PROJECT TITLE:PROMOTION,

INCORPORATION &ADMINISTRATION
OF COMPANY

NAME OF THE STUDENT: SHAIKH SHAHABANOO

SIDDIQUE AHMED

ICSI REGISTRATION NO : 420567464/08/2008

SUBMITTED TO : ICSI EMSOP

PROMOTION, INCORPORATION & ADMINISTRATION
OF COMPANY

INTRODUCTION: -

MEANING & CHARACTERISTICS OF COMPANY:

A Company is a legal entity, allowed by legislation, which permits a

group of people, as shareholders, to apply to the regulators for an
independent organization to be created, which can then focus on
pursuing set objectives, and empowered with legal rights which are
usually only reserved for individuals, such as to sue and be sued, own
property, hire employees or loan and borrow money. These distinct
fundamental legal features and characteristics of a company makes it
more advantageous. The legislation under the Company is
incorporated is Companies Act, 2013 & other applicable rules.

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.

In terms of the Companies Act, 2013 (Act No. 18 of 2013) a

“company” means a company incorporated under this Act or under
any previous company law [Section 2(20)].

Since a corporate body (i.e. a company) is the creation of law, it is

not a human being, it is an artificial juridical person (i.e. created by
law) and it is clothed with many rights, obligations, powers and
duties prescribed by law.
Someof the most striking characteristics of a company are discussed
below:

• Corporate Personality
• Company as an artificial Person
• Perpetual Succession
• Limited Liability
• Separate Property
• Transferability of Shares
• Capacity to sue & be sued
• Contractual Rights

TYPES OF COMPANIES:

As per Companies Act 1956, a Company should have at least 2

persons as its members or shareholders. However, the Companies
Act 2013 introduced a new concept of One Person Company in India
wherein only one Indian person who is a citizen of India can register
a private limited company with some limitation, the different types
of companies can be classified based on different parameters.

Below is a Flowchart showing types of Companies As per Companies

Act 2013
Public Limited Company

Public limited company is a company which can raise a large amount

of capital not only from its promoters, close relatives or investors but
also from the public at large by offering its securities for sale in open
market. The shares of a public limited is a freely tradeable item and
can be listed on a stock exchange for real-time sale, purchase and
deliver. These are generally large companies which need a huge
amount of resources.

Private Limited Company

Private limited company is a type of company which is formed with

minimum two shareholders and two directors.
The minimum requirement with respect to authorized or paid up
capital of Rs. 1,00,000 has been omitted by The Companies
(Amendment) Act, 2015 w.e.f. 29th of May, 2015. Another crucial
condition of a private limited company is that it by its articles of
association restricts the right to transfer its shares & also prohibits
any invitation to the public to subscribe for any securities of the
company. The maximum of 200 persons can become a shareholder in
the company. A private limited company is exempted from various
provisions of the Companies Act 2013 in comparison with the public
limited company. In other words, some of the sections and proviso is
applicable to only public limited companies as they have been
specifically marked as not applicable to a private limited company.

A private Limited company can be formed in three variations. (a). as

a private limited company, (b). As a small company, (c). As a One
Person Company (OPC).

Small Company

Small company is a type of private Limited company having capital

up to Rs. 50 Lac and whose turnover has not crossed Rs. 2 Crore in
any financial year is considered as a small company. Another
requirement is that to be considered a small company it should not
have been formed by a company which is not a small company.
There are certain exemptions available to the small companies which
are almost same as that of a one-person company. The government
filing fee for MCA filing is considerably low for a small company.

One-Person Company

The 2013 Act introduces a new type of entity to the existing list i.e.
apart from forming a public or private limited company, the Act
enables the formation of a new entity a ‘one-person company’
(OPC). An OPC means a company with only one person as its member
(section 3(1)).

One Person company Popularly also known as OPC, can be

incorporated by only one person as its owner, however, it can have
many directors subject to limits prescribed by the Act. A nominee of
the owner of one-person company must be declared with the
consent of such nominee.

Rule 3 of Companies (Incorporation) Rules, 2014 – One Person

Company

1. Only a natural person who is an Indian citizen and resident in

India- (a) shall be eligible to incorporate a One Person
Company; (b) shall be a nominee for the sole member of a One
Person Company. Explanation-For the purposes of this rule, the
term “resident in India” means a person who has stayed in
India for a period of not less than one hundred and eightytwo
days during the immediately preceding one calendar year.
2. A natural person shall not be a member of more than a One
Person Company at any point of time and the said person shall
not be a nominee of more than a One Person Company.
3. Where a natural person, being member in One Person
Company in accordance with this rule becomes a member in
another such Company by virtue of his being a nominee in that
One Person Company, such person shall meet the eligibility
criteria specified in sub rule (2) within a period of one hundred
and eighty days.
4. No minor shall become member or nominee of the One Person
Company or can hold share with beneficial interest.
5. Such Company cannot be incorporated or converted into a
company under section 8 of the Act.
 6. Such Company cannot carry out Non-Banking Financial
Investment activities including investment in securities of
anybody corporates.
7. No such company can convert voluntarily into any kind of
company unless two years have expired from the date of
incorporation of One Person Company, except threshold limit
(paid up share capital) is increased beyond fifty lakh rupees or
its average annual turnover during the relevant period exceeds
two crore rupees.

