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INCORPORATION OF COMPANIES UNDER COMPANIES ACT, 2013

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  1. INCORPORATION OF COMPANIES UNDER COMPANIES ACT, 2013 Presented By: S. DHANAPAL Sr. Partner S Dhanapal & Associates Practising Company Secretaries Chennai Organised By: Nellore Branch of SIRC of ICAI THURSDAY, 30th April, 2014

  2. Scheme of Presentation S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  3. Provisions relating to incorporation of Private and Public Companies The only way to make sense out of change is to plunge into it, move with it, and join the dance. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  4. Different Kinds of Companies which can be incorporated under CA, 2013 • Company Limited by shares • Company limited by Guarantee • Unlimited Company • Formation of Companies with charitable objects etc – Section 8 company • Conversion of other form of entities as company under the act (Chapter XXI companies) • One person company S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  5. Steps in incorporation of Pvt/Pub Co. Contd.. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  6. Steps in incorporation contd…. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  7. Procedural Aspects Documents to be furnished at the time of incorporation • Declaration by Professionals • Affidavit by each of the subscribers to the memorandum and each of the first directors named in the articles • Address for correspondence till registered office is established • Details of subscribers • Particulars of first directors and their consent to act as director • MOA and AOA S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  8. Procedural Aspects Details of subscribers that need to be furnished at time of incorporation The following particulars of every subscriber to the memorandum shall be filed with the Registrar: (a) Name and recent Photograph affixed and scan with MOA and AOA (b) Father’s/Mother’s/ Spouse’s name (c) Nationality (d) Date of Birth (e) Place of Birth (District and State) (f) Occupation (g) Income-tax permanent account number (h) Permanent residential address and also Present address ( Time since residing at present address and address of previous residence address (es) if stay of present address is less than one year ) similarly the office/business addresses S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  9. Procedural Aspects Details of subscribers that need to be furnished at time of incorporation contd…. (i) Email id of Subscriber (j) Mobile No. of Subscriber (k) Phone No. of Subscriber (l) Fax no. of Subscriber (m) Proof of Identity (n) Residential proof (o) Proof of nationality, in case the subscriber is a foreign national. (p) Each subscriber to the MOA and AOA shall furnish the specimen signature duly verified by their respective banker at the time of incorporation. (q) If the subscriber is already a director or promoter of a company(s), then details of those companies are also needed to be given . S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  10. Procedural Aspects Procedure of Signing of Memorandum of Association and Articles of Association by subscriber to Memorandum and Articles of Association If the Subscriber is Literate and Individual • Name, Address, Description and occupation, if any, in the presence of at least one witness • Witness shall sign along with name, address, description and occupation, if any. • The witness shall state that “I witness to subscriber/subscriber(s) who has/have subscribed and signed in my presence. Further I have verified his/their ID for their identification and satisfied myself of his/her/their identification particulars as filled in. He shall also mention the place and date of signing. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  11. Procedural Aspects Procedure of Signing of Memorandum of Association and Articles of Association by subscriber to Memorandum and Articles of Association If the Subscriber is Body Corporate • Same method as mentioned above • However , In case of Body Corporate subscriber, • The memorandum and articles of association shall be signed by 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, • The person so authorized shall not, at the same time, be a subscriber to the memorandum and articles of Association. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  12. Procedural Aspects Procedure of Signing of Memorandum of Association and Articles of Association by subscriber to Memorandum and Articles of Association If the Subscriber is Limited Liability Partnership • Same method as mentioned above • However , In case of Limited Liability Partnership subscriber, • It shall be signed by a partner of the Limited Liability Partnership, duly authorized by a resolution approved by all the partners of the Limited Liability Partnership • The person so authorized shall not, at the same time, be a subscriber to the memorandum and articles of Association. