Incorporation of a Company in India

Incorporation of a company in the Indian market requires a thorough understanding of the procedure for different types of companies. Definite terms outlined by the concerned authorities have to be followed before an approval is provided for incorporation.

Tue Apr 05 2022 | Business Law | Comments (0)


In India, there are definite terms defined by the concerned authority for the different forms of companies, which require capital, assets, members,  shareholders, board of directors and other legal requirements. After accumulating all the legal pre- requisites, one can apply for company incorporation in India.

Private Company

Private Limited Companies are those types of companies where the minimum number of members is two and maximum number is two hundred. Basically, it has a separate legal identity and has limited liability of the members but, at the same time, it has numerous characteristics as those of a partnership firm and has all the advantages of partnership, namely, flexibility, greater capital combination of different and diversified abilities, etc. Identifying marks of a private limited company are name, number of members, shares, formation, management, directors, meetings, etc. The maximum number of directors  have to be mentioned in the Articles of Association. In the grand of privileges and exemptions, the Companies Act has drawn a distinction between an independent private company and other private companies  which is a subsidiary to the other private  company.

a)Wholly Owned Subsidiary

A Wholly Owned Subsidiary can be defined as an entity having its  entire share capital  held by the foreign corporate bodies. Such companies can be formed as a private company , limited by share, limited by guarantee or an unlimited liability company. Below mentioned are the key features of the wholly owned subsidiary company in India:

  • It is regulated by the Indian Company laws and other applicable laws of India.
  • All types of business activities are permitted, such as manufacturing, marketing, service industry. 
  • Where 100% FDI (Foreign Direct Investment) is permitted, there is no requirement of prior approval from Reserve Bank of India; 
  • It is treated as a Domestic Company under Tax Law and is eligible for all exemptions, deduction benefits as applicable to any other Indian Company. 
  • Funding in these companies can be made in the form of share capital and Loan.

b)Joint Venture Company

A Joint Venture (JV) is a business entity created by two or more parties for a specific business purpose and is generally characterized by  shared ownership, shared returns and risks, and shared governance. A joint venture can be structured as a partnership firm, a corporation or any other form of business organisation. Key features of the joint venture are mentioned below:

  • Contribution by partners of money, property, effort, knowledge, skill or other assets to the common undertaking.
  • Joint  interest in the subject matter of the venture.
  • Right of mutual control or management of the enterprise.
  • Right to share in the property.


Below are the decisions and pre-requisites of setting up a private company in India:-

  • Registered Business Name 
    • The name of the business must be followed  with a ˜Limited' or ˜Ltd'.
    • The Companies Registration Office exercises some control over the choice of name so that it  is not  identical (or very similar to) the name of an existing company. 
    • The name of the company should not be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. 
    • The company name must be displayed in a noticeable place at every office, or other premises where the company carries out its business.
  • A Registered Office
      This may not necessarily be the same address as the address where the business is conducted from. Quite frequently, the address used for the registered office is that of the firm's solicitor or accountant. This is the address through which all official correspondence will be communicated .
  • Shareholders
    There must be a minimum of two shareholders (also described as `members' or `subscribers'). 
  • Share Capital
    The Company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100. 
  • Memorandum of Association
    The memorandum is the company's charter. It states the company's name; the location  of its registered office; its share capital;  the liability  and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause, but in practice, the clause is drawn to cover as wide an area as possible.  A 75 per cent majority of the members of the company can change the objects whenever they like.  At least three shareholders must sign the memorandum.
  • The main purpose of the memorandum is discussed in the two funds:
    • The intending shareholder who considers that the investment of his capital shall know within what field it is to be put at risk.
    • Anyone who shall deal with the company shall know, without reasonable doubt, whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects.
    • At least persons in a private company must subscribe to the memorandum. The memorandum shall be printed, divided into consecutively numbered paragraphs, and shall be signed by each subscriber, with his address, description and occupation added, with the presence of at least one witness who will attest the same.
  • Articles of Association
    The Article of Association is a primary declaration of the nature of the company and its business. The  purpose for carrying out the activities along with the MOA, forms together  the company.

    When the company is incorporated in India, AOA is the declaration which describes the rules and regulations for the management of the company and the conduct of its business. This also includes the purpose of the company registration as well as duties and responsibilities of the company to carry out its operation.