Section 8 Company

This is a company which has in its objects the promotion of

commerce, art, science, sports, education, research, social welfare,
religion, charity, protection of the environment or any such other
object; and which intends to apply its profits, if any, or other income
in promoting its objects; and intends to prohibit the payment of any
dividend to its members.

A limited company can be further classified into: (a) Company

limited by shares, and (b) Company limited by guarantee.

a. Companies Limited by Shares

As per section 2(22), “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.

Accordingly, no member of a company limited by shares can be

called upon to pay more than the nominal value of the shares held
by him. If his shares are fully paid-up, he has nothing more to pay.

But in the case of partly paid shares, the unpaid portion is payable at
any time during the existence of the company on a call being made,
whether the company is a going concern or is being wound up. This is
the essence of a company limited by shares and is the most common
form in existence

b. Companies Limited by Guarantee

As per section 2(21) “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. Clubs, trade associations and societies for
promoting different objects are examples of such a company.

c. Unlimited Company
As per section 2(92), “unlimited company” means a company not
having any limit on the liability of its members. Thus, the maximum
liability of the member of such a company, in the event of its being
wound up, might stretch up to the full extent of their assets to meet
the obligations of the company by contributing to its assets.

Government Companies

Section 2(45) defines a “Government Company” as any company in

which not less than fifty one per cent. Of the paid-up share capital is
held by the Central Government, or by any State Government or
Governments, or partly by the Central Government and partly by one
or more State Governments, and includes a company which is a
subsidiary company of such a Government

Foreign Companies
As per section 2(42), “foreign company” means any company or body
corporate incorporated outside India which—
a) has a place of business in India whether by itself or through an
agent, physically or through electronic mode; and
b) conducts any business activity in India in any other manner
Sections 379 to 393 of the Act deal with such companies

Holding Company & Subsidiary Company

As per Section 2(46) “holding company”, in relation to one or more

other companies, means a company of which such companies are
subsidiary companies;

As per Section 2(87) “subsidiary company” or “subsidiary”, in relation

to any other company (that is to say the holding company), means a
company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital
either at its own or together with one or more of its subsidiary
companies:
Provided that such class or classes of holding companies as may be
prescribed shall not have layers of subsidiaries beyond such numbers
as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the
holding company even if the control referred to in sub-clause
(i) or sub-clause (ii) is of another subsidiary company of the
holding company;
(b) the composition of a company’s Board of Directors shall be
deemed to be controlled by another company if that other
company by exercise of some power exercisable by it at its
 discretion can appoint or remove all or a majority of the
directors;
(c) the expression “company” includes anybody corporate;
(d) “layer” in relation to a holding company means its subsidiary or
subsidiaries;

COMPANY INCLUDES BODY CORPORATE

• As per Sec 2(87) Company include a ‘Body Corporate’.
• As per Sec 2(11) body corporate includes a ‘Company incorporate
out of India’.

Thus, an Indian company in which more than 50% shares are held by
a foreign body corporate will be a ‘Subsidiary Company’.
Similarly, any Indian body corporate can be ‘holding company’ even
if that body corporate is not registered as ‘company’ under
Companies Act.
An Indian company can be holding/subsidiary of a foreign body
corporate even if it is not registered as a Company.

Associate Company

As per Section 2(6), “Associate company”, in relation to another

company, means a company in which that other company has a
significant influence, but which is not a subsidiary company of the
company having such influence and includes a joint venture
Company.
Investment Company

As per explanation (a) to section 186, “investment company” means

a company whose principal business is the acquisition of shares,
debentures or other securities.
Dormant Company
Dormant Company is a company which is formed and registered
under The Companies Act, 2013 for a future project or to hold an
asset or intellectual property and has no significant accounting
transaction, such a company or an inactive company may make an
application to the Registrar of Companies (ROC) for obtaining the
status of a dormant company.
“Inactive Company” means a company which has not been carrying
on any business or operation, or has not made any significant
accounting transaction during the last two financial years, or has not
filed financial statements and annual returns during the last two
financial years.
“significant accounting transaction” means any transaction other
than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any
other law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records.

