The Tax PublishersProcedure for Incorporation of Joint Stock Company

A. INTRODUCTORY NOTE

A joint-stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount or held and transferable as stock or divided and held partly in one way and partly in the other, and formed on the principle of having for its members, the holders of those shares or that stock, and no other persons. [Section 566(1)]

Such a company, when registered with limited liability under this Act, shall be deemed to be a company limited by shares. [Section 566(2)]

The number of members of joint stock company with the object of carrying any business other than banking does not exceed twenty. [Section 11(2)]

The purpose of carrying of any business is acquisition of gain. [Section 11(2)]

B. ELIGIBILITY FOR REGISTRATION

The following companies are eligible to get registration as unlimited/limited by shares or guarantee :

(i) Any compaony consisting of seven or more members which was in existence on the 1st day of May, 1982, including any company registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, corresonding to those or either of them.

(ii) Any company consisting of seven or more members formed after 1st May, 1982, in pursuance of any Act of Parliament other than this Act or any other Indian Law (including law in force in Part B State) of any Act of Parliament of the United Kingdom or Letters Patent in force in India.

(iii) Any other company consisting of seven or more members formed after 1st May, 1882 and otherwise duly constituted according to law.

C. NON-ELIGIBILITY FOR REGISTRATION

Note that a companies falling under any of the following categories are not eligible to be registered as a Joint Stock Company :

(i) a company registered under the Indian Companies Act of 1882 or 1912.

(ii) a company having its original registered office at the commencement of the Act was in Burma, Aden or Pakistan.

(iii) a company which was incorporated outside India.

(iv) a company having the liability of its members as unlimited by any Act other than Companies Act.

(v) a company which is not a Joint Stock Company shall not be registered as a company limited by shares.

Note that Joint Stock Company shall be registered only as a company limited by shares.

D. DIN, DIGITAL SIGNATURE AND IDENTITY ADDRESS PROOF

1. Ensure that all the proposed directors have obtained a Director Identification Number (DIN) and at least one of them holds a valid Digital Signature to submit e-forms. (Refer to Chapter on Directors for procedure regarding obtaining DIN and Digital Signatures)

2. Where a professional is engaged to file application for incorporation of company and the statutory declaration in e-Form 1, under section 33(2), he should have a valid Digital Signature Certificate (DSC).

3. Further, the professional engaged to certify e-Forms 18 and 32 should also have valid DSC.

E. APPLY FOR AVAILABILITY OF NAME OF COMPANY

1. Select names (minimum one and maximum six) in descending order of preference.

2. Consider following guidelines for name availability :

(i) Image of the logo associated with a Trade Mark (if any) and the No Objection Certificate from the Statutory Authorities (wherever applicable) should be attached to e-Form 1A.

(ii) Consider provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950.--Vide Letter No. 10(1)-RS/65, dt. 27-11-1965, issued by Department of Company Affairs, before selecting a name.

(iii) Consider section 20 regarding prevention on use of undesirable names and Circular No. 10(1)-/RS/60, dated 1-4-1960 containing instances of undesirable names.

(iv) Follow guiding instructions for deciding availability of names for registration under the Companies Act, 1956 as contained in Circular No. 10(19)/RS/61, dated 5-5-1962 and Circular No. 2/90 (No. 1/1/90-CL-V-27/1/89-CL-III, dt. 5-1-1990.

(v) Follow guidelines regarding use of key words as enshrined in Letter F. No. 27/1/87, dated 13-3-1989.

(vi) Ensure that the proposed name is not identical with or too nearly resembles the name by which a company in existence has been previously registered or a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999.

(vii) Take care that selected names should have a smack of company's main objects.

(viii) Register of names of companies registered in India is maintained at the offices of the Registrar of Companies.

(ix) It may be noted that generic names, without proper noun like the word 'Y2K' (i.e., year 2000) are not allowed as a name for any company as a 'stand alone' name vide Circular No. 5/35/98-CL-V, of Ministry of Law, Justice Company Affairs General Circular No. 6/99, dt. 13-5-1999.

(x) The Department's Circular No. 3/96, dated 12-4-1996 requires avoiding of names with the words 'stock exchange' as a part of the name without obtaining 'no objection' from SEBI.

(xi) Name starting with small alphabets can be used provided the same does not have phonetic or visual resemblance to the name of existing company.--Vide Circular No. 6/99, dated 13-5-1999.

(xii) Unless the proposed company is going to be incorporated as a mutual fund company, it shall avoid the words 'mutual funds' as part of the name.--Vide PIB Press Release, New Delhi, dated 14-2-2000.

3. Make an application duly signed digitally, by the authorised signatory and send it through MCA portal to the Registrar of Companies of the State or Union Territory where registered office of the company will be situated in e-Form 1A [vide rule 4A of the Companies (Central Government's) General Rules and Forms, 1956] along with a fee of Rs. 500 to ascertain availability of name.

4. On submission of e-Form 1A, the system generates Service Request Number (SRN/Challan No.) which shall be used in making payment of fee of Rs. 500 to the RoC and for tracking the status of application.

