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Companies Act, 2013 Incorporation of Company and matters incidental thereto

Companies Act, 2013 Incorporation of Company and matters incidental thereto.

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Companies Act, 2013 Incorporation of Company and matters incidental thereto

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  1. Companies Act, 2013 Incorporation of Company and matters incidental thereto Siddhartha MurarkaFCS, LL.B, B.Com(H)Ghosh & Murarka Legal, Solicitors & Advocates12 Waterloo Street, Kolkata 700 069Mobile: +91 99033 77959Website: www.siddharthamurarka.comEmail: siddharthamurarka@gmail.com

  2. INCORPORATION OF COMPANY

  3. Introduction The provisions for incorporation of Companies in India under the new Company Law regime have undergone certain procedural changes which seem to have been aimed at containing or deterring fictitious applicants from incorporating companies. In this zeal of deterrence one is not sure how India’s rating in the index of “Ease of doing business” would be impacted.

  4. Ease of Doing Business Ranking of 189 Economies - World Bank Report 2014 1. Singapore 2. Hong Kong 3. New Zealand 4. United States 5. Denmark 6. Malaysia 7. Korea 8. Georgia 9. Norway 10. United Kingdom 134. India (2014) 131. India (2013)

  5. India – Ease of doing Business By Topics

  6. Company Formation –The Ubiquitous DSC The regulators seem to promote the DSC business with all its vigour. Earlier DSC was not a pre-requisite for making DIN application but under the new regime, the applicant first needs to have DSCso that the individual can applyfor DIN in Form DIR-3. Hence, all Directors now need to have a DSC.

  7. Director Identification Number (DIN) The applicant is required to attached the following documents in Form DIR-3: Proof of Identity and proof of residence which should be duly certified by the respective Government Authority. It also requires a declaration in Format DIR-4 from the proposed director on a non-judicial stamp paper. Other mandatory requirements are photograph, occupation, educational qualification, place of birth, mobile number, and email id of the proposed director is to be mentioned in the form.

  8. Name (Availability) Reservation (Form INC 1) • Name Availability has been renamed as Name Reservation. • Some funny requirements have been included for example, if the proposed name of the Company includes name of relative of the promoter, the proof of relationship needs to be attached. If a promoter wants to incorporate a company with the name of spouse of his sister-in-law, it seems that at least two birth certificates, two marriage certificates and three family charts would be required.

  9. Memorandum & Articles of Association Memorandum of Association (MoA) There are two minor but notable changes: (a) Trifurcation of “Objects Clause” has been reduced to bifurcation. (b) The “Liability Clause” has been made more precise and clear. Articlesof Association (AoA) Most notable change is the concept of “Entrenchment”.

  10. Application for Incorporation of Company (Form INC 7) • Declaration from Practicing Professional in FormatINC 8; • Affidavit from each promoter / shareholder / director in FormatINC 9; • Recent passport size photograph of each shareholder / promoter in Format INC 10 should be attested by Banker/Notary; • Proof of Identity: Voter Id card / Aadhaar Card / Passport/ Driving License; • Residential Proof: Electricity bill / Bank Statement / Mobile bill/ Telephone bill which should be not be older than two months; • PAN Card to be attached separately; • Duration of stay at present address, if less than 1 year then address of previous residence; • A non-mandatory but strange requirement is furnishing of “in-principle approval from Sectoral Regulators like RBI, SEBI etc” to carry on certain business like that of NBFC or Merchant Bankers; • Details of all companies in which the promoters/directors/ subscribers of the Company under incorporation are associated as promoters / directors / subscribers needs to be furnished.

  11. Registered / Correspondence Office (Form INC 22) For Registered Office address of the Company please furnish – Copy of title deed / lease deed / rent agreement of the property along with the copy of rent paid receipt not older than one month; Accommodation certificate by owner of property ; The proof of evidence of any utility servicelike telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner which is not older than two months; Name and address of Police Station under whose jurisdiction RO is situated needs to be provided.

  12. Particulars of First Directors (Form DIR 12) Particulars of each person mentioned in the articles as first director of the company should be filed in Form DIR 12. Other required documents and information to be attached with Form DIR-12 • Director Consent Letter in Format DIR 2; • Affidavit from each promoter / shareholder / director in Format INC 9(Same which is to be attached in); Form INC 7 • Disclosure of nature of interest with percent of shareholding and it also mandates disclosure of amount invested in case number of entities entered is more than one.

  13. Commencement of Business (Form INC 21) Unlike previous company law, the new regime makes Commencement provisions applicable to all companies having share capital irrespective of being private or public companies. The declaration is to be filed by Director of the Company in Form INC 21within 180 days from the date of incorporation Contd…

  14. ...Contd Documents / Information to be attached in Form INC 21: That every subscriber to MOA has paid the value of shares agreed to be taken by him; That the paid-up share capital of the Company is not less than 5 lakhs or 1 lakh, as the case may be; That the Company has filed verification of Registered Office as provided u/s 12(2); Specimen signature of Directors in Format INC 10(same which is to be attached in Form INC 7); Certificate of Registration issued by the Reserve Bank of India (Only in case of Non-Banking Financial Companies) /from other regulators. This is mandatory to attach in case the affairs of the Company is regulated by any sectoral regulator; Proof of Stamp duty paid.

  15. PRACTICAL VIEWS AND EXPERIENCES 1. No photo on subscription page of MoA;2. Format INC 9 should be on NJSP and duly notorized;3. Appointment Letter not mandatory in Form DIR 12.