Nidhi company:

Nidhi Company means a company which has been incorporated as a

Nidhi with the object of cultivating the habit of thrift and savings
amongst its members, receiving deposits from, and lending to, its
members only, for their mutual benefit, and which complies with
such rules as are prescribed by the Central Government for
regulation of such class of companies.(section 406)
A Company passes through 3 stages: -

PROMOTIONAL STAGE

INCORPORATION STAGE

COMMENCEMENT OF BUSINESS
PROMOTION OF COMPANIES

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
theAct) read with Companies (Incorporation) Rules, 2014 made
underChapter II of the Act (herein after called ‘the Rules’) cover the
provisionswith regard to incorporation of companies and matters
incidentalthereto.

Promotion means all those steps that are required to bring a

company into existence, and then to set it going.It includes such
steps as are required after incorporation of the company until
company is entitled to commence its business. In other words,
promotion continues until Board of directors assumes management
of the company.

Let us now look at the definition of Promoter as per Companies Act,

2013

Promoter: The term ‘promoter’ means a person—

 (a) who has been named as such in a prospectus or is identified by
the company in the annual
return; or

(b) who has control over the affairs of the company, directly or
indirectly whether as a
shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the

Board of Directors of the
company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is

acting merely in a
professional capacity. (section 2(69) of Companies Act, 2013)

Also Note that :- The definition of ‘control’ is linked closely with the
definition of ‘promoter’. The 2013 Act provides that a person having
control over the affairs of the company would be regarded as its
‘promoter’.

➢ Promotion of the Company refers to the entire process by

which a company is brought into existence. It starts with the
conceptualisation of the birth of a company and determination
of the purpose for which it is to be formed. The persons who
conceive the company and invest the initial funds are known as
the promoters of the company. The promoters enter into
preliminary contracts with vendors and make arrangements for
the preparation, advertisement and the circulation of
prospectus and placement of capital. However, a person who
merely acts in his professional capacity on behalf of the
promoter (eg lawyer, CA, etc) for drawing up the agreement or
other documents or prepares the figures on behalf of the
promoter and who is paid by the promoter is not a promoter.
 ➢ The promoters have certain basic duties towards the company
formed:-

1) He must not make any secret profit out of the promotion of the
company. Secret profit is made by entering into a transaction on his
own behalf and then sell to concerned property to the company at a
profit without making disclosure of the profit to the company or its
members. The promoter can make profits in his dealings with the
company provided he discloses these profits to the company and its
members. What is not permitted is making secret profits i.e. making
profits without disclosing them to the company and its members.

2) He must make full disclosure to the company of all relevant facts

including to any profit made by him in transaction with the company.

➢ Functions performed by the Promoters

Decision of the name of the company can be accepted by the

registrar
Arranges printing of MoA and AoA
Details of the Company are added such as MoA, AoA, Nomination of
the director, Bankers, Auditors and registered office of the company

➢ A fiduciary position of the promoter:

A promoter cannot make any profit at the expense of the company.
They cannot sell the property to the company at any profit unless all
the materials facts have been disclosed in front of the board of
directors, or the shareholders of the company.
The promoters need to make a full disclosure of the interest or the
profit earned.

➢ Remuneration:
A promoter is not liable to receive any remuneration for his work
unless a contract expressly approves payment for services offered.
 ➢ According to SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009, “promoter” includes:

(i) the person or persons who are in control of the issuer;

(ii) the person or persons who are instrumental in the formulation

of a plan or programme pursuant to which specified securities
are offered to public;

(iii) the person or persons named in the offer document as

promoters.

➢ A person may be a promoter even if he has undertaken a lesser

active role in the formation of a company. Any person who
becomes a director, places shares or negotiates preliminary
agreements, may be covered by this term. Who constitutes a
promoter in a particular case,has to be seen in the light of a
clear legislative definition provided under section 2(69) the
Companies Act, 2013. A company may have several promoters.
A promoter may be a natural person or a company.

➢ It is clear from the foregoing that the word “promoter” is used

in common parlance to denote any individual, corporate,
syndicate, association or partnership which has taken all the
necessary steps to create and mould a company and set it
going. The promoter originates the scheme for the formation of
a company; gets together the subscribersto the memorandum,
gets the Memorandum and Articles prepared, executed and
registered, finds the bankers, brokers and legal advisers, finds
the first directors, settles the terms of preliminary contracts
with vendors and agreement with underwriters, and makes
arrangement for preparation, advertisement and circulation of
 the prospectus and placement of the capital. But a person who
merely acts in a professional capacity on behalf of the
promoter, such as a solicitor who draws up an agreement or
articles, an accountant or valuer who prepares figures or
valuation on behalf of a promoter, and who is paid for the
same, is not a promoter.

➢ As per section 102 of Companies Act, 2013 , where as a result

of the non-disclosure or insufficient disclosure in any
explanatory statement annexed to the notice of a general
meeting , by a promoter, director, manager, if any, or other key
managerial personnel, any benefit accrues to such promoter,
director, manager or other key managerial personnel or their
relatives, either directly or indirectly, the promoter, director,
manager or other key managerial personnel, as the case may
be, shall hold such benefit in trust for the company, and shall,
without prejudice to any other action being taken against him
under this Act or under any other law for the time being in
force, be liable to compensate the company to the extent of
the benefit received by him. In the case of default in complying
with above provisions, every promoter, director, manager or
other key managerial personnel who is in default shall be
punishable with fine which may extend to 50,000 rupees or five
times the amount of benefit accruing to the promoter, director,
manager or other key managerial personnel or any of his
relatives, whichever is more.

