05 December 2019

RSS Feed

Procedures of Starting a Company in India

E-mail Print PDF

The word 'Company' is originated from the Latin word 'Com' meaning "with or together" and 'Pains' meaning "bread". So, originally, it referred to a group of people who dined together. Starting a company requires a lot of planning and activities and more than that a number of formalities needed to be complied. The details  on the procedures and paper works related to starting a company in India are as follows.

Following are the types of business entities in vogue in India:


• Private Limited Company
• Public Limited Company
• Unlimited Company
• Partnership
• Sole Proprietorship
In addition to the above, for foreign investors and companies can form:
• Liaison Office / Representative Office
• Project Office
• Branch Office
• Wholly owned Subsidiary Company
• Joint Venture Company

The choice of entity depends on the concept and requirements of the entrepreneurs ranging from a sole proprietorship to a public limited company with many formalities.

Proprietorship and Partnership Firms

Registration is not required for a sole proprietorship entity. But if you are liable for state VAT or service tax registration, you need to obtain VAT / service tax registration. For sole proprietorship, separate income-tax / PAN is also not necessary. The PAN of the proprietor can be the PAN of the firm and proprietor and it can be in personal name also.

For partnership firms also, it is not necessary to register with the Govt. in most states of the country. It is almost compulsory in Maharashtra. Please check the laws in your state to confirm.)

But, if you are not registering your partnership firm, you cannot hire legal protection in the disputes between partners. Even if you choose not to register your partnership, always prepare a Partnership Deed which will help to resolve problems in case of disputes between partners. Partnership Deed can be prepared by any lawyers and can be made on stamp paper as per the laws of the place of execution.
For registration of a partnership firm, partnership deed needs to be prepared along with an application form in the required form and both should be submitted with supporting documents at the nearby “Registrar Of Firms” office for approval.

Procedures for Company Registration

Before starting a new company it is required to register with the Registrar Of Companies ( ROC ) which is under The Ministry of Corporate Affairs (MCA), Government of India. There will be penalties for failures in making returns. For a public limited company, all details of the company are available for public inspection so there can be no secrecy. As the director, you will be treated as an employee and is entitled to pay tax.

As compared to a Public Limited Company, Private Limited Company has less agreement constraints. Private Limited Company is the best choice when there is no need of elevating investments through a public issue and the proprietorship is projected to be strictly owned by limited number of persons.
The minimum paid up capital at the time of incorporation of a private limited company is Rs 1,00,000/- and there is no upper limit on having the authorized capital and the paid up capital. This can be enhanced at any time by making payment for additional stamp duty and registration fee.

The first step in company registration is submitting an application in Form No. 1A with the Registrar of Companies (ROC) in the concerned state in which the Registered Office of the proposed Company is / to be situated.  The application is to be signed by any of the promoters.

The following details are to be detailed in the application:

1. Four optional names for the proposed company. The proposed names should be indicative of the main objective of the company. Justification for the name also needs to be specified along with the application to take proper care for 'same or deceptively similar names'
2. Names and full addresses of the promoters (Minimum 7 for a public company and 2 for private company).
3. Authorised Capital of the proposed company
4. Proposed company objective.
5. Names of other group companies ( if any ).

The ROC scrutinises the same and issues an approval letter/ objection within 10 days to the applicant. On receiving the name consent letter from the ROC, the second step is to draft and submit the following credentials before the ROC within six months of the approval.

1. Memorandum of Association (MOA) and Articles of Association (AOA) - These are required to be executed by the promoters in their own hand in the presence of a witness in quadruplicate stating their full name, father's name, residential address, occupation, number of shares subscribed etc. The MOA states the chief, auxiliary and other items of the proposed firm while the AOA incorporates the rules and guidelines of the standard conduct of the firm.

2. Form No. 1 – Form No.1 is a declaration to be executed on a non-judicial stamp paper of Rs.20/- by one of the directors of the proposed company or others like Attorneys or Advocates. It states that all the requirements of the incorporation have been complied with.

3. Form No. 18 - This is to be filed by any of the company directors notifying the address of the registered office of the proposed company.

4. Form No. 29 - This is a consent obtained from all the directors of the proposed company to act as directors of the proposed company. (Not required for pvt ltd company).

5. Form No. 32 – Form 32 states the appointment of the proposed board of directors from the date of incorporation of the company and is signed by any of the acting directors.

6. The name approval letter in original.

7. Power of Attorney signed by all the subscribers of MOA assigning any of the subscribers or others to act on their behalf for the incorporation and accepting of the certificate of incorporation.

8. Power of Attorney in case of subscriber who had appointed another person to sign the MOA on his absence.

9. Filing fees as applicable.

When all the documents are filled and submitted, ROC scrutinizes it and makes corrections if any. On complying with the same, the certificate of incorporation of the company will be issued.

Additional Compliance Required for Public Limited Companies

A Private Company can start its business immediately on incorporation. Public Company has to complete certain legal formalities such as a statutory meeting within 6 months from incorporation, statutory report etc. On completion of the said formalities and on filing of the statutory report with the ROC, the ROC issues a Certification of Commencement of Business to the company. A Public Company can start their business operations on receiving the Certificate of Commencement.
After the Company has incorporated, if required alternate directors can be appointed, to function on your behalf while you are outside the country. But you should be in India within one month of the incorporation of the Company at least once.

Every public limited company should appoint a qualified auditor. The auditor's duty is to check and report to the treasurer about the books of the company, the balance sheet, profit and loss account etc are a true and reflects a fair view of the company's affairs and also its compliance with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting.

Companies Act lays down strict rules on accounting that all companies are supposed to maintain a set of records, which reflects the financial position of the company with accuracy. A company's first accounting period begins on its incorporation until the following financial year ending (31st March). Within ten months of the end of an accounting period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.

In addition to the accounts books, companies are required to have the following registers:

• Register mentioning its members and share ledger
• Register of directors and secretaries
• Register of share transfers
• Register of charges
• Register of debenture holders

All companies must have and use engraved seal. It must be impressed on share certificates and should be used whenever the company needs to execute a deed. Again, it is included in the ready-made company package.

If application for registration is done through internet with e-forms, everything should go with the digital signature, requisite fees and also the hard copy of Memorandum and Article of Association should reach to the RoC.  Many problems which earlier related to registration of a Company in India have been substantially cut down with better and user friendly processes.


Add comment

Security code


Get the Flash Player to see this player.

Follow SEI

Facebook Twitter Linkedin Youtube RSS Feed
Small Enterprise India Newsletters


Take Our Online PollVoice your opinion
What do you expect from the StartUp India Action Plan?