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Incorporating Your Company under Companies Act 2013: A Checklist of Things to Take Care of in India

Starting a business in India can be a daunting task, but incorporating your company under the Companies Act 2013 can be made easy if you have a clear checklist of things to take care of. The Companies Act 2013 lays out the framework for the formation, operation, and management of companies in India. It is important to follow the laws and guidelines set by the government to ensure a smooth incorporation process and avoid any legal complications in the future. In this blog post, we have compiled a list of things you need to take care of before and during the process of incorporating your company under the Companies Act 2013. From choosing the right type of company to registering for taxes, we cover everything you need to know to ensure a hassle-free and successful incorporation process.

1. Introduction to incorporation under Companies Act 2013

The Companies Act 2013 is the primary legislation governing the incorporation and functioning of companies in India. It replaced the Companies Act 1956, which was the previous legislation governing companies in India. The new Act has made significant changes to the way companies are registered and regulated in India, making the process more streamlined and efficient for businesses. Under the Companies Act 2013, companies are required to comply with a set of legal and regulatory requirements, which ensure that their operations are conducted in a transparent and accountable manner. Incorporating a company under the new Act involves several steps and procedures, which must be followed carefully to ensure compliance with the law. This checklist provides an overview of the key things that businesses need to take care of when incorporating a company under the Companies Act 2013 and will help entrepreneurs and businesses understand the process better.

2. Types of companies that can be incorporated under Companies Act 2013

Under the Companies Act 2013, there are several types of companies that can be incorporated in India. One of the most popular types of companies is the Private Limited Company. This type of company has a minimum of two and a maximum of 200 shareholders and the liability of the shareholders is limited to the amount of capital they have invested in the company.

Another type of company that can be incorporated is the Public Limited Company. A Public Limited Company can have an unlimited number of shareholders and the liability of the shareholders is limited to the amount of capital they have invested in the company.

There is also the One Person Company (OPC), which is a type of company that can be incorporated with just one shareholder. The liability of the shareholder is limited to the amount of capital they have invested in the company.

In addition to these types of companies, there are also other types such as Section 8 Company, Producer Company, and Limited Liability Partnership (LLP). Each type of company has its own set of rules and regulations, and it is important to choose the right type of company based on your business needs and goals. Understanding the different types of companies and their requirements can help you make an informed decision when it comes to incorporating your company under the Companies Act 2013.

3. Choosing the right type of company for your business

Choosing the right type of company for your business is crucial as it will determine the ownership, liability, taxation, and compliances related to your business.

There are various types of companies that can be incorporated under the Companies Act 2013 in India, such as a Private Limited Company, Public Limited Company, One Person Company, Limited Liability Partnership, and more.

A Private Limited Company is the most preferred choice for small to medium-sized businesses as it provides limited liability protection to its shareholders, has a separate legal entity, and is easier to incorporate and manage.

On the other hand, a Public Limited Company is suitable for large businesses that require significant capital investment and want to raise funds from the public. It is also subject to stricter regulations and compliances.

A One Person Company is ideal for a single entrepreneur who wants to start a business and enjoy the benefits of limited liability protection without the hassle of incorporating a partnership or a sole proprietorship.

A Limited Liability Partnership is a hybrid partnership and company structure that provides limited liability protection to its partners while allowing them to manage the business directly.

Choosing the right type of company structure for your business depends on various factors such as the nature of your business, the number of shareholders, the capital investment required, and the compliances and regulations involved. It is advised to consult with a professional to make an informed decision.

4. Getting a Digital Signature Certificate (DSC)

Getting a Digital Signature Certificate (DSC) is an important step in the process of incorporating your company under Companies Act 2013 in India. A DSC is an electronic form of signature that is used to verify the authenticity of documents and is required by the Ministry of Corporate Affairs (MCA) for all online filings.

To obtain a DSC, you will need to follow a few steps. First, you will need to choose a Certifying Authority (CA) who will issue the DSC. There are many CAs to choose from and you can find a list of approved CAs on the MCA website.

Once you have chosen a CA, you will need to fill out an application form and provide certain documents for verification. These documents may include proof of identity, proof of address, and passport-sized photographs.

After submitting your application, you will need to undergo a verification process. This may involve a physical visit to the CA's office or an online verification process. Once your application has been verified, the CA will issue your DSC.

It's important to note that a DSC is valid for a specific period of time, typically 1-2 years, after which it will need to be renewed. Make sure to keep track of the expiration date of your DSC and renew it in a timely manner to avoid any disruption in online filings with the MCA.

