the Memorandum and Articles has been fully paid up.

o    The share capital of the company to be

§  Not less than Rs. 5,00,000/- in case of public company
§  Note less than Rs. 100,000/- in case of a private company

   - The company to file with the registrar a verification of its registered office
  Relaxation in the Companies Act 2013:

   - The companies need not obtain a certificate of commencement of business henceforth.
   - They need not enter into any provisional contracts.

10. Registered office of the Company:

    - Every company shall have a registered office on and from 15th day of its incorporation.

   - Notice of change of the registered office shall be filed with the ROC within 15 days from the date of such changes.

   -  Where the company had changed its name: the company shall paint or affix or print, as the case may be, along with its name, the former name or names so changed during the past 2 years on its letter heads, bills, letter papers, notices, business letters, official publications, hundis, etc…

            11. Conversion of Companies:

Any Company registered under any previous Companies Act, may apply for conversion to any classes of Company specified under this act, by

    -    Making necessary changes to its Memorandum and Articles for such class of Company
    -   Complying with applicable provisions for such class of Company and
    -   Making an application to the Registrar and obtaining a fresh CoI

12. Holding of shares by a subsidiary company in holding company:

A Subsidiary cannot hold any shares or any beneficial interest as member in its Holding Company

13. Service of Documents

Documents to Company may be served by any of the following means

   - Registered / Speed Post to the registered office
   - Courier to the registered office
   - Through electronic means and


14. Documents to Registrar / any Member may be served by any of the following means

         -          Post /Regd / Speed Post to the registered office
         -          Courier
         -          Electronic means
         -          Delivery at his office / address

“Courier” means person /agency which delivers documentand provides PROOF OF DELIVERY

15. Authentication of Documents:

Unless specified otherwise, any document or contract made by Company, required to be signed by Company can be signed by either one of the following
a.    KMP (Don’t they require Board authorisation in this regard???)
b.  Any other officer duly authorised by Board