How to Incorporate a Company

6/30/14 How to Incorporate a Company
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How to Incorporate a Company
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How to Incorporate a
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who wanted to get going and not be bothered with the
fluffy stuff. They were in effect saying “OK. I’ve this great
idea that will change the world. How do I form a company,
get acquired and become obscenely rich?” So in deference
to those die-hards, we will in this post talk about
incorporating companies – the hows, how longs and how
muchs (sic).
We’ve taken the help of noted Chartered Accountant Sudev
Rao in preparing this write-up. (in the interest of full
disclosure, we need to mention that Sudev Rao is
JumpStartUp’s Accountant). Just the points that need to be
kept in mind are mentioned here so don’t go around suing
us and Sudev if your company doesn’t get incorporated!
Let’s start!
In the Internet Economy, names are key. Shakespeare
clearly didn’t envisage the Internet Economy.
So, choosing at least 4 names (most preferred one and 3
others) for your company is step one. Then you need to fill
up a Form called 1A and file it with the local (ROC)
Registrar of Companies.
Form 1A also includes some other info like names of at
least 2 Founders/Promoters, What does the company
intend doing and How much total capital does this
company intend raising? Though the company is yours,
you can’t go around naming it anything you want.
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There are some things to be kept in mind such as:
a. It should not sound similar to an existing company’s
name so as to be misleading
b. The name needs to be indicative of the nature of
business envisaged
c. Names which include “National” or “President” which
connotes Governmental stature would not be allowed.
Till recently you could not do certain things with the name.
For example, no dotcom! But recent relaxations have
ensured that:
1. The name could be in upper or lower case or a
combination.
2. The name could include a numeral viz Birla 3M
3. The name could include a . (dot) for facilitating dot com
ventures.
Registering the name takes about 2 to 3 weeks. Follow-ups
at the ROC can help reduce the cycle time to say, 1 week!
After the name is obtained and you’ve finished printing
your shiny new business cards and shown them to all, the
Memorandum (MOA) and Articles of Association (AOA) on
duly stamped paper and signed by the signatories to the
Memorandum are to be filed.
The MOA contains the name as approved by the ROC, the
main objects, the ancillary objects of the company and the
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other objects (if you want to know what objects are, you
will have to approach your own Chartered Accountant!).
It states what the authorised capital is and that the liability
of the shareholders is limited. The Articles contain the
rules of regulation of the company, the number of first
directors, the size of the board, the procedure for transfer
and transmission of shares, and other procedural
provisions.
Once the MOA and AOA are submitted, the ROC calls the
Founder/promoter or their duly authorised representative
for discussion and acceptance / modification of the
clauses of the MOA/AOA. Once corrections are made
across the table, a Certificate of Incorporation is issued. i.e.
the day the company comes into existence (which can be
proudly hung on the wall behind your desk).
Generally, it takes about a week from filing the MOA/AOA
to receiving the Certificate of Incorporation. Hence the
whole process of incorporation from name availability can
be from 2-5 weeks, depending on the follow up and the
quality of the drafting of the MOA/AOA. The costs of
incorporation are the stamp duties and ROC filing fees
apart from professional charges paid to the Professional
(i.e. the Chartered Accountant typically) who facilitates the
incorporation. The stamp duty and filing fees are a function
of the size of authorised capital as defined in the MOA.
Wait, before you can rush off to run your newly
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incorporated company, there are just a few more
formalities (remember this is India) to complete. These
formalities include getting registered for Professional
Taxes, Sales Taxes and under the Shop & Establishments
Act. If import or export is envisaged then registration for
an Import Export Code Number with The Directorate of
Foreign Trade is required. If the nature of business is an
industry for manufacture SSI, Excise registrations -if
applicable- needs to be looked into. If the number of
employees is 20 or more PF registration may also be
required.
Now can I please go and run my company? Sure, as soon
as it’s verified that you’ve maintained all the required
documents. Such as? The Board Minutes book, the General
Meetings Minutes book, all forms filed with the ROC and a
Statutory Register for starters. And by the way, these are
all required to be maintained at the registered Office of the
company.
Simple right?
This article was originally published in VentureKatalyst,
India’s first e-zine aimed at entrepreneurs, started by
Sanjay Anandaram.
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