➢ A promoter is not allowed to derive a profit from the sale of his

own property to the company unless all material facts are
disclosed. If a promoter contracts to sell his own property to
the company without making a full disclosure, the company
may either repudiate the sale or affirm the contract and
recover the profit made out of it by the promoter. Either way
the dishonest promoter is deprived of his advantage.
The following are the steps in the promotion of Company :-

• Discovery of an idea

The promoters start with an idea to start some business

either in new field which has not been commercially exploited
or in some existing lines of manufactured or business. He
makes preliminary investigation to find out whether the
particular business is useful and he roughly estimates income
and expenditure of the proposed business.

• Detailed Investigation

The promoter needs to make detailed investigation of his

idea with the assistants of many experts like engineers,
chemists, market analysis’s, finance experts, management
consultants etc. on the basis of reports of these experts the
promoters would be in a position to know the capital
requirements, place of location, size of the unit, demand
condition in the market, price of product, cost of production,
Written on capital etc. A detailed investigation will help him to
compare the estimated income is enough to meet the cost of
production and other expenses.

• Assembling
After detailed investigation, if he is satisfied with
practicability and profitability of the proposal concern, he
starts assembling preposition, assembling means getting the
support and consent of other persons to act as a director or
founders, arranging for patents, a suitable site for the
company, machinery and equipment etc.

• Financing
After assembling the proposition, the promoter prepares a
‘prospectus’ to present to the public and to underwriters to
persuade them to finance the ‘proposition’. The promoter also
takes steps to incorporate the company, and to secure the
certificate to commence the business.
INCORPORATION OF THE COMPANY

After taking all preliminary steps of for registration an

application along with the necessary documents stamp duty,
registration fees etc. has to be made to the registrar for the
issue of certificate of incorporation. After scrutinisation of the
document, if the registrar is satisfied he will issue a certificate
of incorporation
A certificate of incorporation is a legal document relating to the
formation of a company or corporation. It is a license to form a
corporation issued by state government or, in some
jurisdictions, by nongovernmental entity.

Steps and formalities for the incorporation of the company. The

following documents to be filed with the registrar

• Memorandum of Association (MOA) with at least 7

persons subscribed, each one share, if it is a public
company. If it is a private company at least 2 persons with
the shares subscribed.

• Articles of Association (AOA) except where table ‘A’

considered as company’s articles.

• Address of the registered office.

• A list of directions with their names, address and

occupation.
 • Consent of directions in writing to act as directions.

• The statutory declaration by an advocate or an attorney

or a chartered accountant practicing in India, who
engaged in the formation of a company or by a person
named in articles as a director, manager, or secretary of
the company.

Following is the Step by Step procedure to incorporate a Company

with SPICe (Simplified Proforma for Incorporating Company
Electronically) Form INC-32 under Companies Act, 2013:

OBTAIN DIGITAL SIGNATURES

For signing the e-forms DSC are required. It is compulsory to obtain

Class-II Digital Signature Certificates for all the subscribers of MOA
and AOA and for atleast one director (if different form the
subscribers) to sign the forms necessary for incorporation. A basic
overview for how to obtain DSC has been mentioned below for oner
reference.

How to obtain DSC?

a) DSC application form duly filled and signed along with the colored
passport size photo;

b) Self attested copy of PAN Card as Identity proof; and

c) Self attested copy of address proof

shall be submitted to the concerned authority.

DIRECTOR IDENTIFICATION NUMBER

As per Section 153, every individual intending to be appointed as

director of a company shall make an application for allotment of
Director Identification Number to the Central Government.

Now, there is no prerequisite of at least 1 (one) director shall possess

DIN before making an application for incorporation. Therefore,
Directors of the proposed Company can apply for their DIN through
SPICe. The self attested copy of identity proof and address proof is
required to be attached with the form for the processing of DIN.

Important Point to be kept in mind:

a. Proof of Identity: Self attested copy of PAN Card (mandatory) and

copy of Voter’s Identity Card/ Passport/ Driving License/ Aadhar Card.

b. Proof of Address : Copy of Bank Statement/ Electricity Bill/

Telephone Bill/ Mobile Bill which shall not be older than two months

Further, if the individuals not having DIN and being appointed as

director exceeds 3 then, they can apply for DIN by filling of Form DIR-
3 with the Registrar. A basic overview of how to apply for DIN
through the same is given below.

How to Obtain DIN with Form DIR-3?