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  13. Procedural Aspects Procedure of Signing of Memorandum of Association and Articles of Association by subscriber to Memorandum and Articles of Association S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  14. Provisions relating to MOA and AOA S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  15. Point for noting! Letterheads should include CIN – Section 12 (3) (c) Every Company shall get its name, address of its registered office and the Corporate Identification number along with telephone number, fax number, if any, e-mail and the website address, if any printed in all its business letters, billheads, letter papers and in all its notices and other official publications. If there is name change, former name should come – Proviso to Section 12 (3) Where a company has changed its name(s) during the last two years, it shall paint or affix or print, as the case may be, along with its name, the former name(s) so changed during the last two years as required under clauses (a) and (c) S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  16. Memorandum of Association – Section 13 • Object Clause: • The Object clause of the company is now required to include only the following • The objects for which the company is proposed to be incorporated • Any matter considered necessary in furtherance thereof • Does this mean the company cannot have other objects clause in its MOA? • Liability clause : • It should state, Liability of members of the company, whether limited or unlimited and also in the case of a company limited by shares, that liability of its members is limited to the amount unpaid, if any, on the shares held by them. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  17. Shifting of Registered Office Within same state from one ROC to another ROC • Application in form INC 23 to be filed with RD along with annexure as required • Notice before one month to be published in english and regional newspaper and individual notice on all debenture holder, creditor and depositor. • Objection can be made within 21 days, else deemed as no objection • shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  18. Shifting of Registered Office From one state to another • Application in form INC 23 to be filed with CG along with documents as prescribed in rules • Notice before 14 days of hearing to be published in English and regional newspaper and individual notice on all debenture holder and creditor. • shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  19. Articles of association- Section 5 Entrenchment Provisions The articles of a company may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with Entrenchment provisions can be included either a) At the time of Incorporation of company itself or b) Subsequent to incorporation • In case of Public Company For Altering Articles of Association to have Entrenchment clause, Alteration needs to be approved by way of special resolution by members. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  20. Forms to be filed with Registrar for entrenchment (Rule 10of the Companies (Incorporation) Rules, 2014) • In case of existing companies, the Form No. MGT-14 shall be filed within thirty days from the date of including entrenchment clause in the articles. Form of Articles - Rule 11 of the Companies (Incorporation) Rules, 2014. • The model articles as prescribed in Table F of Schedule I may be adopted by a company either in totality or otherwise ALTERATION OF ARTICLES – Section 14 The company has to pass special resolution for alteration of articles and has to file Form MGT-14 with Registrar of Companies. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  21. ONE PERSON COMPANY S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  22. One Person Company • Definition [Section 2(62)] • “One Person Company” means a company which has only one person as a member. • Salient Features • Number of members(Min & Max is 1 ) • Number of Directors(Min 1 & Max 12) • Name of company (Shall carry word (OPC) • Member and Nominee to be natural persons • Limit on number of OPCs is restricted to 1 • Automatic conversion to pvt/public co. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  23. One Person Company • Special requirements, privileges and exemptions: • Incorporation (Nomination also is mandatory) • Annual Return (Signed by CS or the Director) • Financial Statement (Cash flow is not required) • Number of Directors (12 with SR no limit) • General Meetings (No meeting required) • Board Meetings(Two meetings)(Once 6 months) • Term of auditor (No rotation is applicable) • Contract by OPC ( Shall record in minutes) S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  24. One Person Company • Mandatory conversion of OPC to pvt/pub co. • Voluntary conversion of Pvt./Pub co. to OPC • Penal Provisions for OPC S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  25. Incorporation of One Person Company • ONE PERSON COMPANY (OPC) • Eligible Person for Incorporation & nominee :- • Only natural person who is an Indian Citizen & resident in India • Resident in India - Stayed in India not less than 182 Days immediately preceding F.Y • Maximum - Not more than 1 OPC • Nomination – Rule 2.2:- • Subscriber to OPC shall nominate person along with consent and fee as provided in Annex ‘B’ to registrar along with its MOA & AOA. • Withdrawal –Nominated person may withdraw his consent by giving notice provided that another person should be appointed as nominee with in 15 days of such withdrawal in same manner provided • OPC has to file relevant form within 30 days having notice of such withdrawal. • Change – At any time for any reason including in case of death and incapacity to contract such has to be intimated to Roc.

