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How to incorporate a private limited company in India?

Incorporation denotes providing recognition in the eyes of law. A joint company does not enjoy the status of a legal entity until and unless it is incorporated. Before proceeding for registration the promoter give emphasis on the following aspects.

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i. The promoter has to ensure from the Registrar whether the proposed name is available or not.

ii. Selection of other name will be considered when the proposed name is not available.

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iii. He has to obtain a letter of intent or license from appropriate authority if the nature of business comes under the Industries (Development and Regulation) Act, 1951.

iv. Selection will be made with regard to underwriter, banker solicitors and signatories of memorandum of Association and Articles of Association.

v. He has to prepare the memorandum and Articles of Association.

After compliance of above mentioned steps, the promoter will prepare the following documents and submit with the Registrar of company.

1. Memorandum:

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It is regarded as the fundamental document which defines the objective of the company. It is signed by at least two persons in case of private company and seven persons in case of public company.

2. Articles of Association:

It is an important document which contains rules and regulations for internal management of company. It should be duly stamped and signed by the signatories of the memorandum of Association.

A public limited company do not submit Articles of Association because it adopts Table-A of companies Act.

3. The name and address of the registered office of the company.

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4. A statement of nominal capital of the company, when it exceeds Rs. 5 lakhs, a certificate from the central government permitting such issue is submitted.

5. A list of proposed directors, their names and addresses and occupations.

6. The contract with managing director, secretaries and the treasurers.

7. A statutory declaration by an advocate with regard to compliance of legal requirements of company Act.

The above document with necessary fees, stamp duty and registration fee is submitted with the registrar. If the registrar is satisfied, he may issue one certificate called certificate of companies can start their business.

However, public limited company can start their business after issuing of prospectus or statement in lieu of prospectus. On receipt of prospectus, another certificate called certificate of commencement is issued.

Types of Company:

Joint stock companies are classified into different types on the basis of different angles and considerations. The followings are some of major broad divisions of company:

  • On the basis of incorporation.
  • Basis of nature of liability.
  • Point of view of nationality.
  • Basis of transferability of shares.
  • Basis of ownership.

1. Basis of Incorporation:

On the basis of incorporation companies are classified into:

(a) Chartered company which is formed by the charter or special permission of king.

(b) Statutory company formed by the special Act of state legislature or the parliament.

(c) Registered company which is registered and incorporated under the Indian Companies Act, 1956.

2. Basis of Liability:

On the basis of liability of the members, companies are broadly classified into:

(a) Company with unlimited liability where liability of shareholder is unlimited.

(b) Company with liability limited’s by guarantee where the liability is limited up to a guaranteed amount.

(c) Liability limited by shares where the liability of the shareholder is limited up to face value of share.

3. Basis of nationality:

From nationality point of vies, there are broadly two types of companies called:

(a) National company formed and operated within the national boundary of a country.

(b) Multi-national company which operates beyond the country where registration is made.

4. Basis of Transferability:

On the basis of transferability of shares, the companies are broadly classified into:

(a) Private company where provisions of articles of association restrict on the right to transfer shares. Its membership is restricted to a maximum of fifty excluding the employees and minimum two persons are required.

(b) Public company where there is no restriction on transferability of shares. Here minimum number is restricted to seven and maximum is unlimited.

5. Basis of Ownership:

On the basis of ownership the followings are broad divisions of company:

(a) Government Company where more than 51 % of paid-up share capital is held by the gover5nment.

(b) Holding company which holds majority of shares of another company.

(c) Subsidiary company whose shares are held by holding company.

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