Download form DIR-3(Application for Allotment of DIN) from the MCA
portal. Fill the form & attach the requisite documents and upload the
duly filled and signed form to MCA portal.

NAME OF THE COMPANY

While filing the SPICE we can apply for only onenames. Further, there
is an option to reserve the name in advance through the facility
available on MCA portal known as Reserve Unique Name (RUN). An
overview for applying of name through RUN is given below for oner
reference.

How to apply name through RUN?

The Company can apply upto two names through ‘RUN’ facility
accompanied with a fees of Rs. 1000/-. If the name gets rejected, one
resubmission is allowed within 15 days of the date of rejection. Once
the name reserved it shall be available for 20 days from the date of
reservation. Which means SPICe shall be filed within such 20 days.

Important points to be kept in mind while reserving the suitable

name:

The name of Company should not be a name similar/identical to any

existing company or LLP or similar/identical to a registered trademark
or a subject matter of an application pending for registration under
the Trade Marks Act, 1999. Further, the same shall be in accordance
with the provisions of Rule 8 of Companies (Incorporation) Rules,
2014.
If the objects of the Company is as such that it requires any approval
from any regulatory body then while reserving the name through Run
facility, a declaration by the directors shall be attached that the
company shall take such approval before the commencement of the
business. (In case of NBFC, approval of RBI is required)

PREPARE MEMORANDUM AND ARTICLES OF ASSOCIATIONS OF THE

COMPANY

Memorandum of Association is the charter of the company whereas

the Articles of Association are the internal rules and regulations of
the Company. It shall be drafted with utmost care and with the help
of professionals.

Further, the Simplified Proforma for Incorporating Company

Electronically (SPICE) in Form INC-32 is to be filed along with e-
Memorandum of Association in Form No. INC-33 and e-Articles of
Association in Form No. INC-34.

Therefore, the Subscriber Sheet will be authenticated by affixing the

digital signatures of all the subscribers in both the forms.

The above two forms is required to be signed by the witness which

shall be an associate or a fellow member of ICSI/ICAI/ICMAI.

Some Practical Aspects:

The DSC of all the subscribers shall be associated with the PAN as
authorized signatory on the MCA portal.
APPLICATION FOR INCORPORATION

The Application for Incorporation shall be filed in Form INC-32

(SPICE). Some of the key aspects to be kept in mind while filling the
form are as follows:

Name of the Company: If the name is reserved through RUN then the
SRN of the Run shall be entered in the form and it will automatically
pre-fill the name reserved. If the name is not reserve then the
applicant can apply for one name in the Form INC 32 (SPICE).

Capital of the Company: There is no minimum or maximum bar for

the Authorised and Paid-up Capital of the Company [Sec-2(68)]. One
can form a company with any amount but always consider the fees
and stamp duty payable as statutory fees is totally correlated with
the Capital of the Company.

Note: If the company is formed with a nominal capital of less than or

equal to rupees ten lakhs or in respect of companies not having a
share capital whose number of members as stated in the articles of
association does not exceed twenty, fee on INC-32 (SPICe) shall not be
applicable (Rule 38)

Details of directors and subscribers: The details of the subscribers

and directors shall be filed such as address, educational qualification.
D.O.B., occupational qualification, number of shares subscribed etc. If
the individual proposed to be appointed as director in the company
then it can apply for DIN by the procedure mentioned above. In case
the subscriber is already holding a valid DIN, and the particulars
provided therein have been updated as on the date of application,
and the declaration to this effect is given in the application, the proof
of identity and residence need not be attached.

Other details: Other details such as address of the registered office,

main division activity, source of income etc.

Attachments: The following documents needs to be annexed as

attachment with the form:

a. Declaration by the first subscriber(s) and director(s) in Form INC-

9 [Rule-15].

b. Interest in other entities by first directors.

c. Affidavit by the first subscriber(s) and director(s) for Non-

Acceptance of Deposit [MCA circular №11/2013]

d. Consent to act as directors by the individual proposed to be

appointed as director in the company in Form DIR-2.

e. Proof of Office address (Conveyance/ Lease deed/ Rent Agreement

etc. along with rent receipts).

f. Utility Bill of the premise (Electricity/Water/Gas/Telephone Bill not

older than 2 months)

g. Identity and Address of Subscribers and Directors (if applying for

DIN).
h. NOC from Owner if the premise is not owned or taken on a lease.

Signing of Forms: The form shall be digitally signed by one individual

that is proposed to be director in the company and shall be certified
by a professional.

To avoid any mistakes and assist one in filing the form diligently and
efficiently one should engage a professional in the above process.

UPLOADING OF FORM: Form SPICE along with the e MOA and e AOA
shall be uploaded on the portal of MCA.

OTHER FACILITIES

PAN & TAN for the Company

We can apply for PAN and TAN of the Company trough SPICE. We
need to fill the AO code for the PAN and TAN. The AO code can be
found by the link that is available in the help lit of Form SPICE.