    The AOA must contain all the information regarding who holds s the distribution among the directors, officers, shareholdersshareholdersshareholders etc. who holds  right to vote and veto, the nature and the form in which the primary business of the company is to be carried out.

    • Valuation of Intellectual rights
    • The appointment of directors
    • The Meeting of directors at  the quorum and the percentage of vote
    • The decision of the management of the company 
    • Transfer of shares 
    • The Special Voting Rights 
    • The Dividend Policy
    • Winding up and its conditions; notice to the members
    • Confidentiality of know-how and the penalties in case of disclosure 
    • First right to  refusal 
  • Auditors
    Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or does not  present) a true and fair view of the company's affairs and complies with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold  office from the conclusion of the meeting until the next general meeting. 


New Company Integrated Incorporation Process by Single Form INC-10 w.e.f. 01-05-2014 as introduced by Companies (Incorporation) Amendment Rules, 2015. Following are the steps taken by the individual who intends to register a  company in India.

  1. Reservation of Company Name

First, the applicant is required to apply for a name in   Form No. INC-1.   The fee for seeking a name approval is already prescribed, as per the amendment and the period of 60 days are allowed for incorporating the company. As mentioned above, the name should not be undesirable i.e.; identical, resembling, restricted or prohibited. 

  1. Application for Incorporation of Companies

After obtaining availability of name, the applicant should file   Form No. INC-7  for other than One Person Company and in   Form No. INC-2   (for One Person Company) with Jurisdictional Registrar of Companies (ROC) along with required information in attachments and along with prescribed fee.

  1. Documents to be filed for Incorporation

Section 7 of the Companies Act prescribes the various documents and information to be filed with RoC for registration of a new company as under:

  • MoA and AoA duly signed and verified
  • Declaration by Professionals INC-08    
  • Declaration from Director, Manager or Secretary
  • Affidavit from each subscribers and first directors INC-09
  • The address for correspondence
  • Complete Details of Subscribers with proof of identity
  • Complete Details of first Directors with proof of identity
  • Particulars of interest of first directors in other firm/body corporate and NoC
  1. Drafting, Signing and Witness of Memorandum (MoA) and Articles (AoA)

The memorandum (MoA) should be drafted by keeping in mind the provisions of section 4 of The Companies Act, 2013 and objects should not be contrary to those as per Form No. INC 1. The Memorandum and Articles of Association of the company should be signed as under:

  • The MoA and AoA shall be signed by each subscriber to the memorandum, who shall add his name, address, description and occupation in his own handwriting in the presence of at least one witness.
  • The witness shall attest the signature and shall likewise sign and add his name, address, description and occupation. The witness shall state that:
      a) I witness to subscriber/subscriber(s), who has/have subscribed and signed in my presence (date and place to be given); further I have verified his or their Identity Details (ID) for their identification and satisfied myself of his/her/their identification particulars as filled in”  
  • If the subscriber is illiterate, he should affix his/her thumb impression or mark which shall be described as such by the person, writing for him, who shall place the name of the subscriber against or below the mark and authenticate it by his own signature and he/she shall also write against the name of the subscriber, the number of shares taken by him/her. Also, such person shall  read and explain the contents of the MoA and AoA to the illiterate subscriber and make an endorsement to that effect on the MoA and AoA.
  • Where the subscriber to the memorandum is a body corporate, the MoA and AoA should be signed by the director, officer or employee of the body corporate duly authorized in this behalf by a resolution  of the board of directors of the body corporate and where the subscriber is a Limited Liability Partnership (LLP), it should be signed by a partner of the Limited Liability Partnership, duly authorized by a resolution  approved by all the partners of the LLP. However, in either case, the person so authorized shall not, at the same time, be a subscriber to the memorandum and articles of Association.
  1. Declaration by Professionals:

As per section 7(1)(b),   a declaration is required to be filed with RoC by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, to the effect that all the requirements of this Act and the rules made  thereunder in respect of registration and matters precedent or incidental thereto, have been complied with. The declaration should be in   Form No. INC-8.

  1. Affidavit from subscribers and first directors:

The affidavit shall state that he/shhas not been convicted of any offence in connection with the promotion, formation or management of any company or he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company etc. shall be in   Form No. INC-9.

Particulars of every subscriber

 The particulars of every subscriber to the MoA shall be filed with the Registrar.