5. Obtaining a Director Identification Number (DIN)

Before you can incorporate your company under Companies Act 2013 in India, one of the essential steps is to obtain a Director Identification Number (DIN). DIN is a unique identification number assigned by the Ministry of Corporate Affairs to any person who wants to become a director of a company. It's a mandatory requirement, and without it, you won't be able to start your company.

To obtain a DIN, you need to fill out an online application form on the Ministry of Corporate Affairs website and provide your personal details, including your full name, date of birth, and contact information. You also need to attach scanned copies of your ID proof and address proof documents along with the application.

Once you have completed the application form and submitted it online, you will receive an application reference number. You can use this number to track the status of your application. If everything is in order, you will receive your DIN within a few days.

It's important to note that each director of the company needs to have a DIN, and the process of obtaining a DIN can take some time. Therefore, it's advisable to apply for a DIN well in advance to avoid any delays in the incorporation process.

6. Filing for name availability

One of the first steps to incorporating your company in India is to file for name availability. This is an important step because your company's name is its identity and it is important to ensure that the name you choose is unique and not already taken by another company.

To file for name availability, you will need to submit an application to the Ministry of Corporate Affairs (MCA). The application should include at least six names in order of preference, along with their meanings and significance. The MCA will then review your application and check if the name is available for use.

It is important to note that the MCA has certain guidelines for naming your company. For example, the name cannot be identical or similar to an existing company, trademarked name, or a name already reserved with the MCA. The name should also not be offensive or against the law.

Once the MCA approves the name, it will be reserved for 20 days. This means that you will have 20 days to complete the rest of the incorporation process and submit the required documents to the MCA. If you are unable to complete the process within 20 days, you can apply for an extension of another 20 days.

Filing for name availability is a crucial step in incorporating your company in India. It is important to choose a name that is unique, meaningful, and in line with the MCA guidelines. With careful planning and attention to detail, you can ensure that you choose the right name for your company and successfully incorporate it under the Companies Act 2013.

7. Drafting the Memorandum of Association (MOA) and Articles of Association (AOA)

The Memorandum of Association (MOA) and Articles of Association (AOA) are two crucial documents that need to be drafted when incorporating a company under the Companies Act 2013 in India.

The MOA outlines the company's objectives, its scope of activities, the authorized share capital, and the liability of its members. On the other hand, the AOA contains the internal rules and regulations of the company, such as the appointment of directors, the distribution of shares, and the internal management of the company.

It is essential to ensure that both the MOA and AOA are drafted carefully and reviewed by legal experts to avoid errors or loopholes that may cause problems later on. The MOA and AOA should also be aligned with the company's objectives and goals.

In addition, the MOA and AOA must be signed by the subscribers to the memorandum and other witnesses in the presence of a notary public. The MOA and AOA must also be filed with the Registrar of Companies (ROC) during the incorporation process.

Overall, drafting the MOA and AOA is a critical step in the company incorporation process, and it is essential to take care of this aspect with utmost diligence and attention to detail.

8. Getting the company registered with the Registrar of Companies (ROC)

Getting your company registered with the Registrar of Companies (ROC) is a crucial step in the process of incorporation. The ROC is a designated authority that is responsible for regulating and administering the company registration process in India. Therefore, it is important to ensure that you follow all the guidelines and procedures laid down by the ROC in order to successfully register your company.

The first step towards getting your company registered with the ROC is to obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all the directors of your company. This is mandatory as all the documents and forms that need to be submitted to the ROC are required to be signed digitally using the DSC.

Next, you need to select a unique name for your company and apply for its registration with the ROC. The name should not be similar to any existing company name or trademark in India. Once the name is approved, you need to file the necessary forms and documents with the ROC. This includes the Memorandum of Association (MoA) and Articles of Association (AoA), along with other documents that verify the identity and address of the directors and shareholders.

After the documents are submitted, the ROC will verify and scrutinize them for any discrepancies or errors. If everything is found to be in order, the ROC will issue a Certificate of Incorporation (CoI) which legally recognizes your company and allows you to start business operations.

Overall, getting your company registered with the ROC requires attention to detail and adherence to the guidelines and procedures laid down by the Indian Companies Act 2013. By following the necessary steps and submitting the correct documents, you can successfully incorporate your company and start your entrepreneurial journey.

