The incorporation process begins with the conceptualization of the idea, to incorporating a legal entity and finally commencing the business activities. Here are the broad steps involved.
A company can be incorporated as either public limited or private limited. While the steps are more or less the same, incorporating a public company would require meeting a few more compliance mandates.
According to the Companies Act, private limited companies can commence business activates immediately after receiving the Certificate of Incorporation. However, a public company has to undertake the Capital Subscription to raise capital from the public (Initial Public Offering). A public company has to issue prospectus to invite the public to purchase the company’s shares and must also meet the minimum requirements for the subscription before it can receive the Certificate of Commencement of Business.
Related: Types of Companies Registered under MCA in India
Public Limited Company
Private Limited Company
Subscription of capital
Commencement of business
Certificate of Commencement of Business
The first step in the formation of the company is to promote the company. This essentially means conceiving a business idea and taking the necessary steps to form the company and giving a practical connotation to the business plan – Such as feasibility of the business idea, setting up the business facility and company registration.
A promoter of the company is anyone who discovers the business opportunity and takes the necessary business and statutory steps to incorporate the company. There can be one or more promoters of the company and the promoters of the company are often the first shareholders of the company as well.
The promoters of a company perform various functions to set up a business and bring the company into existence.
Related: Post Incorporation Compliance for Companies in India
Once the necessary documents are prepared, the promoters submit and file the application for incorporation with the Registrar of Companies (Roc) in the state where the company’s register office would be set up. The Application form SPICe-32 will be accompanied by the above mentioned supporting documents.
The RoC will examine the documents and check if all the statutory requirements for the formation of the company have been met.
Once the Registrar is satisfied with the compliance of all the formalities, the Certificate of Incorporation will be issued, signifying the birth of the company. A CIN (Corporate Identity Number) will be allotted to the company.
The Certificate of Incorporation is the legal proof and evidence of the birth of the company. The company can validate contracts and agreements to carry forward its business activities.
With the Certification of Incorporation, the birth and validity of the company existence cannot be questioned; even if the company was set up with unlawful objectives. In such a situation, a case can be registered in the Court of Law against the company that will ultimately result in its strike-off or winding-up.
Once the Certificate of Incorporation has been obtained, a private limited company can immediately commence business activities. However, a public company will have to go through the process of capital subscription to raise the necessary capital.
A public company raises capital funds by issuing shares and debentures of the company to the public. Here is a brief look at the various steps required to raise the funds from the public. The first issue of the company to raise funds from the public is called Initial Public Offering (IPO).
A private company can commence business immediately after securing the Certificate of Incorporation, however, a public company must first secure a Certificate of Commencement of Business.
Upon successful allotment of shares and capital subscription, the public company will have to make an application the RoC for the Certificate of Commencement of Business. The following documents will need to be filed with the application:
Once the Registrar is satisfied with the documents, the Certificate of Commencement of Business is issued and the company can commence business operations.
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