The particulars include;  

  • Name
  • Recent Photograph
  • Father’s name /Mother’s name    
  • Nationality 
  • Date of Birth
  • Place of Birth (District and State)
  • Educational qualification
  • Occupation
  • Income-tax PAN
  • Permanent residential address
  • Present address
  • Address of previous residence if stay of present address is less  than one year
  • The office/business addresses 
  • Email id
  • Phone Number
  • Proof of Identity
  • Proof of Residence, Proof of Nationality (for foreign national)
  • If the subscriber is already a director or promoter of a company(s), 
  • The specimen signature and latest photograph duly verified by the banker or notary shall be in the prescribed   Form No. INC-10.   
  • Where the subscriber to the memorandum is a body corporate, then the details of the Body Corporate are required to be filed.
  1. Particulars of first directors of the company and their consent to act as such:

    The particulars of first directors of the company and his interest in other firms or bodies corporate along with his consent   (Form DIR.2)   to act as director of the company shall be filed in   Form No.DIR.12   along with   the prescribed fee.
  1. The particulars of the registered office of the company should be filed in   Form No. INC-22.

  2. Payment of Fee

    While uploading various documents prescribed, fee can be paid online including stamp duty for MoA.
  1. Accounts

    The Companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditor’s and director’s reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholdersshareholdersshareholders at a general meeting and a set delivered to the registrar of companies.  
  1. Registers, etc.

In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders ; a book can be purchased to hold  all of the above. This will be provided automatically if you buy a running concern. 

  1. Company Seal

All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.

  1. Certificate of incorporation:

After the RoC is satisfied that all documents and information which is required has been filed in the prescribed manner and along with prescribed fee, the Certificate of Incorporation shall be issued by the Registrar in   Form No. INC-11

  1. Commencement of Business etc.:

After incorporation, every company before commencing any business or exercising any borrowing powers is required to file declaration INC-21 and INC-22 (if not filed at the time of incorporation)  

  1. Application for Income Tax PAN or TAN:

As per Income Tax Notification 38/2015 dated 10-04-2015, a company which has not been registered under Cos Act, 2013, Application for allotment of PAN or TAN can be made in   Form INC-7   by quoting Corporate Identity Number (CIN) of the company


Rule of ShareholdersShareholdersShareholders

The shareholdersshareholdersshareholders may exert a significant indirect influence by exercising the rights and powers available to them. These include:

  • passing resolutions at shareholders meetings 
  •  voting out directors
  • electing to sell their shares
  • exercising minority buy-out rights (this is where dissenting shareholdersshareholdersshareholders require the company to buy their shares: the right can give significant protection to disaffected shareholdersshareholdersshareholders wanting to sell and preserve their capital)
  • requesting the company, in writing, to provide information held by the company (with a right to appeal to the court if the company refuses)
  • requiring the company to provide the shareholders with a statement of the shares that he or she  holds, and of the various rights, privileges, conditions and limitations that attach to those shares

Company decisions that require shareholder participation

Certain decisions about the running of the company cannot be made without shareholdersshareholdersshareholders participating. These include:

  • various decisions requiring the unanimous assent of shareholdersshareholders (see below)
  • alterations to the constitution
  • alterations to shareholdersshareholders' rights
  • decisions invulving major transactions
  • decisions invulving remuneration and other benefits

The shareholdersshareholders are entitled to pass a resulution relating to the management of the company. However, the resolution will not be binding on the board of directors, unless the company constitution (if there is one) provides otherwise.

Sharehulder meetings: ordinary resulutions and special resulutions

The powers reserved for shareholders may only be exercised at a meeting of shareholders or by a resolution passed instead of a meeting.

shareholder powers may generally be exercised by ordinary resolution, which means a resolution passed by a simple majority. However, in certain cases shareholder powers must be exercised by "special resulution", that is, a resolution requiring a 75 percent majority. This applies where the shareholders wish to exercise their powers to:

  • adopt, alter or revoke the company's constitution
  • approve a major transaction
  • approve an amalgamation
  • put the company into liquidation

Rule of Directors

The duties and responsibilities of directors stipulated by the Indian Companies Act of 2013, can broadly be classified into the following two categories: --

[i] The duties and liabilities which encourage and promote the sincerest investment of the best efforts of directors in the efficient and prudent corporate management, in providing elegant and swift resolution of various business-related issues including those which are raised through "red flags", and in taking fully mature and wise decisions to avert unnecessary risks to the company.