  16. OTHER RELATED MATTERS

  17. Procedure for Change of Name Convene a Board Meeting and pass a Board Resolution regarding change of name clause in Memorandum of Association and call a General Meeting seeking approval of shareholders; File Form INC 1 for change of Name; Convene an Extra Ordinary General Meeting and pass a special resolution; A certified true copy of the resolution along with the explanatory statement and altered MoA shall be filed in file Form MGT14; Application for Change of name is subject to approval of Central Government in Form INC24; A new Certificate of incorporation shall be issued to the Company consequent upon change of name.

  18. Procedure for Change of Object Clause • Convene a Board Meeting and pass a Board Resolution regarding change of object clause in Memorandum of Association and call a General Meeting seeking approval of shareholders; • Convene an Extra Ordinary General Meeting and pass a special resolution; • A certified true copy of the resolution along with the explanatory statement and altered MoA shall be filed in Form MGT14; • The Company will receive Certificate of Registration of the special resolution confirming alteration of object clause.

  19. Procedure for Change of Registered Office within the local limits of the City For change of Registered Office address within the local limits of the City, convene a Board Meeting and pass a Board Resolution and please furnish the following attachments in Form INC 22– Copy of title deed / lease deed / rent agreement of the property along with the copy of rent paid receipt not older than one month; Accommodation certificate by owner of property ; The proof of evidence of any utility servicelike telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner which is not older than two months; Name and address of Police Station under whose jurisdiction RO is situated needs to be provided.

  20. Procedure for Change of Registered Office from one state to another state • Convene a Board Meeting and pass a Board Resolution regarding change of Registered Office from one state to another and call a General Meeting seeking approval of shareholders; • Convene an Extra Ordinary General Meeting and pass a special resolution by Poll??; • A certified true copy of the resolution along with the explanatory statement and altered MoA shall be filed in Form MGT14; • Application to Regional Director (RD) for change of Registered Office in Form INC 23; • The original application along with the enclosures to be submitted to the Regional Director (RD); • Copy of application will be filed by the Company to the Chief Secretary of the concerned State Government; • The certified copy of the order of the Central Government shall be filed within 30 days from the date of receipt of certified copy of the order in Form INC 28; • Now, file Form INC 22 for change of Registered Office from one state to another. Contd…

  21. ...Contd Documents / Information to be attached in Form INC 23: Copy of MoA & AoA; Certified true copy of notice of the general meeting along with relevant explanatory statement; Certified true copy of special resolution sanctioning shifting of registered office; Certified true copy of the minutes of the general meeting authorizing such alteration, giving details of the no. of votes cast in favour or against the resolution; Proof of service of the application to the Registrar, Chief Secretary of the state, SEBI or any other regulatory authority, if applicable; Power of attorney/vakalatnama/Board resolution; List of creditors and debenture holders should not be more than one month before the date of filing of application; Affidavit from Directors confirming no NBFC activities;

  22. ...Contd Documents / Information to be attached in Form INC. 23: Affidavit from Directors in terms of rules; Affidavit verifying the application; Affidavit by the company secretary of the company and atleast two directors, one of whom shall be MD in regards to the correctness of list of creditors and affairs of the company; Affidavit by directors about no retrenchment of employees; Affidavit verifying the list of creditors; It is mandatory to attach in case if there is any prosecution is pending against the company or if any inquiry, inspection or investigation is initiated against the company; Copy of newspaper advertisement for notice of shifting the registered office in Format INC 26 atleast 14 days before the date of hearing; Notice to the Creditors by registered post together with the acknowledgement atleast 14 days before the date of hearing;

  23. Conversion of Private Company into Public Company (Section 14 r/w Section 13 of CA 2013) • Convene a Board Meeting and pass a Board Resolution regarding conversion of Private Company into Public Company and call a General Meeting seeking approval of shareholders; • Convene an Extra Ordinary General Meeting and pass a special resolution; • A certified true copy of the resolution along with the explanatory statement and altered AoA shall be filed in Form MGT14; • Now, file Form INC 27 with its attachments such as minutes of the meeting and altered AoA / MoA for conversion of Private Company into Public Company.

  24. Conversion of Public Company into Private Company 2nd Proviso to S. 14(1) yet to be notified. General Circular No. 18/2014 dated June 11, 2014 clarifies that power will remain with RoC as was under CA 1956; Convene a Board Meeting and pass a Board Resolution regarding Conversion of Public Company into Private Company and call a General Meeting seeking approval of shareholders; Convene an Extra Ordinary General Meeting and pass a special resolution; A certified true copy of the resolution along with the explanatory statement and altered AoA shall be filed in Form MGT14; Approval of Tribunal is mandatory in case ofconversion of Public Company into Private Company. After getting the order copy from Tribunal, it should be filed with RoC within fifteen days in Form INC 27 ; Now, file Form INC 27 with its attachments such as minutes of the meeting and altered MoA / AoA for conversion of Public Company into Private Company.

  25. Conclusion The new Act has been somewhat over-zealous in containing spurious activities such as frivolous incorporation of companies. While the spirit is in good order but this zeal will make the process of incorporation of companies time taking and cumbersome which may inadvertently penalise all promoters and corporates in general, adversely affecting India’s rating in the index of “Ease of doing business”.

  26. SiddharthaMurarkaFCS, LL.B, B.Com(H)Ghosh & MurarkaLegal, Solicitors & Advocates12 Waterloo Street, Kolkata 700 069Mobile: +91 99033 77959 • Website: www.siddharthamurarka.com Email: siddharthamurarka@gmail.com Thank You !!!

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