What is a company?
Lord Justice Lindley – “A company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising therefrom. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it pertains are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted.”
In other words a company is a legal entity (Salomon v/s Salomon) that is separate and distinct from its owners, known as shareholders or members. It is created under the law to engage in various business activities, enter into contracts, and own assets. Companies are a common form of business organization, and they play a crucial role in the global economy. There are different types of companies, each with its own characteristics and legal structures.
What are the different type of companies?
What are key characteristics and features of a company?
Legal Entity:
A company is considered a legal entity, meaning it has legal rights and obligations separate from its owners. It can sue and be sued, enter into contracts, and own property. This corporative personality feature safeguards the owners from any kind of liability.
Artificial Person: As companies are created by law and are destroyed by law, but with all the rights of legal person, they are considered to be artificial person.
Limited Liability:
One of the significant advantages of a company is the concept of limited liability. Shareholders' liability is limited to the amount invested in the company, and their personal assets are generally protected from the company's debts and liabilities.
Ownership by Shareholders:
Ownership of a company is represented by shares, and individuals or entities that own these shares are shareholders. Shareholders may participate in the company's profits through dividends. Shareholders ownership is limited to the shares only. As per sec 44 of the companies act 2013, all the shares, debentures, and any other kind of interest of the shareholders in the company is 100% transferable.
Management by Board of Directors:
Companies are managed by a board of directors, which is elected by the shareholders. The board appoints officers, such as a CEO, who are responsible for the day-to-day operations.
Registration and Regulation:
Companies are required to register with the relevant government authorities, and their formation and operations are governed by laws and regulations. Compliance with these regulations is crucial. Public companies are required to be registered with 7 members at least, private companies with two members and as per sec 3 of the Indian companies act 2013 one person company with one person.
Perpetual Succession:
A company has perpetual succession, meaning it can continue to exist even if there are changes in ownership or management. The death or withdrawal of a shareholder does not affect the company's continuity.
Separation of Ownership and Control:
In larger companies, there is often a separation between ownership (shareholders) and control (management). Shareholders may not be directly involved in day-to-day operations.
Issuance of Securities:
Companies can issue various securities, such as stocks and bonds, to raise capital for expansion, projects, or other financial needs.
Financial Reporting:
Companies are required to maintain proper financial records and regularly publish financial statements. This transparency helps stakeholders make informed decisions.
Common Seal: Common seal are the evidence that the sealed agreements are signed on the behalf of the company, in whose name seal is made.
Companies play a crucial role in economic development, job creation, and innovation. The legal structure of a company provides a framework for governance, accountability, and the protection of stakeholders' interests. The specific regulations and requirements for forming and operating a company vary by jurisdiction.
How to register a name for the company in India?
Registering a name for a company in India involves checking the availability of the desired name and obtaining approval from the Ministry of Corporate Affairs (MCA). Here are the steps to register a name for a company in India:
Step 1:. Choose a Unique Name:
Select a unique and meaningful name for your company. Ensure that the name aligns with the business activities and follows the guidelines set by the MCA.
Step 2: Check Name Availability:
Use the MCA portal's "RUN (Reserve Unique Name)" service to check the availability of the chosen business name.
Visit the MCA website: http://www.mca.gov.in/
Step 3: Access the RUN Service:
On the MCA portal, go to the "MCA Services" section.
Under the "RUN Services" tab, choose the "RUN - Reserve Unique Name" option.
Step 4:Create a User Account:
If you don't have a user account on the MCA portal, create one by providing the required details.
Step 5:Submit Name Reservation Application (RUN Form):
Fill out the RUN form with the following details:
Proposed company name (up to two choices).
Type of company (private limited, public limited, etc.).
Main business activities.
Any other relevant information.
Step 6: Pay Fees (if applicable):
Pay the prescribed fees for submitting the name reservation application. The fees vary based on the type of company and the number of name choices.
Step 7:Await Approval:
After submission, the MCA will review the name reservation application. The approval process typically takes a few hours.
Step 8: Check Status:
Check the status of your name reservation application on the MCA portal. Once approved, the status will indicate "Approved."
Step 9: Incorporate the Company:
Once the name is approved, proceed with the incorporation process. File the necessary documents, including the Memorandum of Association (MOA) and Articles of Association (AOA), with the MCA.
Note:
The name reservation process can be done through the MCA portal using the online RUN service.
It's advisable to provide alternative names in case the first choice is not available or approved.
The approval is subject to the guidelines and rules set by the MCA. Names that are identical or too similar to existing companies may be rejected.
The name reservation process is an essential step in registering a company in India. It's important to adhere to the MCA guidelines and ensure that the chosen name complies with legal requirements. Engaging with professionals such as company secretaries or chartered accountants can provide valuable assistance in navigating the name reservation process and ensuring compliance with regulations.
What is the Process to Register a Private Company?
The process to register a company in India involves several steps and compliance with the Companies Act, 2013. The specific steps can vary based on the type of company (private limited, public limited, one-person company, etc.). Here is a general overview of the process to register a private limited company in India:
Step 1:Obtain Digital Signature Certificates (DSC):
First of all, directors must obtain Digital Signature Certificates (DSC) for online filing. DSC is used to sign the electronic incorporation documents.
Step 2:Obtain Director Identification Numbers (DIN):
Directors must obtain Director Identification Numbers (DIN) from the Ministry of Corporate Affairs (MCA). DIN is a unique identification number for directors.
Step 3:Name Reservation:
a. Choose a unique name for the company and check its availability on the MCA portal using the "RUN (Reserve Unique Name)" service.
b. Reserve the name by filing the required application and paying the prescribed fees.
Step 4: Draft Memorandum of Association (MOA) and Articles of Association (AOA):
Draft the MOA and AOA, which define the company's objectives, rules, and regulations.
Step 5: File Incorporation Documents:
a. Prepare the necessary documents, including the MOA, AOA, and a declaration from the directors.
b. File the incorporation documents (SPICe Form) on the MCA portal.
Step 6:. Pay Registration Fees:
Pay the prescribed registration fees based on the authorized capital of the company.
Step 7:. Certificate of Incorporation (COI):
a. If the Registrar of Companies (RoC) approves the application, they will issue a Certificate of Incorporation (COI).
b. The COI confirms the existence of the company and includes the company's Corporate Identification Number (CIN).
Step 8: Apply for PAN and TAN:
Apply for the company's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
Step 9: Register for Goods and Services Tax (GST):
Depending on the nature of the business, register for GST through the GST portal.
Step 10: Open a Bank Account: Open a business account in the name of busineess. As from now onwards you will have to maintain the finance health of your registered private company.
Step 11: Compliance with Other Laws: Get licenses and permission from the authoritative bodies to run the company smoothly.
Step 13: Issue Share Certificates: Depending on the nature of the company (private), issue the shares.
Note: The registration process has been streamlined with the introduction of the SPICe (Simplified Proforma for Incorporating Company Electronically) form on the MCA portal. Engaging professionals, such as chartered accountants or company secretaries, can facilitate the registration process and ensure compliance. The steps outlined here are specific to a private limited company. The steps for other types of companies may vary.
Reference:
Comments