[ii] Fiduciary duties which ensure and secure that the directors of companies always keep the interests of the company and its stakeholders, ahead and above their own personal interests.

The following duties and liabilities have been imposed on the directors of companies -

  • A director of a company shall act in accordance with the Articles of Association (AOA) of the company.
  • A director of the company shall act in good faith, in order to promote the objects of the company, for the benefits of the company as a whole, and in the best interests of the stakeholders of the company.
  • A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
  • A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
  • A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
  • A director of a company shall not assign his office and any assignment so made shall be void.
  • If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one Lakh Rupees but which may extend to five Lac Rupees.

Board Meeting

Meeting of Board of Director should be called by giving 7 days notice to Directors at his registered address through post/electronic means/ post

Meeting at shorter Notice: A meeting of Board of Directors can be called by shorter notice subject to the conditions:

Quorum of Board Meeting:

  • 1/3 rd of total strength OR 2 (Two) Directors, whichever is higher.
  • Where meeting of Board could not be held for want of quorum, the meeting shall automatically adjourn to same time, same place at next week (Not being national holiday).
  • If number of directors reduced below quorum, then the remaining directors may huld the meeting for the fullowing purposes: 
    • To call a General meeting
    • Increase the number of directors.
  • Quorum in case of Interested Directors:
  • If interested director exceed or equal to 2/3 of total strength the remaining directors not being less than 2 (two) shall be the quorum


With reference to your query regarding removal/resignation/vacation of the position of director, thefollowing are the provisions available in the Indian Companies Act, 2013:

a.Resignation of the director as per Section 168 of the Companies Act, 2013

  • The director may resign his office by giving the notice in writing to the company citing reasons for his resignation. Such director can be removed immediately without following any complex process for the removal.
  • The resignation of a director shall take effect from the date on which the notice is received by the company or any specified date as mentioned by the Director in the notice. The director shall be liable for the offences occurred during the term of his office even after the resignation.
  • The Director is required to file the Form DIR-11 within 30 days of the resignation and shall state the reason for the resignation, enclose the copy of the notice which is sent to the company and the proof of dispatch.The duties of the company in case of such resignation by the director:
  • Upon the receipt of the notice of the resignation by the director, the company shall take note of such resignation by passing the Board resolution  in the Board Meeting.
  • The Company shall file the form DIR-12 within 30 days of the resignation and is required to place the fact of such resignation in the Director  Report in the following General Meeting.Removal from directorship through General Meeting as per Section 169 of the Companies Act, 2013
  • The company can remove the director by passing an  ordinary resolution in the General Meeting before the expiry of the term of his office.
  • The special notice is required to pass such resolution and the company shall send such notice to the director and the members of the company.
  • The director shall be given the opportunity of being heard in the General Meeting.
  • In case the director gives any written representation to the company, then such representation shall be given to the all the member of the company to whom the notice is sent.
  • Due to the insufficient time or by the company default, the copy of the said representation could not be given to the member of the company then in that case the director can read out such representation in the meeting.
  • The members of the company can remove such director by the simple majority.
  • The company shall file the form DIR 12 within 30 days from the date of removal of such director along with a copy of the resolution passed in the General Meeting.


The following are the documents required at the time of meeting for the removal of the director:

  • Special notice of the meeting
  • Board resolution / Minutes
  • Agenda of the Meeting


If any shareholder/member intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. The Company shall make necessary arrangements to avoid failure of video or audio visual connection. For this purpose, Section 103 of the Companies Act 2013 that the company shall ensure that the quorum of 2 members must be present throughout the meeting other than the member who intends to participate through the video conferencing. The quorum must be present at the registered office of the company.

Every participant shall identify himself for the record before speaking on the agenda. If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or distorted, the company shall request for a repeat or reiteration by the member. From the commencement of the meeting and until the conclusion of such meeting, no person other than the members present at the meeting shall be allowed access to the place where the General Meeting.


