Company Formation in India | BareLaw
Overview:
Corporate business management plays a major role in firms. Such limited liability partnerships meet the needs of partners who desire to reduce or limit their liabilities. Therefore, how do these companies form or incorporate LLPs before they then become distinct legal entities? The paper examines such details and processes as outlined below.
PROCEDURE FOR FORMATION OF FOLLOWING COMPANIES:
One Person Company (OPC):
Chapter 2 of the Companies Act, 2013 deals with the incorporation of companies which is applicable to all private, public and one person company. According to section 3(1) (c) of the act, “a company shall be formed by one person in case of one person company which is again a private company and such one person shall subscribe his/her name in the memorandum of association of such company.”
Before that time, this individual should be a natural citizen of India and have resided there for not less than 182 days per year. These conditions had been amended because it was so strict for incorporation purposes in India as well as making it easier to do business here.
For knowing the requirements for formation of One Person Company, proviso to section 3 has to be referred. It states that during formation of an OPC, consent from another person who shall act as a secondary holder must be acquired from him so that he takes over when subscriber dies or becomes unable to contract. This consent must be filed with the registrar at the time of registration along with MOA & AOA.
The second subscriber may also withdraw his consent anytime particularly when it is through prior notice; hence, this subscriber can change his name at any given moment. Also note that he has to communicate this new nomination as prescribed by the law and notify registrar accordingly on behalf of the company using prescribe format. As per companies act this will not amount to alteration in memorandum. Once these particular requirements are satisfied; registration for OPC will take place like that done in case of a private company as described above.
Private Limited Company (PLC):
First and foremost, as per section 3, there should be minimum two members for the incorporation of private company which shall subscribe their names to such memorandum of such a private company. Secondly, the words “Private Limited” should be mentioned after the name of the company because it is limited by shares or guarantee. Therefore, sections 4 and 5 of the companies act must have been complied with properly since these deals with what are contained in MOA & AOA and how that should be done.
To begin with, the seventh section of the Companies Act concerns itself with the incorporation process of a company and getting the certificate of incorporation in addition to other documents. Like the Limited Liability Partnership (LLP), these documents must bear signatures of its respective members and to be lodged with the Registrar together with Memorandum and Articles. If such requirements under Section 7 are fulfilled, then it shall be registered by Registrar of companies and he/she gives it a certificate for incorporation.
Limited Liability Partnerships:
Unlike laws applied in the two previous entities, however, statute governing formation of LLPs is found in separate enactment wholly dedicated to them called Limited Liability Partnership Act 2008.
Under Section 6 of this act, there is a requirement that an LLP should have minimum number of partners. In brief, section six provides that an LLP needs at least two partners for its formation purposes but if within six months from date of registration one partner remains in such business as sole owner then this person will be personally responsible during five years from that day as mentioned in this law.
The third chapter deals entirely on provisions related to formation of LLPs and connected matters. For instance, Section 11 emphasizes on what constitutes an incorporation document while Section 12 focuses on registration thereof. The same way a certificate of incorporation is for a company being formed so can also be said about registration document for an LLP which is outlined in section twelve. According to section 11(2), where any person or persons who subscribed towards incorporation document have signed their names thereto, stating their respective names addresses residential addresses:- Such an Incorporation document shall set forth: form prescribed by the rules name; address LLP’s registered office; particulars each partner subscribing his/her address/address him/herself included designated partners their names.
Upon delivery in appropriate manner all concerned by any individual or group like auditors or legal consultants involved directly with creating some LLC required ensure full compliance under above mentioned statute.
Finally, registration of the Incorporation document presented before Registrar of the State is discussed in section 12. After fulfilling these requirements contained in Section 11, the registrar shall within a specified period issue a certificate for incorporation of such LLP. Such a certificate should contain signature and seal of the registrar to authenticate that this LLP has been incorporated as per this act.
