Incorporation of a Company & Documents Required for It

What is Incorporation?

Incorporation is the legal process of forming a corporate entity or firm. A new legal entity is a corporation that separates the firm’s assets and earnings from its owners and investors. Corporations can be formed in almost any country and are often identified as such by the use of terms such as “Inc.” or “Limited (Ltd.)” in their titles. Incorporation is the second stage of the Formation of a Company.

After submitting the required documents such as MoA, AoA, Consent of Proposed Directors, Agreement, Statutory Declaration, and Receipt of Payment of fee and going through the required formalities, the promoters file an application for the incorporation of the company. The application must be filed with the Registrar of Companies of the state where the company’s registered office will be established.

Documents Required for Incorporation of a Business

1. Memorandum of Association: MOA is the most important document as it defines the objective of the company. No companies can legally undertake activities that are not contained in the MOA. The MOA contains different clauses which are given as follows-

• The Name Clause
• Registered Office Clause
• Objects Clause
• Liability Clause
• Capital Clause
• Association Clause

The MoA must be duly stamped, signed, and witnessed. 

2. Articles of Association: AOA contains the rules regarding the internal management of the company. A Public Ltd. Co. may adopt Table A which is a model set of articles given in the companies act. Table A is a document containing rules and regulations for the internal management of a company. If a company adopts Table A, there is no need to prepare separate Articles of Association. Like MoA, the AoA must be duly stamped, signed, and witnessed. 

3. Consent of Proposed Directors: Apart from the MOA and AOA, written consent of each person named as a director is required confirming that they agree to act in that capacity and undertake to buy and pay for qualification shares.

4. Agreement: The agreement, if any, which the company proposes to enter with any individual.

5. Statutory Declaration: A declaration stating that all the legal requirements about registration have been complied with is to be submitted to the Registrar. 

6. Payment of Fees: Along with the above-mentioned documents, necessary fees have to be paid for the registration of the company. 

7. In addition to these documents, a notice about the exact address of the registered office may also be submitted. If it is not filed at incorporation time, it may be submitted within 30 days after receiving the certificate of incorporation.

8. Documentary proof of registration fee paid.

After receiving the application and all needed documents, the Registrar must be satisfied that the documents are in order and that all legislative conditions for registration have been completed. However, it is not his responsibility to conduct an in-depth investigation into the authenticity of the facts stated in the documents.

When the Registrar is satisfied that the registration processes have been completed, a Certificate of Incorporation is issued to the company indicating the birth of the firm. As a result, the certificate of incorporation might be referred to as the birth certificate of the company. With effect from November 1, 2000, the Registrar of Companies issues a CIN (Corporate Identity Number) to the Company.

Effect of the Certificate of Incorporation

The date written on the Certificate of Incorporation is the legal birth date of a firm. On such day, it becomes a legal entity with perpetual succession. It acquires the right to enter into legally binding agreements. The Certificate of Incorporation is indisputable documentation of a company’s incorporation. Consider what would happen to an unsuspecting person/party with whom the company enters into a contract if it is subsequently discovered that the company’s formation was unlawful and hence illegitimate. As a result, the legal situation is that once a Certificate of Incorporation is granted, the company becomes a legitimate business entity, regardless of any flaws in its registration. As a result, the Certificate of Incorporation acts as solid evidence of the company’s legal existence.

Some intriguing examples of the impact of the Certificate of Incorporation’s conclusiveness are as follows:

1. On January 6th, registration documents were filed. On January 8th, the Certificate of Incorporation was issued. However, the date on the Certificate was January 6th. In this case, it was determined that the corporation existed, and the contracts executed on January 6th were considered legal.

2. On the Memorandum, someone forged the signatures of others. The Incorporation was still regarded as legal.

Thus, regardless of the shortcomings in the procedures, the Certificate of Incorporation once granted, is indisputable evidence of the company’s existence. Even if a corporation is registered with illegal objects, the firm’s existence cannot be questioned. The only solution is to wind it up. Because the Certificate of Incorporation is so important, the Registrar needs to follow extreme caution before issuing it.

What are Preliminary Contract?

During the company’s promotion, promoters enter into particular contracts with third parties on behalf of the company. These contracts are known as preliminary or pre-incorporation contracts. These contracts are not legally binding against the firm. After coming into existence, a company if wants to, in order to honour the contracts made by the promoters, may decide to enter into a fresh contract with the same terms and conditions. However, it should be noted that it cannot confirm/ratify a preliminary contract. It means that a company cannot be forced to honour a preliminary contract. Promoters, on the other hand, are personally accountable to third parties for these contracts.

What is Direct Identification Number?

DIN is a one-of-a-kind Director Identification Number given by the Central Government to everyone who intends to become or is already a director of a firm. It is an 8-digit, permanently valid unique identifying number. The information about the directors is kept in a database by DIN. DIN is specific to a person which means even if he is a director in two or more firms, he only needs one DIN. And, if he left one firm and joins another, the same DIN would continue to work there as well.