INCORPORATION OF A PRIVATE LTD. COMPANY AS PER COMPANIES ACT 2013

INCORPORATION OF A PRIVATE LTD. COMPANY AS PER COMPANIES ACT 2013

Obtain director identification number (DIN)

Obtain director identification number (DIN) online from the Ministry of Corporate Affairs portal. The applicant is required to fill out and submit Form DIN-1 to obtain the provisional DIN. This form is available online on the Ministry of Corporate Affairs 21st Century (MCA 21) portal (www.mca.gov.in). The provisional DIN is immediately issued. The applicant is also required to pay an application fee of INR 100, which can be done online. The printed application form must then be signed and sent for approval to the Ministry of Corporate Affairs by courier, along with proof of payment (Service Request Number [SRN] of the fee paid online), proof of identity, and proof of residence within 60 days of the date of generation of the provisional DIN. On receipt of the DIN application form and attached supporting documents, the concerned authority verifies all the documents and, upon approval, issues a permanent DIN. The status of the DIN approval process can be checked online on the MCA portal. The provisional DIN itself is approved as the permanent DIN.

Obtain Digital Signature Certificate

Obtain digital signature certificate online from private agency authorized by the Ministry of Corporate Affairs.

To use the new electronic filing system under MCA 21, the applicant must obtain a Class-II Digital Signature Certificate (DSC). The DSC can be obtained from six private agencies authorized by the Ministry of Corporate Affairs (MCA 21). Each certifying agency has its own fee structure, ranging from INR 400 to INR 2,600, depending upon various factors such as validity period, delivery time, and cost structure. Company directors submit the prescribed application form along with proof of identity and address. After the DSC is obtained, it must be registered on the MCA portal before it can be affixed on any e-form. Once the Director has obtained the provisional DIN online, DSC may be obtained while the provisional DIN is being registered.

1. Reservation of Name

Application for reservation of name shall be filed in Form No INC.1. In this application, optional names can be quoted. While finalizing these names, the following issues needs to beconsidered.
Name should contain three parts like;

a. First Part – Prefix (a unique name or brand name e.g. Reliance, Tata, Mahindra etc)
b. Second Part – Activity (business activity e.g. Industries, Motors, Chemicals etc)
c. Third Part – Status (Private Limited)

2. Application of Incorporation

Once the name is approved by ROC, an application for incorporation shall be filed with RoC in Form No INC-7

Following documents or details shall be submitted or provided along with Form No INC-7

a. Memorandum and Article of Association (please refer Note 1 for details)

b. Declaration from Practicing Professional (CS or CA or CMA) in Form INC-8 stating that all the requirement of the act and rules has been complied with

c. An affidavit from each subscriber and from each First director, if any, in Form No INC 9

d. Address for correspondence till its registered office is established

e. Particulars of subscribers along with their proof of identity (please refer Note 2 for details)

f. Particulars of First Director, if any, alongwith their proof of identity (please refer Note 2 for details)

g. Particulars of interest of First Directors in other firms or body corporate alongwith their Consent to as Director shall be in Form No DIR 12

h. Specimen signature and photo duly verified by banker or notary in Form No INC-10

Note 1:Memorandum and Article of Association MoA and AoA shall be signed by each subscriber who shall add his name, address, description and occupation in presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, description and occupation. (Formats of MOA and AOA has been given in Schedule I of the Act)  Note 2: Following particulars to be given for subscriber and first directors Details – Name and recent photo affixed and scan with AOA and MOA – Father’s/Mother’s Name – Nationality – Date of Birth – Place of Birth – Education Qualification – Occupation     PAN Number – Permanent residential address – email id – phone number Proof of Identity Indian National: PAN Card (mandatory) and any one of (Voters’ Id, Passport, Driving License, Aadhar Card Foreign National: Passport Proof of residence Bank Statement/Electricity Telephone/Mobile Bill (shall not be more than Two months old)

3. Certificate of Incorporation

The RoC on the basis of Documents and information filled by applicant issue a Certificate of Incorporation and it shall allot Corporate Identity Number (CIN)

4. Commencement of Business

Company having share capital shall not commence any business or exercise any borrowing powers unless Declaration shall be filed in Form No INC 21 by a Director and the content of the form shall be verified by Practicing Professional (CS/CA/CWA) stating that every subscriber has paid the value of shares agreed to be taken and paid up capital is not less than statutory limit; and

Following documents needs to be attached with the Form No INC 22

Registered document of the title in name of Company; or

Notarised copy of Lease/rent agreement along with rent paid receipt (Rent receipt shall not be older than 1 month); or