Foreign National Subscriber to MoA

Where subscriber to the memorandum is a foreign national residing outside India-

  • (a) in a country in any part of the Commonwealth, his signatures and address on the memorandum and articles of association and proof of identity shall be notarized by a Notary (Public) in that part of the Commonwealth.
  • (in a country which is a party to the   Hague Apostille Convention, 1961   his signatures and address on the memorandum and articles of association and proof of identity shall be notarized before the Notary (Public) of the country of his origin and be duly apostillised in accordance with the said Hague Convention.
  • (in a country outside the Commonwealth and which is not a party to the Hague Apostille Convention, 1961, his signatures and address on the memorandum and articles of association and proof of identity, shall be notarized before the Notary(Public) of such country and the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer empowered in this behalf under section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act,1948 (40 of 1948) or, where there is no such officer by any of the officials mentioned in section 6 of the Commissioners of Oaths Act, 1889 (52 and 53Vic.C.10), or in any Act amending the same;
  • (visited in India and intended to incorporate a company, in such case the incorporation shall be allowed if, he/she is having a valid Business Visa. However, in case of Person is of Indian Origin or Overseas Citizen of India, requirement of business Visa shall not be applicable.


After obtaining registration, the company proceeds with its business for which it requires funds. A private company cannot raise funds from the public; the capital is to be raised by way of private arrangements viz. from among the family members, relatives and friends, But first of all the company will issue shares to the subscribers to its memorandum and other members of the company. The issued capital must not exceed the authorized capital of the company. If a company wants to issue capital more than its authorized capital, it has to first raise, its authorized capital by passing a special/ordinary resolution  (as prescribed in the Articles) and applying in Form No. 5-alongwith additional registration fee, before the ROC.

Types of Shares

A company may issue following types of Shares:

  • Equity shares
  • Preference shares

According to Section 90(2), a private company which is not a subsidiary of a public company may issue shares of such other kind as it may think fit. Similarly, a private company shall be free to issue shares with disproportionate voting rights.


A certificate, issued under the common seal of the company, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares. We have discussed Section 46 of the Companies Act, 2013 dealing with share certificates.

Where a company issues any share capital, no certificate of any share or shares held in the company shall be issued, except

  • in pursuance of a resolution passed by the Board; and
  • on surrender to the company of the letter of allotment or fractional coupons of requisite value, save in cases of issues against letters of acceptance or of renunciation, or in cases of issue of bonus shares.

If the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, if any, as to seek supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating evidence, as it may think fit.

Form of Share Certificate:

Every certificate of share or shares shall be in Form SH 1 or as near thereto as possible and shall specify the name(s) of the person(s) in whose favor the certificate is issued, the shares to which it relates and the amount paid-up thereon.

Signature on Share Certificate:

Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of, and signed by-

  • Two directors duly authorized by the Board of Directors of the company for the purpose or the committee of the Board, if so authorized by the Board; and
  • The secretary or in absence of Company Secretary, any person authorised by the Board for the purpose.

If the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than the managing or whole-time director.

In case of a One Person Company, every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of and signed by.

  • one director or a person authorized by the Board of Directors of the company for the purpose, and
  • the Company Secretary, or any other person authorized by the Board for the purpose.

Facsimile Signature:

A director shall be deemed to have signed the share certificate if his signature is printed thereon as a facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography, or digitally signed, but not by means of a rubber stamp. The director shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.

Entry in Register of Members:

The particulars of every share certificate issued shall be entered in the Register along with the name(s) of person (s), to whom it has been issued, indicating the date of issue.


The e-forms for incorporation of companies under the Companies Act 2013 can be uploaded in following two portals: 

  • MCA 21 portal under Ministry of Corporate Affairs:

    MCA 21 is an e-Governance project by the Ministry of Corporate Affairs, Government of India. The main objective of this project was to transform the mode of working from usual paperwork to paperless format. This initiative was launched to deliver over 100 services to citizens electronically covering the Companies Act of 1956 and now Companies Act 2013. These services are provided in easy and secured manner through Ministry of Corporate Affairs portal. The MCA 21 was also the first portal Incorporation of Companies under the Government to use the Digital Identity of the users. In recent times the MCA Portal has been revamped and the revamped portal is more user friendly.
  • E-BIZ portal under DIPP, Ministry of Commerce and Industry

    E-Biz is the integrated services projects and part of the 27 Mission Mode Projects (MMPs) under the National E Governance Plan (NEGP) of the Government of India. eBiz is being implemented by Infosys Technologies Limited (Infosys) under the guidance and regulation of Department of Industrial Policy  and Promotion (DIPP), Ministry of Commerce & Industry, Government of India. The focus of eBiz is to improve the business environment in the country by enabling fast and efficient access to Government-to Business (G2B) services through an online portal. Such initiative will help in reducing unnecessary delays in various regulatory processes required to start and run businesses
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