Legal Meaning: "Company" means a company incorporated under the Companies Act 2013 or under any previous company law;
A company is a legal entity formed by a group of individuals to engage in and operate a business commercial or industrial enterprise. A company may be organized in various ways for tax and financial liability purposes depending on the corporate law of its jurisdiction.
A company has a definite legal entity which is different and independent from its members. It can hold and deal with any sort of property.
The liability of the shareholders of the Company is restricted to the magnitude of the due amount of the shares that are held by them.
The company is an artificial person that is established by law perpetuates to exist regardless of the differences in its membership.
The Company is an artificial entity or a person, cannot sign its name by itself. Hence, every company is enforced to possess its own authentication or a seal which moves as official signatures of the Company.
The shares of a public limited company (PLC) are transferable. The authorisation of the Company or the concession of any member of the Company is not required for the transfer of shares.
A company is a legal person can get into contracts and can implement the permissible authorities against others. It can accuse and be accused in its name if there is a breach of contract by the Company
"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.
"Unlimited company" means a company not having any limit on the liability of its members.
The liability of shareholders, unless and otherwise stated, is limited to the face value of shares held by them or guarantee given by them.
Deaths, insanity, insolvency of shareholders or directors do not affect the company’s existence. A company has a separate legal entity with perpetual succession.
In company business, the management is in the hands of the directors who are elected by the shareholders and are well experienced persons. In order to manage the day-to-day activities, salaried professional managers are appointed. Thus, the company business offers professional management.
As there is no limit to the maximum number of shareholders in a public limited company, expansion of business is easy by issuing new shares and debentures. Companies normally use their reserves for expansion purposes.
If the shareholders of a company are displeased with the progress of the business, they can sell their shares any time. During all this change of ownership, the business continues to operate.
As the membership is very large, the whole business risk is divided among the several members of the company. This is an advantage particularly for small investors.
As per the legal provisions, a company has to make various statements available to the Registrar of the Companies, Financial Institutions; the secrecy of business comes down.
Compared to proprietorship and partnership, a company has to comply with more legal requirements. It consumes considerable time and effort.
Sometimes the managers and directors misuse the company resources for their personal benefits. This brings losses to the company and company is closed.
Unlike proprietorship and partnership, the day-to-day affairs of a company are looked after by salaried managers. Since they are the employees not the owners, they do have hardly any personal interest and commitment in the company. This may result in inefficiency and, in turn, losses.
The Companies Act provides for a detailed and lengthy process to explain the winding up of a company. This process is a lot more time consuming and expensive.
Incorporated companies have to pay a higher tax. An incorporated company does not get any discounts and any minimum taxable limits. An incorporated company also has to pay income tax on the whole of its income at a fixed rate whereas other companies are charged at a gradual or slab rate.
It is important to note that every person who is to be appointed as a director must have “Director’s Identification Number (DIN)” [Section 152(3)] or any number as may be prescribed under Section 153. If the proposed director does not already have a DIN, he/she must obtain the same before incorporation of the company. This can be obtained by making an application on the MCA portal in Form DIR - 3. DIN may also be obtained through Form INC-32 (SPICe).
Section 18 of the IT Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. Acquire DSC - A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian Information Technology Act, 2000.
An application for Reservation of Name shall be made to Registrar of Company (ROC), through the web service.SPICe+ 32 www.mca.gov.in by using web service SPICe+.
Upon receipt of an application as per above stated provision under section 4(4), the Registrar of Company (ROC), may reserve the name for a period of 20 Days from the date of the application.
After ascertaining name availability from the Registrar of Companies steps should be taken to get the memorandum and articles of association for the proposed company drafted and printed. The memorandum of a company has to be in Tables – A, B, C, D and E in Schedule-I to the Companies Act, 2013.
The memorandum and articles should be printed and signed by subscribers. Thereafter, the memorandum and the articles should be stamped by the appropriate State Authority (Collector of Stamps) under the Indian Stamp Act,1899.
The memorandum and articles are then dated, but the date must be the date of stamping or later than the date of their stamping and not, in any event, a date prior to the date of their stamping.
Proviso to Rule 12 of the Companies (Incorporation) Rules, 2014 provides that in case pursuing of any of the objects of a company requires registration or approval from sectoral regulators such as Reserve Bank of India, Securities and Exchange Board, registration or approval, as the case may be.
Various Documents and Forms which are required for Incorporation of the company are filed with respective authorities.
The fee shall be as provided in the Companies (Registration Offices and Fees) Rules, 2014.
On receipt of the aforementioned documents and forms, the office of the Registrar of Companies will scrutinise them and if they are found complete in all respects, the Registrar will register the company and allot CIN.
A Certificate of Incorporation will be issued by the Registrar of Companies under his hand and seal of his office and sent electronically. One may take printout of Certificate of Incorporation which is generated online.
A company comes into existence is generally by a process referred
to as incorporation. Once a company has been legally incorporated, it
becomes a distinct entity from those who invest their capital and labour
to run the company.
Usually the first step to form a company is the process known as ‘promotion’ where a person persuades others to contribute capital to a proposed company before it is incorporated . Such a person is called the promoter of the company. Promoters also can enter into a contract on behalf of a company before or after it has been granted a certificate of incorporation, and arrange share issues in the name of the company. Section 3 to 22 of the Companies Act, 2013 (herein after called the Act) read with Companies (Incorporation) Rules, 2014 made under Chapter II of the Act (herein after called ‘the Rules’) cover the provisions with regard to incorporation of companies and matters incidental thereto