9. Obtaining a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN)

One of the most important steps to take after incorporating your company in India is to obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). These are key requirements for any business operating in India and are necessary for tax purposes.

A PAN card is a unique ten-digit alphanumeric identifier issued by the Income Tax Department of India. It is mandatory for all businesses to have a PAN card. It is used for various purposes such as filing tax returns, opening bank accounts, and making financial transactions. You can apply for a PAN card through the NSDL or UTIITSL websites online or by submitting a physical application at any of their authorized centers.

A TAN is also a ten-digit alphanumeric identifier issued by the Income Tax Department of India. It is mandatory for businesses to deduct tax at the source and also to collect tax at the source. TAN is used for depositing tax deducted at source (TDS) with the government. You can apply for a TAN by submitting an application online or by submitting a physical application to any of the authorized TIN-FCs.

It is important to note that the process of obtaining a PAN card and TAN can take some time, so it is advisable to start the application process as soon as possible. Once you have obtained these essential documents, you can easily comply with the tax regulations in India and avoid any legal issues.

10. Issuing and allotting share certificates

Once the company is registered, the next step is to issue and allot share certificates to the shareholders. Share certificates are a legal proof of ownership of shares in the company and are issued to the shareholders in return for their investment in the company. The process of issuing and allotting share certificates involves the following steps:

1. Determining the number of shares to be issued: The first step is to determine the number of shares to be issued and the face value of each share.

2. Preparation of share certificate: Once the number of shares is determined, the share certificate is prepared. The share certificate contains details such as the name of the company, the name of the shareholder, the number and face value of shares, and the date of issue.

3. Signing of share certificate: The share certificate is then signed by the authorized signatories of the company.

4. Allotment of shares: The shares are then allotted to the shareholders and the share certificate is handed over to them.

5. Filing of form SH-1: After the shares are allotted, the company is required to file Form SH-1 with the Registrar of Companies within 30 days of allotment of shares.

Issuing and allotting share certificates is an important step in the process of incorporating a company. It is important to ensure that all the necessary steps are followed and the documents are filed with the Registrar of Companies to ensure that the process is completed smoothly and without any legal complications.

11. Registering for Goods and Services Tax (GST)

One of the most important steps after incorporating your company in India is to register for Goods and Services Tax (GST). GST is a tax system that has been implemented in India to replace all the previous indirect taxes. It is a consumption-based tax that is levied on the supply of goods and services.

Registration for GST is mandatory for businesses with an annual turnover of more than Rs. 20 lakhs. For businesses in special category states, the limit is Rs. 10 lakhs. Even if your annual turnover is below the threshold limit, it is advisable to register for GST as it gives your business credibility and allows you to claim input tax credit on the purchases you make for your business.

To register for GST, you need to have a PAN card, a valid email ID, and a mobile number. You can register for GST online through the GST portal. Once you have registered, you will be issued a GSTIN (Goods and Services Tax Identification Number).

It is important to note that GST has different rates for different goods and services. It is important to classify your goods and services correctly to ensure that you are paying the correct rate of tax. Failure to do so can result in penalties and interest.

In conclusion, registering for GST is an important step in incorporating your company in India. It is advisable to seek professional help to ensure that you are complying with all the requirements and regulations related to GST.

12. Conclusion and further steps

In conclusion, incorporating your company under the Companies Act 2013 can seem like a daunting task, but with careful planning and execution, you can successfully register your company in India. From choosing your company name and getting it approved to filing the necessary documents with the Registrar of Companies, every step is important and needs to be completed with accuracy and attention to detail.

Once your company is registered, there are a few further steps you can take to ensure your business is set up for success. Firstly, ensure that you have a clear business plan in place and that you have identified your target market. This will help you to focus your efforts and resources on achieving your business goals.

Secondly, make sure that you comply with all the legal and regulatory requirements of doing business in India. This includes keeping accurate financial records, obtaining the necessary permits and licenses, and complying with all tax laws and regulations.

Finally, consider working with a professional business consultant or advisor who can provide you with guidance and support as you navigate the challenges of running a business in India. With the right advice and support, you can ensure that your company is successful and thriving for years to come.

We hope that this checklist of things to take care of when incorporating your company under Companies Act 2013 in India helps you navigate the process. Incorporating your company can be a daunting task, but with this guide, you have a comprehensive list of the things you need to take care of. Remember, it's always best to consult with a legal professional who can guide you through the process in detail. We wish you the best of luck in your endeavors and hope that you find success in your business ventures.

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