Importer Exporter Code

The Company can also apply for importer exporter code through
SPICE.

CERTIFICATE OF INCORPORATION

If after filing the requisite forms for Incorporation, the Registrar is

satisfied with the content of document filed, Registrar (ROC) will issue
the certificate of Incorporation in form INC-11 [Rule-18] alongwith
the PAN and TAN of the company

AFTER ALL THESE STEPS, THE COMPANY IS READY ….!

COMMENCEMENT OF BUSINESS:-

After the Company is formed, the next step is filing INC 20A

EForm INC-20A is required to be filed pursuant to Pursuant to

Section 10A(1)(a) of the Companies Act, 2013 and Rule 23A of the
Companies (Incorporation) Rules, 2014, which are reproduced for
your reference.
Section 10A:

(1) A company incorporated after the commencement of the

Companies (Amendment) Ordinance, 2018 and having a share capital
shall not commence any business or exercise any borrowing powers
unless—

(a) a declaration is filed by a director within a period of one hundred

and eighty days of the date of incorporation of the company in such
form and verified in such manner as may be prescribed, with the
Registrar that every subscriber to the memorandum has paid the
value of the shares agreed to be taken by him on the date of making
of such declaration; and

(b) The company has filed with the Registrar a verification of its
registered office as provided in sub-section (2) of section 12.

(2) If any default is made in complying with the requirements of this

section, the company shall be liable to a penalty of fifty thousand
rupees and every officer who is in default shall be liable toa penalty
of one thousand rupees for each day during which such default
continues but not exceeding an amount of one lakh rupees.

(3) Where no declaration has been filed with the Registrar under
clause (a) of sub-section (1) within a period of one hundred and
eighty days of the date of incorporation of the company and the
Registrar has reasonable cause to believe that the company is not
carrying on any business or operations, he may, without prejudice to
the provisions of sub-section (2), initiate action for the removal of
the name of the company from the register of companies under
Chapter XVIII.]

ADMINISTRATION OF THE COMPANY

The two important documents on the basis of which the Company

can be operated/administered are Memorandum of Association &
Articles of Association.

Memorandum of Association:-

Meaning of memorandum: It is the most important as well as the

primary document of the company without this document no
company can be registered in India. This is a document which sets
out the constitution of a company; It defines the company’s relations
with the outside world, and the scope of its activities. Hence it is also
called as life giving document or character of the company it defines
companies’ relationship with shareholders and outside world. It has
to be divided into paragraphs, consecutively numbered and printed

Clauses or contexts of Memorandum of Association:-

✓ Name Clause: - This clause contains the name of the company.

The name selected should not besimilar to that of the existing
company. The name of the company must be approved by the
central govt. The name of the Public company must have limited and
private company must have private ltd. If company is formed not
with the object of declaring dividend, but to promote culture, art etc.
The central govt may permit the company to drop the word limited.

✓ Situation or Domicile Clause: - In this clause the name of the

state in which the registered officeof the company is situated is
mentioned. This clause fixes the jurisdiction (limit) of the
registrar of the companies for the company law matters.

✓ Object Clause: - This clause defines the object for which the
company is formed. The objectshould be legal and must not be
inconsistent with the companies act. The object must not be
thegeneral. A company is not legally allowed to carry any
business other than specified in thisclause.

✓ Liability Clause: - This clause states that the liability of members

is limited to the face value ofthe shares up by them. If a
member has already paid some amount on shares, he can be
called uponto pay only the unpaid amount on shares.

✓ Capital Clause: - In this clause, particulars regarding the amount

of share capital with which thecompany is proposed to be
registered and the division of share capital into a fixed amount
areincluded.

✓ Subscription Clause: - The subscribes to the memorandum will

give adeclaration to this clause and express the desire to
purchase a number of shares mentioned againstthe respective
names
Articles of Association of the Company (AOA)

The Articles are the internal regulation of the company on the basis
of which its internal affairs are managed. Every business unit or
institution must have its own rules and regulations for an efficient
management of its affairs. They lay down the powers of directors,
shareholders and officers.
Articles must be printed, divided into paragraphs, numbered
consecutively and signed by each subscriber of the memorandum
and filed with Registrar.
Importance of Articles: While the memorandum lays down the
objects and purposes for which the company is formed. Articles
prescribe the regulations for the attainment of those objects. Articles
provide the rules for the conduct of the day-to-day administration of
the companies.