Authorisation from Owner to Company along with proof of ownership for use of premises as Registered Office (NOC can be submitted for this); and

Proof of evidence of any utility service like gas, electricity, telephone etc. in the name of owner (not older than 2 months)

COMPLETE 2013 COMPANIES ACT LIST OF SECTIONS AND THEIR NAMES

COMPLETE 2013 COMPANIES ACT LIST OF SECTIONS AND THEIR NAMES
Section 1- Short title, extent, commencement and application
Section 2- Definitions.
Section 3- Formation of company.
Section 4- Memorandum.
Section 5- Articles.
Section 6- Act to override memorandum, articles, etc.
Section 7- Incorporation of Company.
Section 8- Formation of companies with charitable objects, etc.
Section 9- Effect of registration.
Section 10- Effect of memorandum and articles.
Section 11- Commencement of business, etc
Section 12- Registered office of company.
Section 13- Alteration of memorandum.
Section 14- Alteration of articles.
Section 15- Alteration of memorandum or articles to be noted in every copy.
Section 16- Rectification of name of company.
Section 17- Copies of memorandum,articles, etc., to be given to members.
Section 18- Conversion of companies already registered.
Section 19- Subsidiary company not to hold shares in its holding company.
Section 20- Service of documents
Section 21- Authentication of documents, proceedings and contracts.
Section 22- Execution of bills of exchange, etc.
Section 23- Public offer and private placement.
Section 24- Power of Securities and Exchange Board to regulate issue and transfer of securities, etc
Section 25- Document containing offer of securities for sale to be deemed prospectus.
Section 26- Matters to be stated in prospectus.
Section 27- Variation in terms of contract or objects in prospectus.
Section 28- Offer of sale of shares by certain members of company.
Section 29- Public offer of securities to be in dematerialised form.
Section 30- Advertisement of prospectus.
Section 31- Shelf prospectus.
Section 32- Red herring prospectus.
Section 33- Issue of application forms for securities.
Section 34- Criminal liability for mis- statements in prospectus.
Section 35- Civil liability for mis-statements in prospectus.
Section 36- Punishment for fraudulently inducing persons to invest money.
Section 37- Action by affected persons
Section 38- Punishment for personation for acquisition, etc., of securities.
Section 39- Allotment of securities by company.
Section 40- Securities to be dealt with in stock exchanges.
Section 41- Global Depository Receipt.
Section 42- Offer or invitation for subscription of securities on private placement.
Section 43- Kinds of share capital.
Section 44- Nature of shares or debentures.
Section 45- Numbering of shares.
Section 46- Certificate of shares.
Section 47- Voting rights.
Section 49- Calls on shares of same class to be made on uniform basis.
Section 50- Company to accept unpaid share capital, although not called up.
Section 51- Payment of dividend in proportion to amount paid-up.
Section 52- Application of premiums received on issue of shares
Section 53- Prohibition on issue of shares at discount.
Section 54- Issue of sweat equity shares.
Section 55- Issue and redemption of preference shares.
Section 56- Transfer and transmission of securities.
Section 57- Punishment for personation ofshareholder.
Section 58- Refusal of registration and appeal against refusal.
Section 59- Rectification of register of members.
Section 60- Publication of authorised, subscribed and paid-up capital.
Section 61- Power of limited company to alter its share capital.
Section 62- Further issue of share capital.
Section 63- Issue of bonus shares.
Section 64- Notice to be given to Registrar for alteration of share capital.
Section 65- Unlimited company to provide for reserve share capital on conversion into limited company
Section 67- Restrictions on purchase by company or giving of loans by it for purchase of its shares.
Section 68- Power of company to purchase its own securities.
Section 69- Transfer of certain sums to capital redemption reserve account.
Section 70- Prohibition for buy-back in certain circumstances.
Section 71- Debentures.
Section 72- Power to nominate
Section 73- Prohibition on acceptance of deposits from public.
Section 74- Repayment of deposits, etc., accepted before commencement of this Act. Section 76- Acceptance of deposits from public by certain companies.
Section 77- Duty to register charges, etc
Section 78- Application for registration of charge.
Section 79- Section 77 to apply in certain matters.
Section 80- Date of notice of charge.
Section 81- Register of charges to be kept by Registrar.
Section 82- Company to report satisfaction of charge.
Section 83- Power of Registrar to make entries of satisfaction and release in absence of intimation from company.
Section 84- Intimation of appointment of receiver or manager.
Section 85- Companys register of charges
Section 86- Punishment for contravention.
Section 87- Rectification by Central Government in register of charges.
Section 88- Register of members, etc.
Section 89- Declaration in respect of beneficial interest in any share.
Section 90- Investigation of beneficial ownership of shares in certain cases
Section 91- Power to close register of members or debenture holders or other security holders.
Section 92- Annual return.
Section 93- Return to be filed with Registrar in case promoters' stake changes
Section 94- Place of keeping and inspection of registers, returns, etc.
Section 95- Registers, etc., to be evidence.
Section 96- Annual general meeting.
Section 100- Calling of extraordinary general meeting.
Section 101- Notice of meeting
Section 102- Statement to be annexed to notice.
