BACKGROUND
In India, the Companies Act, 2013, governs the establishment and operation of corporations or companies. The first Companies Act following independence, which controlled corporate enterprises in the country, was passed in 1956. The Bhabha Committee’s suggestions formed the 1956 Act. This Act has been amended several times, and in 2013, major changes were implemented, including the incorporation of provisions to govern all listed and unlisted companies in the country, the implementation of many new sections, and the repeal of the relevant corresponding sections of the Companies Act, 1956. In addition, by enacting Section 135 of the 2013 Act, India became the first country to make corporate social responsibility (CSR) expenditure mandated by law. This is a historic piece of legislation having much further implications for all Indian-incorporated businesses.
INTRODUCTION
A company is a group of people who have their meals together. The phrase is derived from the Latin word (“com”, which means “with” or “together,” and “panis,” which means “bread”). According to Section 2(20) of the Companies Act, 2013, a company is any association of persons registered under the current or prior companies act. It is referred to as a “body corporate"” because the individuals who comprise it are united into one body by incorporating it according to the law and vesting it with legal identity.
A company is defined under common law as a ‘legal person’ or ‘legal entity’ distinct from its members and capable of living beyond the lifetimes of its members. It is not only legal; rather, it is a legal mechanism for achieving any social or economic goal, and it is to a significant part publicly and socially responsible. As a result, it is a combined political, social, economic, and legal institution.
It goes without saying that we have a plethora of different types of businesses. There are numerous different types of businesses, ranging from corporations to sole proprietorships. These corporations are classed primarily based on their size, number of members, control, liability, and mode of capital access.
TYPES OF COMAPNIES
1. One Person Company: The Companies Act of 2013 also includes a new sort of corporate entity in the form of a company in which just one person is the sole owner. It’s like having a one-man army. A One Person Company (OPC) is defined in Section 2(62) as a company with only one member. For example, Shree Aasht Vinayak Travels Private Limited was originally a one-person firm and is now a Private Ltd. corporation.
2. Private Company: According to section 2(68) of the Companies Act, 2013 (as amended in 2015), a “private company” is primarily defined as a corporation with a minimum paid-up share capital as required and whose articles limit the power to transfer its shares. A private company’s name must include the term “Private”. It can have up to 200 members. For example, Jaguar and Company Pvt. Ltd.
3. Public Company: A “public corporation” is defined under Section 2(71) of the Companies Act of 2013 (as modified in 2015). A public business must have a minimum of seven members and no upper limit on the number of members. A limited liability public business must include the word “Limited” at the end of its name. A public company’s shares are freely transferable. For example, Hindustan Petroleum Corporation Ltd.
REGISTRATION OF A COMPANY IN INDIA
Company Registration is the process of forming a business and granting it legal standing under Indian law. The legal document known as the Certification of Incorporation, which is acquired at the completion of the registration procedure, serves as legal confirmation of the company's existence. The provisions of the Indian Companies Act, 2013, regulate both pre- and post-incorporation processes. The Ministry of Corporate Affairs (MCA) of the Government of India regulates this.
PROCEDURE FOR REGISTRATION OR INCORPORATION OF A COMPANY
Section 7 of the Companies Act, 2013, details the procedure for incorporation of a company. Listen below is the procedure for the registration of the same:
Step 1: Filing of company registration papers with the registrar
To incorporate a company, the subscriber has to file the following company registration papers with the registrar within whose jurisdiction the location of the registered office of the proposed company falls.
The Memorandum of Association and Articles of Association of the company- All subscribers have to sign on the memorandum.
The person who is engaged in the formation of the company has to give a declaration regarding compliance of all the requirements and rules of the Act. Individuals named in the Articles have to also sign the declaration.
Each subscriber to the Memorandum and individuals named as first directors in the Articles should submit an affidavit with the following details:
Declaration regarding non-conviction of any offence with respect to the formation, promotion, or management of any company.
He/she has not been found guilty of fraud or any breach of duty to any company in the last five years.
The documents filed with the registrar are complete and true to the best of his/her knowledge.
Address for correspondence until the registered office is set-up.
If the subscriber to the Memorandum is an individual, then he needs to provide his full name, residential address, and nationality along with a proof of identity. If the subscriber is a body corporate, then the prescribed documents need to be provided.
Individuals mentioned as subscribers to the Memorandum in the Articles need to provide the details specified in the point above along with the Director Identification Number (DIN).
The individuals mentioned as first directors of the company in the Articles must provide particulars of interests in other firms or bodies corporate along with their consent to act as directors of the company as per the prescribed form and manner.
Step 2: Issuing the Certificate of Incorporation
Once the Registrar receives the information and company registration papers, he registers all information and documents and issues a Certificate of Incorporation in the prescribed form.
Step 3: Corporate Identity Number (CIN)
The Registrar also allocates a Corporate Identity Number (CIN) to the company which is a distinct identity for the company. The allotment of CIN is on and from the company’s incorporation date. The certificate carries this date.
Step 4: Maintaining copies of Company registration papers
The company must maintain copies of all information and documents until dissolution.
PENALTY FOR FALSE INFORMATION
Furnishing false information at the time of incorporation
If an individual intentionally provides incorrect or false information or suppresses any material information in the documents provided to the Registrar for the incorporation during the formation of a company, the individual is liable for action for fraud under Section 447 of the Companies Act, 2013.
The company is already incorporated based on false information
If a company has already been formed but subsequently discovers that the information or documents supplied were fraudulent or erroneous, the promoters, initial directors, and anyone making a declaration are accountable for fraud under Section 447.
Order of the National Company Law Tribunal (NCLT)
If a company is formed by providing false or erroneous information or representations, or by concealing material facts or information in the documents provided, the Tribunal may issue the following orders (if an application is submitted and the Tribunal is pleased with it):
Issue an order governing the company’s management. If necessary, it can make amendments to its Memorandum and Articles. This order is either in the public or the company’s and its members’ and creditors’ best interests.
Make its members’ responsibility limitless.
Order that the firm’s name be removed from the Registrar of Companies.
Order that the business be wound up; and
Pass any further orders that it considers appropriate.
The Tribunal must provide the corporation a sufficient opportunity to present its case before issuing an order. Furthermore, the Tribunal should analyze the company’s transactions, such as duties contracted or payment of any liability.
DIFFERENCES BETWEEN PUBLIC, PRIVATE AND ONE PERSON COMPANY
There are some differences which exist between these companies; they are explained below as:
CONCLUSION
Any organization of persons intending to be known as a corporation must be registered in accordance with the above-mentioned Law. An incorporated corporation has a slew of advantages that no other commercial organization has. We may say that the Companies Act of 2013, which replaced the Company Law of 1956, made incredible modifications that greatly enhanced the quality of the present law. The Companies Act of 2013 is extremely important since it defines the legal extent of companies. This stated scope eventually benefits end-users since the corporations are compelled to act within a legal framework. As a result, many businesses are restricted to a specific geographical area.As a result, these corporations maintain inside a set boundary wall and do not abuse their position. Thus, it benefits in a variety of ways, including employee protection in terms of labor rights, end-users receiving high-quality goods, and society as a whole facing fewer company-related fraudulent concerns because the law has it all under control.
Witten By,
Kalpana Nailwal
Intern, Chanchlani Law World
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