Company Formation and Incorporation
Formation sequence
Company formation begins with promotion and ends with a certificate of incorporation. The exam tests the order of steps and the documents that convert a business idea into a separate legal entity.
Core rules and concepts
- Promotion: promoters identify the business, arrange capital and decide the company type (private, public, one person or Section 8, as applicable).
- Name reservation: an application is made to the Registrar; the name must not be identical or too nearly resembling an existing name and must not violate restricted words.
- Incorporation documents: MOA (constitution and objects), AOA (internal rules), declarations by promoters and directors, registered office proof, DIN and DSC for directors, and fee payment.
- The Registrar issues a certificate of incorporation with the CIN; the company becomes a legal person from the date on the certificate.
- Under the Companies Act, 2013, a separate certificate to commence business is generally not required for newly incorporated companies.
Worked example
Two promoters want a private limited company. They reserve the name through the prescribed incorporation application, then file the MOA, AOA, declarations, director consents, identity and address proofs for the registered office, and pay fees. The Registrar is satisfied and issues the certificate of incorporation. Reasoning: the certificate is conclusive evidence of incorporation; the company can then open a bank account and issue shares. The promoters must not treat the name reservation alone as incorporation.
Traps that cost marks
Do not confuse the MOA with the AOA: the MOA defines the company's relationship with the outside world and its objects; the AOA regulates internal management. Do not say a private company needs a minimum of seven members; it needs at least two. Do not claim that a certificate of commencement is always needed under the 2013 Act.