Section 103- Quorum for meetings.
Section 104- Chairman of meetings.
Section 105- Proxies.
Section 106- Restriction on voting rights.
Section 107- Voting by show of hands.
Section 108- Voting through electronic means.
Section 109- Demand for poll.
Section 110- Postal ballot.
Section 111- Circulation of members’ resolution.
Section 112- Representation of President and Governors in meetings.
Section 113- Representation of corporations at meeting of companies and of creditors. Section 114- Ordinary and special resolutions.
Section 115- Resolutions requiring special notice.
Section 116- Resolutions passed at adjourned meeting.
Section 117- Resolutions and agreements to be filed.
Section 118- Minutes of proceedings of general meeting, meeting of Board of directors and other meeting and resolutions passed by postal ballot.
Section 119- Inspection of minute-book of general meeting.
Section 120- Maintenance and inspection of documents in electronic form.
Section 121- Report on annual general meeting.
Section 122- Applicability of this Chapter to One Person Company.
Section 123- Declaration of dividend.
Section 126- Right to dividend, rights shares and bonus shares to be held in abeyance pending registration of transfer of shares.
Section 127- Punishment for failure to distribute dividends.
Section 128- Books of account, etc., to be kept by company.
Section 129- Financial statement.
Section 133- Central Government to prescribe accounting standards.
Section 134- Financial Statement, Boards report, etc.
Section 135- Corporate Social Responsibility.
Section 136- Right of member to copies of audited financial statement.
Section 137- Copy of financial statement to be filed with Registrar.
Section 138- Internal Audit.
Section 139- Appointment of auditors.
Section 140- Removal, resignation of auditor and giving of special notice.
Section 141- Eligibility, qualifications and disqualifications of auditors.
Section 142- Remuneration of auditors.
Section 143- Powers and duties of auditors and auditing standards.
Section 144- Auditor not to render certain services.
Section 145- Auditor to sign audit reports, etc.
Section 146- Auditors to attend general meeting.
Section 147- Punishment for contravention.
Section 148- Central Government to specify audit of items of cost in respect of certain companies.
Section 149- Company to have Board of directors.
Section 150- Manner of selection of independent directors and maintenance of data bank of independent directors.
Section 151- Appointment of director elected by small shareholders.
Section 152- Appointment of directors.
Section 153 - Application for allotment of Director Identification Number
Section 154 - Allotment of Director Identification Number
Section 155 - Prohibition to obtain more than one Director Identification Number
Section 156- Director to intimate Director Identification Number.
Section 157- Company to inform Director Identification Number to Registrar.
Section 158- Obligation to indicate Director Identification Number.
Section 159- Punishment for contravention.
Section 160- Right of persons other than retiring directors to stand for directorship.
Section 161- Appointment of additional director, alternate director and nominee director
Section 162- Appointment of directors to be voted individually.
Section 163- Option to adopt principle of proportional representation for appointment of directors
Section 164- Disqualifications for appointment of director.
Section 165- Number of directorships.
Section 166- Duties of directors.
Section 167- Vacation of office of director.
Section 168- Resignation of director.
Section 169- Removal of directors.
Section 170- Register of directors and key managerial personnel and their shareholding Section 171- Members right to inspect.
Section 172- Punishment.
Section 173- Meetings of Board
Section 174- Quorum for meetings of Board.
Section 175- Passing of resolution by circulation.
Section 176- Defects in appointment of directors not to invalidate actions taken.
Section 177- Audit committee.
Section 178- Nomination and Remuneration Committee and Stakeholders Relationship Cocommittee
Section 179- Powers of Board.
Section 180- Restrictions on powers of Board.
Section 181- Company to contribute to bona fide and charitable funds, etc.
Section 182- Prohibitions and restrictions regarding political contributions.
Section 183- Power of Board and other persons to make contributions to national defence fund, etc.
Section 184- Disclosure of interest by director.
Section 185- Loan to directors, etc.
Section 186- Loan and investment by company.
Section 187- Investments of company to be held in its own name.
Section 188- Related party transactions.
Section 189- Register of contracts or arrangements in which directors are interested. Section 190- Contract of employment with managing or whole-time directors.
Section 191- Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares.
Section 192- Restriction on non-cash transactions involving directors.
Section 193- Contract by One Person Company.
Section 194- Prohibition on forward dealings in securities of company by director or. key managerial personnel.
Section 195- Prohibition on insider trading of securities.
Section 196- Appointment of managing director, whole-time director or manager.
Section 197- Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits
Section 198- Calculation of profits.
Section 199- Recovery of Remuneration in certain cases.
Section 200- Central Government or company to fix a limit with regard to remuneration.
Section 201- Forms of, and procedure in relation to, certain applications.
Section 202- Compensation for loss of office of managing or whole-time director or manager.