5. The Registrar, shall then confirm the availability of one of the name.

6. When the RoC approves the name, the same shall be available for incorporation of proposed company within a period of 60 days. The availability of the name approved can be extended for further period of 30 days, by the Registrar, on request. If company is not incorporated within 60 days or 90 days, as the case may be from the date of approval of name by RoC, the approval shall stand lapsed.

7. Where name is not available, select fresh name and apply again to RoC with requisite application fees.

F. CHANGE OF NAME REQUIRED FOR REGISTRATION--WHEN ?

If in the opinion of the Central Government, the name of the company seeking registration is undesirable, the company has to change its name with effect from the date of registration.

G. COMPANY LIMITED BY SHARES--REGISTRATION OF

1. Pass a Special Resolution to alter the form of memorandum and articles of association for a deed settlement.

2. Alter the memorandum and Articles of Association in pursuance of the Special Resolution mentioned in 1 above.

H. ELECTRONIC FILING OF e-FORM 37, e-FORM 39,
e-FORM 32 AND e-FORM 18

1. Download from the MCA portal, the e-Forms, i.e., e-Forms 37, 39, 32 and 18.

2. Get then filled in, digitally signed, prescrutinized and keep them ready for uploading through MCA portal.

I. Filing of e-Form 37

1. The e-Form 37 should be filed through MCA portal www.mca.gov.in by a person named in the Articles of Association, such as a director, manager or secretary of the company or an advocate or an attorney or a pleader or Chartered Accountant or a Company Secretary (in whole time practice) duly authorised by the promoters.

2. e-Form should be filed immediately but not later than 2 months from the date of availability of name.

3. The Service Request Number (SRN) generated on filing e-Form 1A for approval of name should be quoted in e-Form 37

(i) Stamp Duty

The declaration in e-Form 37 and the altered Memorandum and Articles of Association required to be submitted to RoC office should be duly stamped in accordance with the stamp duty prevailing in the State in which the company has its registered office.

(ii) Attachments

The following documents are required to be attached with e-Form 37 :

(a) Altered copy of Memorandum and Articles of Association;

(b) Annexure containing details of agreement, if any, which the company proposes to enter as a Joint Stock Company;

(c) Power of attorney, if the documents are to be filed by a professional.

(iii) How to attach documents

All the documents should be attached in a PDF format. A physical document is to be converted into electronic document through scanning. A soft copy may also be converted into PDF format and used as an attachment.

(iv) Filing fee be paid for filing the above documents, i.e., e-Form 37 and altered memorandum and articles of association. In addition to above registration fee as per Schedule X of the Companies Act, 1956 has to be paid for registration of company as a Joint Stock Company.

II. Filing of e-Form 39 with RoC

Simultaneously, an application should be filed with RoC through MCA portal www.mca.gov.in. However, in case of registration of unlimited company, e-Form 39 is not required.

III. Filing of e-Form 1 with RoC

In case of a firm proposing to be registered as a Joint Stock Company under Part IX.

A declaration in e-Form 1 should be filed with RoC through MCA portal www.mca.gov.in to enable the RoC to make registration of existing firm as a Joint Stock Company.

IV. Filing of e-Form 32 with RoC

e-Form 32 contains the particulars of directors. This form is also required to be filed with RoC through MCA portal. In case the number of directors exceeds 3, e-Form memorandum can be filed with e-Form 32 in continuation.

V. Filing of e-Form 18 with RoC

In case of firms, a declaration in e-Form 18 is also required to be filed with RoC through MCA portal www.mca.gov.in.

The above e-Forms should be downloaded from the MCA portal and uploaded one by one in the order as above. After one e-Form, upload another e-Form and read the message and follow the same accordingly.

3. Who can file ?

The person such as managing director, director, manager, secretary on being authorised by the Board of directors can file e-Forms.

4. Time Limit

The e-Forms mentioned above can be filed simultaneously with e-Form 1.

5. Pre-Certification

The pre-certification has to be obtained from any professional, i.e., from among Cost Accountants, Chartered Accountants and Company Secretary (in whole time practice).

6. Digital Signatures

The e-Forms should be digitally signed by an authorised person whose name is incorporated in the articles of association as managing director, director, manager or secretary.

7. Filing Fee

Filing fee is related to authorised capital of the company proposed to be registered as a Joint Stock Company.

I. MODE OF PAYMENT

1. The fee can be paid through one of the specified modes, viz., remittance in authorised banks, credit cards or through internet banking. In case of online payment, filing process shall be complete immediately.

2. When payment is tendered through authorised bank (Punjab National Bank, State Bank of India, Indian Bank, ICICI Bank and HDFC Bank), a pre-filled challan (GAR-7) containing SRN, date of challan, expiry date, name and designation of user by whom challan is tendered, name and address of the company, particulars of remittance, total amount and head of account shall be generated by the system. The challan should be used for making payment before the date of expiry mentioned therein and the transaction shall be completed by the concerned banks.

J. EFFECT OF NON-PAYMENT BEFORE DUE DATE

Note, if payment is not made by the date mentioned on the challan, the submission of form shall be treated as incomplete and message through e-mail will be received that form cannot be regarded as filed due to non-payment. Status of application and payment can be verified through MCA portal.