Some of the Contents of AOA:

Articles contain rules and regulations regarding:
• Share capital and variation of rights.
• Calls on shares
• Transfer, transmission, forfeiture of shares and surrendered of
shares.
• Issue of share warrants
• Alteration and reduction of capital
• Voting and reduction of capital
• Borrowing powers.
• Proceedings at the board and the general body meetings.
• Appointment, powers, duties, qualifications, remuneration etc of
the directors.
• Dividends and services
• Maintenance of books of accounts and their audits
• The company seal
• Winding up

BOARD MEETINGS:-
Company directors are responsible for the management of their
companies. They must act in a way most likely to promote the
success of the business and benefit its shareholders. The board of
directors has an essential role in company governance and setting
the strategic direction of the business. The right board of directors
brings your company specialist knowledge and expertise in key
business areas, such as management, finance or technology. They
also have responsibilities to the company’s employees, its trading
partners, and the state. Companies use board meetings to create and
improve key business strategies.
The company secretary acts as the chief governance officer of the
company, and shares various responsibilities with the directors
under the Companies Act
According to Section 205 of the Companies Act, 2013 the Company
Secretary shall discharge following functions and duties, this is the
first time that the duties of the company secretary have been
specified in the company law:
➢ To report to the Board about the compliance with the
provisions of this Act.
➢ To ensure that the company complies with the applicable
secretarial standards.
➢ To provide to the directors of the company the guidance they
require in discharging their duties, responsibilities and powers.
➢ To facilitate the convening of meetings and attend Board,
committee and general meetings and maintain the minutes of
these meetings.

Meetings of the Board are significant in the light of running of the

company more efficiently and effectively.
Companies Act, 2013, mandates a company to hold minimal number
of meetings of the Board for its proper functioning.
Board meetings are crucial for a company’s development as these
formal meetings are held to devise policies,drive the management,
strategize and evaluate the expectations of the stakeholders.
For board meetings to be effective they need to:
➢ have a purpose;
➢ members of the board must be provided with adequate notice
and appropriate materials in advance;
➢ be chaired effectively;
➢ follow proper meeting procedures and respect the time of
board members;
➢ have clear supporting documents such as an agenda, minutes
and other reports;
➢ have action taken reports;
➢ be documented with minutes.

Section 173 of the Act, provides that the first board meeting should
be held within thirty days of the date of incorporation. Thereafter
there shall be minimum of four board meetings every year and not
more than one hundred and twenty days shall intervene between
two consecutive Board meetings.
Further, in this context Secretarial Standard on Board Meetings (SS-
1) issued by ICSI clarifies that the Board shall meet at least once in
every calendar quarter, with a maximum interval of one hundred and
twenty days between any two consecutive Meetings of the Board,
such that at least four meetings are held in each calendar year.
Further, SS-1 states that the company shall hold first meeting of its
Board within thirty days of the date of incorporation. It shall be
sufficient if subsequent Meetings are held with a maximum interval
of one hundred and twenty days between any two consecutive
Meetings.
In case of one person company (OPC), small company, dormant
company and private company which is startup, at least one Board
meeting should be conducted in each half of the calendar year and
the gap betweentwo meetings should not be less than Ninety days.
However, this provision would not apply to a one person company in
which there is only one director on its Board.
In case of Section 8 Company, after MCA exemptions Notification
Dated 05.06.2015, the provision of Section 173(1) shall apply only to
the extent that the Board of Directors, of such companies shall hold
at least one meeting within every six calendar months.
Specified IFSC Public Company shall hold the first meeting of the
Board of Directors within sixty days of its incorporation and
thereafter hold at least one meeting of the Board of Directors in each
half of a calendar year.
Provided further that a Specified IFSC private company shall hold the
first meeting of the Board of Directors within sixty days of its
incorporation and thereafter hold at least one meeting of the Board
of Directors in each half of a calendar year.”. (Notification Dated
4.01.2017).
The board also works through committees. The committees have to
meet in accordance with the terms of reference of the committee as
per the Act.
GENERAL MEETINGS:-
A company may have many kinds of meetings; general meetings are
one among them. In very simple terms, a meeting of general body
may be called general meeting. General meeting comprises of all
general members of a recognized on that is company in our case.
A general meeting may be Annual General Meeting (AGM),
Extraordinary General Meeting (EGM) and class meetings.
A company secretary plays a critical role in preparation, convening,
holding and conducting a meeting
Annual general meeting
(1) A general meeting of every company to be called the “annual
general meeting” shall in addition to any other meeting be held once
in every calendar year and not more than 15 months after the
holding of the last preceding annual general meeting, but so long as
a company holds its first annual general meeting within 18 months of
its incorporation, it need not hold it in the year of its incorporation or
in the following year.
(2) Notwithstanding sub section (1), the Registrar may extend the
period of 15 months or 18 months referred to in that subsection,
notwithstanding that the period is so extended beyond the calendar
year– (a) upon an application by the company, if the registrar thinks
there are special reasons to do so;or (b) in respect of any class of
companies. A private company may, by resolution passed by all of
such members as, being entitled to do so, vote in person or, where
proxies are allowed, by proxy present at the meeting, dispense with
the holding of annual general meetings. (Section175A)
EXTRAORDINARY GENERAL MEETING
There are so many matters relating to the business of a company,
which requires approval or consent of members in general meeting.
It is always not possible for consideration of such matters to wait
until the next annual general meeting. The articles of association of
the company of the company make provisions for convening general
meeting other than the annual general meeting. All general meetings
other than annual general meeting are called extra-ordinary general
meetings (EGM). According to SS-2 items of business other than
ordinary business may be considered at an EGM or by means of a
postal ballot, if thought fit by the Board. This means that all the
transactions dealt upon in an EGM shall be special business.
Class Meetings:-
Class meetings are meeting of shareholders, holding a particular class
of share which is held to pass resolution which will bind only the
members of the class concerned. Only members of the class
concerned may attend and vote at meeting. Usually the rules to
voting apply to class meetings as they govern voting at general
meetings.