Section 203- Appointment of key managerial personnel.
Section 204- Secretarial Audit for bigger companies.
Section 205- Functions of the Company Secretary.
Section 206- Power to call for information, inspect books and conduct inquiries.
Section 207- Conduct of inspection and inquiry.
Section 208- Report on inspection made.
Section 209- Search and seizure.
Section 210- Investigation into affairs of company.
Section 211- Establishment of Serious Fraud Investigation Office.
Section 212- Investigation into affairs of company by Serious Fraud Investigation Office.
Section 214- Security for payment of costs and expenses of investigation.
Section 215- Firm, body corporate or association not to be appointed as inspector.
Section 216- Investigation of ownership of company.
Section 217- Procedure, powers, etc., of inspectors.
Section 219- Power of inspectors to conduct investigation into affairs of related companies, etc
Section 220- Seizure of documents by inspector.
Section 223- Inspectors report.
Section 224- Actions to be taken in pursuance of inspectors report.
Section 225- Expenses of investigation.
Section 228- Investigation, etc., of foreign companies.
Section 229- Penalty for furnishing false statement, mutilation, destruction of documents.
Section 366- Companies capable of being registered.
Section 367- Certificate of registration of existing companies.
Section 368- Vesting of property on registration.
Section 369- Saving for existing liabilities.
Section 370- Continuation of pending legal proceedings.
Section 371- Effect of registration under Part.
Section 374- Obligations of companies registering under this Part.
Section 379- Application of Act to foreign companies.
Section 380- Documents, etc., to be delivered to Registrar by foreign companies.
Section 381- Accounts of foreign company.
Section 382- Display of name, etc., of foreign company.
Section 383- Service on foreign company.
Section 384- Debentures, annual return, registration of charges, books of account and their inspection.
Section 385- Fee for registration of documents.
Section 386- Interpretation.
Section 387- Dating of prospectus and particulars to be contained therein.
Section 388- Provisions as to experts consent and allotment.
Section 389- Registration of prospectus.
Section 390- Offer of Indian Depository Receipts.
Section 391- Application of sections 34 to 36 and Chapter XX.
Section 392- Punishment for contravention.
Section 393- Companys failure to comply with provisions of this Chapter not to affect validity of contracts, etc.
Section 394- Annual reports on Government companies.
Section 395- Annual reports where one or more State Governments are members of companies.
Section 396- Registration offices.
Section 397- Admissibility of certain documents as evidence
Section 398- Provisions relating to filing of applications, documents, inspection, etc., in electronic form.
Section 399- Inspection, production and evidence of documents kept by Registrar.
Section 400- Electronic form to be exclusive, alternative or in addition to physical form.
Section 401- Provision of value added services through electronic form.
Section 402- Application of provisions of Information Technology Act, 2000.
Section 403- Fee for filing, etc.
Section 404- Fees, etc., to be credited into public account.
Section 405- Power of Central Government to direct companies to furnish information or statistics.
Section 406- Power to modify Act in its application to Nidhis.
Section 407- Definitions.
Section 408- Constitution of National Company Law Tribunal.
Section 409- Qualification of President and Members of Tribunal.
Section 410- Constitution of Appellate Tribunal.
Section 411- Qualifications of Chairperson and Members of Appellate Tribunal.
Section 412- Selection of Members of Tribunal and Appellate Tribunal.
Section 413- Term of office of President, Chairperson and other Members.
Section 414- Salary, allowances and other terms and conditions of service of Members.
Section 439- Offences to be non-cognizable.
Section 442- Mediation and Conciliation penal.
Section 443- Power of Central Government to appoint company prosecutors.
Section 443- Power of Central Government to appoint company prosecutors.
Section 445- Compensation for accusation without reasonable cause.
Section 446- Application of fines
Section 447- Punishment for fraud.
Section 448- Punishment for false statements
Section 449- Punishment for false evidence.
Section 450- Punishment where no specific penalty or punishment is provided.
Section 451- Punishment in case of repeated default.
Section 452- Punishment for wrongful withholding of property.
Section 453- Punishment for improper use of "Limited" or "Private Limited".
Section 454- Adjudication of penalties.
Section 455- Dormant company.
Section 456- Protection of action taken in good faith.
Section 457- Non-disclosure of information in certain cases.
Section 458- Delegation by Central Government of its powers and functions.
Section 459- Powers of Central Government or Tribunal to accord approval, etc., subject to conditions and to prescribe fees on applications.
Section 460- Condonation of delay in certain cases.
Section 461- Annual report by Central Government
Section 462- Power to exempt a class or classes of companies from provisions of this Act.
Section 463- Power of court to grant relief in certain cases.
Section 464- Prohibition of association or partnership of persons exceeding certain number
Section 467- Power of Central Government to amend Schedules.
Section 468- Power of Central Government to make rules relating to winding up.
Section 469- Power of Central Government  to make rules.
Section 470- Power to remove difficulties