K. PHYSICAL SUBMISSION OF STAMPED DOCUMENTS

All the e-Forms and other relevant documents as follows are to be submitted in physical form to the RoC. Unless these documents are submitted in physical form duly signed by the person authorised to sign digitally, to the RoC quoting Service Request Number (SRN), the filing shall be treated as incomplete and legal action shall be taken against the company and the board of directors.

(i) Original and duly stamped and signed e-Forms;

(ii) Original and duly stamped and Signed altered Memorandum and Articles of Association.

L. CORPORATE IDENTIFICATION NUMBER (CIN)

1. The concerned RoCs will then issue a certificate of incorporation.

2. The certificate of incorporation will bear Corporate Identity Number (CIN) which will be of 21-digit number. The CIN will provide for identification of company about the listing status, activity (industry), ownership, registered office, and year of incorporation of the company.

3. CIN has been designed to help easily identify the companies belonging to a State, industry, ownership, or age. There are 21 digits in CIN. The first letter denotes the listed or unlisted company. The first five digits represent economic activity of the company, the second two places represent State in which the company's registered office is situated; the next four digits places, indicate ownership code, and last six places in the CIN are unique number assigned to every company in any particular economic activity, in a particular State, of a particular year of incorporation and of particular ownership category far example :

Example of CIN

(i)

Life Insurance Corporation of India

L30540MT1T956UGCXXXXXX

(ii)

State Bank of India

L40205MT1T912UGCXXXXXX

4. The date which is imprinted on the certificate of incorporation will be the date on which the company has come into being as body corporate having separate legal status, perpetual succession and common seal.

5. To transact the following business, a Board meeting shall be held preferably within one month from the date of incorporation :

(i) allotment of shares to the subscribers to the memorandum and others;

(ii) appointment of first auditor of the company;

(iii) adoption of common seal;

(iv) appointment of first director of the company;

(v) election of chairman of the Board of directors;

(vi) appointment of managerial personnel like managing director;

(vii) ratification of preliminary contracts;

(viii) any other matter.

6. Section 149(7)(a) empower private limited companies to commence business and exercise borrowing power immediately after obtaining certificate of incorporation from the Registrar of Companies.

7. Where a private company is proposed to be incorporated as a subsidiary of a public company, the same will be treated as a public company. [Section 3(1)(iv)(c)]

M. COMPANY REGISTERED UNDER PART IX THE ACT

1. Where it is proposed to convert the joint stock company into a company registered under Part IX of the Act, then select suitable name considering the guidelines for availability of name.

2. For availability of name apply to the concerned RoC in e-Form 1A alongwith filing fees as prescribed in the Companies Act, 1956.

3. Before registration in pursuance of aforesaid part of a joint stock company, there shall be delivered to the Registrar following documents :

(i) e-Form 39 showing the names, addresses, and occupations of all persons who on a day named in the list, not being more than six clear days before the day of registration, were members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number;

(ii) a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Royal Charter, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and

(iii) if the company is intended to be registered as a limited company, a statement in e-Form 39 specifying the following particulars :

(a) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists;

(b) the number of shares taken and the amount paid on each share;

(c) the name of the company, with the addition of the word 'Limited' or 'Private Limited' as the case may require, as the last word or words thereof; and

(d) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

4. In the aforesaid situation it is worth noting that if the company is a private limited company, then it will have the minimum paid-up share capital of Rs. 1 lakh or such higher amount as may be prescribed or if it is a public limited company, then the same will have the minimum paid-up share capital of Rs. 5 lakhs or such higher amount as may be prescribed.

N. PREPARATION OF DOCUMENTS

Prepare the following documents --

(i) Deed of settlement or

(ii) Instrument constituting or regulating the joint stock company.

O. STAMPING OF DOCUMENTS

Get the aforesaid document stamped as per the Stamp Act prevailing in the State or Union Territory where the company is proposed to be formed.

P. OCCUPATION OF OFFICE

Occupy office of the joint stock company by way of acquisition of or rent a place for office.

Q. PRINTING OF STATIONARY

Get printed letter heads, Bills, vouchers and various other documents wherein the name and office address of joint stock company are incorporated.

R. BANK ACCOUNT

1. Open bank account(s) in the name of joint stock company.

2. For the aforesaid bank account(s), the company will make necessary authorisation for operating bank account. Further, any of the two members shall be authorised to operate bank account jointly.

S. COMMENCEMENT OF BUSINESS

Commence the business with the capital obtained from the members of the company.

T. APPOINTMENTS

Necessary appointment of officers for the company should be made.

U. ENTITY

It is worth noting that a joint stock company does not constitute separate legal entity and hence is not distinct from the members constituting it. A joint stock company is not an artificial person in the eyes of law.

V. PERSONAL LIABILITY, WHEN

1. Every member of a company, association or partnership carrying on business in contravention of this section shall be personally liable for all liabilities incurred in such business.

2. A joint stock company shall comply with all the formalities under the Shops and Establishment Act of the concerned State as applicable.

3. A joint stock company shall comply with the provisions of any other law applicable, if any, for the time being in force in India.

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