Types of Resolution
Section 114 relates to Ordinary and Special Resolution. Ordinary
Resolution A resolution shall be an ordinary resolution if the notice
required under this Act has been duly given and it is required to be
passed by the votes cast, whether on a show of hands, or
electronically or on a poll, as the case may be, in favour of the
resolution, including the casting vote, if any, of the Chairman, by
members who, being entitled so to do, vote in person, or where
proxies are allowed, by proxy or by postal ballot, exceed the votes, if
any, cast against the resolution by members, so entitled and voting.
Special Resolution A resolution shall be a special resolution when: (a)
the intention to propose the resolution as a special resolution has
been duly specified in the notice calling the general meeting or other
intimation given to the members of the resolution; (b) the notice
required under this Act has been duly given; and (c) the votes cast in
favour of the resolution, whether on a show of hands, or
electronically or on a poll, as the case may be, by members who,
being entitled so to do, vote in person or by proxy or by postal ballot,
are required to be not less than three times the number of the votes,
if any, cast against the resolution by members so entitled and voting.
If the notice convening the meeting (where at special business will
be transacted) does not state the nature of the special business, the
meeting would be deemed to have been convened irregularly.
Consequently, that special business cannot be dealt with at the
meeting.

Virtual Meetings
The new Act permits for meeting of Board of directors through video
conferencing or audio conferencing.
E-voting at a general meeting has now been practiced and well
recognized by the law
Corporate Social Responsibility (CSR)
Another important topic which needs to be covered in
Administration of Company is Corporate Social Responsibility (CSR)
CSR includes the participation of companies in social activities of the
society in which they function and conduct their business. As the
companies draw resources from the society to run their business, in
turn they have to pay something to the society.
Corporate Social Responsibility is the continuing commitment by
business to behave ethically and
contribute to economic development while improving the quality of
life of the workforce and their families as well as of the local
community and society at large” -Lord Holme and Richard Watts
The companies’ act 2013 has given a legal status to this activity u/s
135 and as provided mandatory provisions under this section to
discharge CSR activities by the companies.
As per sec. 135(1) of the act, companies with a specified net worth
Every company having net worth of rupees five hundred crore or
more, or turnover of rupees one thousand crore or more or a net
profit of
rupees five crore or more during any financial year, will have to
comply with CSR provisions. That they have to mandatorily spend 2%
of their average net profit, towards specified CSR activities. (average
of last 3 years).
CSR Policy (Sec 135(4)):
CSR policy to be formed by the CSR committee and to be sent to
board for approval
1. A list of CSR initiatives to be taken up by the company.(with
Schedule VII)
2. Modalities of execution of such projects due to be specified.
3. Implementation schedules are to be stated
4. Monitoring process of such projects or programmes has to be
given
5. Reviewing of CSR policy time to time
6. Placing the CSR policy on the website of the company.

The board should ensure that the company spends, in every financial
year, at least two percent of the average net profit of the company
made during the 3 immediately proceeding financial years.

If company is unable to spend the stipulated amount (2% of average

profit)this should be stated in director’s report to be submitted to
auditors along with financial reports. The reason for not spending
the earmarked money should also be stated in the report.

Points to remember
a. Any contribution to political parties is disqualified.
b. Any project which benefits only the employees or their families
shall be disqualified.
c. Any activity undertaken during the normal course of its business is
disqualified.

CONCLUSION :-

As soon as a company is incorporated, whether public or private

limited, it becomes a juristic person. It has its own name and
property. It is a separate legal entity distinct from its members who
incorporate it. A company does its business through its Directors.
The directors are also called the ears, eyes and hands of the
company. The directors of a company are in fiduciary position. On
the one hand they run the company as its owner (Policy maker) and
on the other hand they are merely a servant of the company and
take remuneration. They are entitled to do any work on behalf of the
company, what a company can do in ordinary course of business.
There are certain items for which Board is not empowered to do.
Such items are done by the company in general meeting. Any action
done by the directors in the ordinary course of business are treated
as done by the Company. But wrong done by the Directors (criminal
action ) are the responsibility of the Directors and not the
responsibility of the Company.