Liability of Independent Directors

Liability of Independent Directors under following Acts:


1. Negotiable Instruments Act

For fastening of criminal liability under the Negotiable Instruments Act, there is no presumption that every Director was aware of the transaction. The Act does not make all the Directors liable for the offence. The criminal liability can only be fastened under the following circumstances:

 Director should be in charge of AND be responsible to the company for the conduct of the business of the company.
 Not responsible if he proves that the offence was committed without his knowledge OR that he had exercised all due diligence to prevent the commission of the offence.


2. Labour Laws viz. Factories Act, Industrial Disputes Act, Provident Fund Act, Payment of Gratuity Act

An offence committed by a company under the various labour legislations (specifically in case of Employees Provident Funds, Payment of Gratuity Act, 1972 and Miscellaneous Provisions Act, 1952 and Factories Act, 1948) is attributed to the persons who were responsible for and had control over the affairs of the company. Hence, Directors would be personally liable for offences committed by a company under the relevant labour legislations. However, this liability is not one imposed on all Directors uniformly; it is only imposed on such Directors who are in overall control of the affairs of the company (this implies control over the day-today affairs of the company). Those Directors who are not in overall charge of the company, but are only in control of certain aspects; or are aware of the policy of the company, but are not in charge of it, would not be held liable.

3. Companies Act
One of the key concepts of the Companies Act is the meaning of the term “officer who is in default.” Under the act, liability for default by a company has been imposed on an officer who is in default. By virtue of their positions in the company, the managing director, the whole-time director, and the company secretary directly fall within the scope of this term. Under the 1956 Act, certain key employees such as the chief executive officer and chief financial officer did not directly come within the ambit of the term, which raised serious concerns because these personnel were viewed as key officials in any company. The 2013 Act corrects this anomaly and significantly expands the scope of the expression “officer in default.” The term also includes the following:

• any individual who, under the superintendence, control, and direction of the board of directors, exercises the management of the whole, or substantially the whole, of the affairs of a company;
• any person on whose advice, directions, or instructions the board of  directors is accustomed to act, other than persons giving advice in a professional capacity; and
• every director aware of wrongdoing by virtue of knowledge of or participation in proceedings of the board without objection

However, Companies Act, 2013 has sought to balance wide nature of the obligations, functions and duties imposed on an Independent Director. The Act restricts and limits the liability of Independent Directors to the matters which are directly relatable to them. Section 149 (12) limits the liability of an Independent Directors only in respect of acts of omission or commission by a company which had occurred with his knowledge, attributable through board processes, and with his consent or connivance or where he had not acted diligently.

                 Article on section 185

Section 185

Applicability:This section applies to public and private company both except to a private company;

• in whose no other body corporate has invested any money.
• if the borrowings of such company from banks or financial institutions or any body corporate is less than twice its paid up share capital or Rs.50 crores whichever is lower;
• and such a company is not in default in repayment of such borrowing subsisting at the time of making transactions under this section.

Scope:This section provides that no company shall:

• advance any loan;
• any loan represented by a book debt;or
• give any gurantee;or
• provide any security in connection with any loan taken to any director of the company or such other person in whom such director is interested.

Exception:

1. This section does not apply when loan is given to a managing or whole time director:

•  as a part of the conditions of service extended by the company to all its employees;
• pursuant to any scheme approved by the members by a special resolution;

      2. A company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve bank of India.

    

      3.any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or 

      4.any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:

 Provided that the loans made under clauses (3) and (4) are utilised by the subsidiary company for its principal business activities.".

Penalty:  If any loan is advanced or a guarantee or security is given or provided in contravention of the provisions of sub-section (1):

•  the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees;and
•  the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both.