  26. Incorporation of One Person Company • SOLE MEMBER:- • Ceases to be member in the event of Death or his incapacity • His Nominee becomes the member of OPC and as such he shall nominate nominee with in 15 days of becoming member • Such cessation and nomination has to be filled with the Registrar of Companies • PENALTY – RULE 2.3:- • OPC and any officer of officer contravenes provision shall be punishable with fine which may extend to 5000 and further fine which may extend to 5000 for everyday if same contravention continues • OPC TO CONVERT ITSELF INTO PVT. CO. OR PUBLIC CO – Rule 2.4 • Where paid up Share Capital of OPC exceed 50Lakhs or Avg turnover exceed 2 Crores – it ceases to be OPC • Such OPC has to convert it self into Pvt. or Public Co. within 6 months from date of increase of paid-up capital beyond 50 Lakh or last day of relevant period during which Avg annual turnover exceeds 2 Crore • Within 30 days of such event OPC has to inform that it has ceased to be OPC

  27. One Person Company Salient Features • A One Person Company is incorporated as a private limited company. • It must have only one member at any point of time and may have only one director. • The words “One Person Company” must be mentioned in brackets below the name of the company. • The member and nominee should be natural persons, Indian Citizens and resident in India. The term "resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year. • One person cannot incorporate more than 1 OPC or become nominee in more than 1 OPC. • If a Member of OPC becomes a member in another OPC by virtue of his being nominee in that OPC then within 180 days he shall be meet the eligibility criteria of being Member in one OPC. • OPC to lose its status if paid up capital exceeds Rs. 50 lakhs or average annual turnover is more than 2 crores in 3 immediate preceding consecutive years.

  28. One Person Company Salient Features • No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. • Such Company cannot be incorporated or converted into a company under section 8 of the Act. • Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate. • No such company can convert voluntarily into any kind of company unless 2 years is expired from the date of incorporation, except in cases where capital or turnover threshold limits are reached. • Existing Private Limited Companies can convert themselves into one Person Company by following the procedure prescribed in the rules, provided their capital and turnover is below the threshold limits. • The words ‘‘One Person Company’’ shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.

  29. RESERVATION OF NAME • UNDESIRABLE NAMES – Rule 2.5 • It attracts proviso of Section 3 of The Emblems & Names ( Prevention of Improper Use) Act, 1950 • Name of the Registered Trade Mark – except consent of the owner of such trademark • Identical or too resembles with name of existing Co. or LLP • Not in consonance with principal object • Other than finance companies no other co. is allowed to use words like financing, leasing, chit fund, investments , securities….. • Proposed name is identical to Co. dissolved and the period of 2 years has not elapsed from such dissolution or if the proposed name is struck off in pursuant to Section 248, the same will not be allowed before expiry of 20 years or in case of LLP 5 Years • Changed its activities if not reflected in its name than it shall change its name in line with activities within period of 6 month

  30. SECTION 8 COMPANY S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  31. Steps in incorporation • Step 1 - Checking Name availability / Obtaining Name • Step 2 - Apply for grant of license by filing necessary Form along with the requisite documents and fee • Step 3 - Applicant shall Within a week of application, publish a notice as per Form 2.18 at his own expenses at least once in a) Vernacular language in vernacular paper and b) English Language in English Paper and c) on websites to be notified by central Government S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  32. Steps in incorporation • Step 4 - Deliver the copy of the notice forthwith to Registrar • Step 5 - Registrar may require an applicant to furnish approval or concurrence of any appropriate authority, regulatory body, department, ministry of central or state government, if required. • Step 6 - If registrar decides to issue license, license shall be in form 2.19 and he will have power to include conditions, as may be deemed necessary. • Step 7 - Incorporate the company by filing necessary form along with the requisite documents and fee S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  33. Steps in incorporation • Step 8 - If the documents are found in order, ROC will register the company and issue Certificate of incorporation (Section 7 (2)) • Step 9 - Filing of Document for Registered office of the company in along with necessary documents within 30 days of incorporation (Section 12) • Step 10 - File declaration in stating that the capital amount has been brought in by the subscribers. (Section 11) • Step 11 - Commence business like sales , purchase , borrowing only after completing Step 9 & Step 10 S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  34. Quick Recap S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  35. Quick Recap….. • Affidavit to be filed by first directors and subscribers that they have not been convicted of any offence, breach of duty to any company etc. and that all information furnished regarding incorporation is true and complete to their knowledge. • Proof of identity to be furnished for all directors and subscribers • Directors’ interest in other companies/body corporate to be furnished. • Subscription money to be brought in within 180 days of incorporation • AOA may contain entrenchment provision. • Notice of change in situation of registered office and alteration of articles to be filed with ROC within 15 days instead of 30 days as provided in the earlier Act. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  36. Penal Provisions S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  37. Penal Provisions S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  38. Penal Provisions S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  39. S Dhanapal & Associates An insight on Changes proposed under Companies Act 2013 A Firm of Practising Company Secretaries

  40. REFLECTIONS TO