The Need for Company Law
All countries embarking on an economic lift from both local and foreign investments have enacted laws putting in place business in its proper perspective. Many laws are to provide a significant fraction of government revenues and employment to local folks.
The most significant laws which have been enacted in India include the Companies Act of 1956 and the Indian Companies Act of 2013. These laws clearly define what incorporation in company law is all about.
In this article, allow us to make a concise answer to a frequently asked question – What is Incorporation in Company law?
India’s Prevailing Company Laws
Companies Act, 1956 aptly defines a company as a business entity under the present and preceding Acts. No company in India gets to be registered without complying requirements stipulated in the provisions of these laws.
India’s Company Laws are basically created to regulate and ensure fair competition in the market. Among India’s other complementing business laws include:
- Companies Act, 2013
- Societies Registration Act, 1860
- The Indian Partnership Act, 1932
- The Companies Amendment Act, 2006
- The Limited Liability Partnership Act, 2008
It is, however, worthy to note that companies are incorporated under the Indian Companies Act of 2013. A partnership arising from a contract is governed by the company law in India in matters where the Partnership Act does not stipulate specific provisions.
India’s Implementing Agency
India’s Ministry of Corporate Affairs defines Incorporation as the legal procedure in forming a corporate structure or simply, a company. The process involves clear definition and separation of corporate structures’ assets and its income from its investors – including the owner. Completion of the meticulous process forms of the trek leading to company formation in India.
MCA, along with other line agencies, are mandated to implement laws governing business, which includes incorporation.
Incorporation in Company Law
Company laws in India provide procedural steps for the registration of a company.
Registration starts with an application with the Registration of Memorandum and Articles under Section 33 of the act. The application should be submitted along with Memorandum of Association (MOA), Article of Association (AOA), a copy of the agreement, and a declaration attesting truthfulness of the requirements.
Eligible Business Forms for Incorporation
Under the Companies Act of 2013, investors can incorporate these types of companies:
- Unlimited company – A company may be incorporated with unlimited liability of its shareholders. In case of insolvency, everybody forming part of the unlimited company, are equally liable for the debts.
- Guarantee company – The magnitude of shares and guarantees are deemed as the limit of the liability of the members. If one invested one dollar, his maximum liability, therefore, is one dollar.
- Private company – It is a company with an Article of Association mandating minimum capital of one lakh rupees or more. This type of business form has preferential rights over its members provided that it has a minimum of fifty members and does not engage in an invitation to the public to subscribe to its shares or debentures.
- Foreign company – A business entity incorporated outside India
- Government company – A business form holding a maximum of 49 per cent shares with the remaining 51 per cent held by the government
Beyond Incorporation in Company Law
Interestingly, aside from incorporating a company, India also allows restructuring, which usually happens when an incorporated business is transferred to another company formed for a specific purpose.
India’s Company Law also allows amalgamation which sees merging of two or more companies to incorporate a third business entity. The same principle applies when a company is absorbed or blended into another.
Incorporation in Company Law yields many complexities. Thus, the process requires the services of 3E Accounting India, an equitable India accounting firm, with a proven track record of excellence in delivering results required at any given situation.