The Companies Act, 2013: A Guide to Company Registration
In the realm of corporate governance, the Companies Act, 2013, stands as a pivotal piece of legislation in India. It meticulously outlines the regulations and requirements governing the formation and registration of companies. In this article, we will explore the essential rules and documents specified in the Act, delving into the process of company registration, the role of promoters, and the far-reaching implications of registration.
Before diving into the intricacies of registration, it’s vital to comprehend the role of promoters. Section 2(69) of the Companies Act, 2013, defines promoters as individuals who play a fundamental role in the inception of a company. They can be identified as follows:
Named Promoters: Those individuals officially designated as promoters in the company’s prospectus or annual returns.
Control Over Affairs: Individuals who directly or indirectly exercise control over the company’s affairs.
Advisors and Directors: Those who provide guidance, direction, or instructions to the Board of Directors.
Promoters are essentially the visionary architects behind a company’s formation and registration. It’s crucial to note that professionals such as solicitors and accountants, when acting in their professional capacity, are not considered promoters of the company.
Formation of a Company
Section 3 of the Companies Act, 2013, outlines the foundational requirements for establishing a company. Here’s a breakdown of these requirements:
1. Public Company: A public company necessitates the involvement of seven or more individuals who subscribe their names to the memorandum and register the company for any lawful purpose.
2. Private Company: A private company, on the other hand, can be formed with just two or more individuals.
3. One-person Company: For those wishing to embark on a solo entrepreneurial journey, a one-person company can be formed by a single individual.
Registration or Incorporation of a Company
Crucial to the process is Section 7 of the Companies Act, 2013, which details the procedure for the incorporation of a company. The steps include:
1. Filing of Registration Papers: To initiate the incorporation process, the subscribers must file the following documents with the registrar whose jurisdiction encompasses the location of the proposed company’s registered office:
- Memorandum and Articles of the company, signed by all subscribers.
- A declaration regarding compliance with all the Act’s requirements and rules, signed by the individual responsible for forming the company and by a person named in the Articles.
- Affidavits submitted by each subscriber to the Memorandum and individuals named as first directors in the Articles. These affidavits must affirm:
- Non-conviction of any offense related to company formation, promotion, or management.
- Lack of guilt for fraud or any breach of duty to any company within the last five years.
- The completeness and accuracy of the documents filed with the registrar.
- An address for correspondence until the registered office is established.
- For individual subscribers, full name, residential address, nationality, and proof of identity; for corporate subscribers, prescribed documents must be provided.
- Directors mentioned in the Articles must furnish details of their interests in other firms or bodies corporate, along with their consent to act as directors of the company in the prescribed manner.
2. Issuance of Certificate of Incorporation: Upon receipt and verification of the registration papers, the registrar registers all the information and documents, subsequently issuing a Certificate of Incorporation in the prescribed format.
3. Corporate Identity Number (CIN): The registrar also allocates a unique Corporate Identity Number (CIN) to the company, serving as its distinct identity. This number is effective from the company’s incorporation date, which is reflected on the certificate.
4. Maintenance of Registration Papers: The company is legally obligated to maintain copies of all information and documents filed during the registration process until the company undergoes dissolution.
Consequences of Furnishing False Information
The Companies Act, 2013, takes a stern stance against the provision of incorrect or false information during the company formation process. This can include the suppression of material information. Here are the repercussions:
1. Individual Liability: Individuals found to have deliberately furnished false information or suppressed material facts are subject to legal action for fraud under Section 447.
2. Company Implications: If it is discovered at a later date that a company has been incorporated based on false or incorrect information, the promoters, first directors, and individuals making declarations can also face legal action for fraud under Section 447.
Intervention of the National Company Law Tribunal (NCLT)
The Act empowers the National Company Law Tribunal to intervene when a company has been incorporated with fraudulent information. The NCLT can pass a range of orders if it is satisfied with an application, including:
- Regulating the company’s management, which may involve changes to its Memorandum and Articles in the interest of the public, company members, and creditors.
- Making the liability of the company’s members unlimited.
- Ordering the removal of the company’s name from the Registrar of Companies.
- Mandating the winding-up of the company.
- Passing any other order deemed suitable.
Before issuing such orders, the NCLT must provide the company with a fair opportunity to present its case and must consider the company’s transactions, obligations, and liabilities.
The Effects of Registration
The Companies Act, 2013, enforces several significant effects upon the registration of a company, as specified in Section 9:
Corporate Entity: From the date of incorporation, the subscribers to the Memorandum and all subsequent members become a single body corporate.
Legal Person: The registered company is granted the status of a legal person, separate from its incorporators. It can contract, sue, and be sued under its own name.
Perpetual Existence: The company enjoys perpetual existence until dissolution or removal by the Registrar. This grants it the power to acquire, hold, and dispose of property in various forms.
In conclusion, the Companies Act, 2013, plays a pivotal role in regulating the formation and incorporation of companies in India. It places great importance on transparency, accuracy, and legal compliance throughout the registration process, ensuring that companies are established on a solid legal foundation. Moreover, the Act’s provisions underscore the legal implications of furnishing false information during incorporation, reinforcing the necessity of integrity in corporate governance. By adhering to these guidelines, companies can navigate the path to successful registration and commence their operations with a firm legal footing.