THE COMPANIES BILL, 2011
Let us understand about ‘Incorporation of Company’
May we divide this section into following three areas?
i. Action from the Company.
ii. Action from the Registrar.
iii. Action from the Tribunal.
Before going into the subject areas, let us focus on some of the terminology, we need to familiar with
i. Memorandum of Association.
ii. Articles of Association.
iii. Subscribers of the Memorandum.
iv. First Directors of the Company in the Articles.
v. Registrar, within whose jurisdiction.
vi. An Advocate in Practice.
vii. A Chartered Accountant in Practice.
viii. A Cost Accountant in Practice.
ix. A Company Secretary in Practice.
x. Director of the Company. (first named in the Articles)
xi. Manager of the Company. (first named in the Articles)
xii. Secretary of the Company. (first named in the Articles)
xiii. Registering the documents/information in the Register.
xiv. “Director Identification Number”.
xv. Issuing “Certificate of Incorporation”.
xvi. Allotting “Corporate Identity Number”
xvii. Preserving the documents/information till its dissolution.
xviii. Liable for action under section 447.
xix. Tribunal may take action, on incorrect information/Documents.
First Area - Action from the Company
Prepare following Documents:
i. Memorandum of Association
ii. Articles of Association
iii. A Declaration by a prescribed person, engaged in the formation of the Company
iv. A Declaration by a person named in the articles as a director, manager or secretary of the Company
v. An affidavit from each of the subscribers to the memorandum
vi. An affidavit from the named first directors of the Company in the Articles
Provide following information:
i. Address for Correspondence
ii. Particulars of every subscriber to the memorandum along with proof of identity
iii. Particulars of the persons mentioned in the articles as the first directors of the company
iv. Particulars of the interests of the persons mentioned in the articles as the first directors of the company
Ensure that the above information is Correct.
Ensure that the above documents contain the Correct Information.
Preserve such Original Documents along with information at the Registered Office, till its dissolution under this Act.
Consequences on incorrect information or documents carrying incorrect information.
Above points are explained in the following steps.
Step 1: Memorandum of Association
Prepare the “Memorandum of Association of the company” as per the provisions of Sec 4. Preparation of it includes being signed by all the subscribers who subscribed their names to the Memorandum.
Step 2: Articles of Association
Prepare the “Articles of Association of the company” as per the provisions of Sec 5. Preparation of it includes being signed by all the subscribers who subscribed their names to the Memorandum.
Here you remember that first subscribers subscribe their names to the Memorandum. Then the very members who subscribed their names to the memorandum will sign the Articles of association. This point is not specified by any provision of Sec 5, but the it will be clear if we go through following provision:
“Sec 5(6) The articles of a company shall be in respective forms specified in Tables, F, G, H, I and J in Schedule I as may be applicable to such company.” It says “The Articles shall be signed by each subscriber of the memorandum of association who shall add his address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any, and such signatures shall be in form specified”
“Sec 7(1)(a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed;” is complied with above both steps.
Step 3: A Declaration by a prescribed person, engaged in the formation of the Company
A declaration carrying the statement “that all the requirements of this Act and the rules made there under in respect of registration and matters precedent or incidental thereto have been complied with” in the prescribed form by one of the following who is engaged in the formation of the company
i. An Advocate in Practice.
ii. A Chartered Accountant in Practice.
iii. A Cost Accountant in Practice.
iv. A Company Secretary in Practice.
Step 4: A Declaration by a person named in the articles as a director, manager or secretary of the Company
A declaration carrying the statement “that all the requirements of this Act and the rules made there under in respect of registration and matters precedent or incidental thereto have been complied with” in the prescribed form by a person named in the articles
i. As a Director of the Company or
ii. As a Manager of the Company or
iii. As a secretary of the Company
Provisions of Sec 7(1)(b) are observed in Step 3 and Step 4
Step 5:
An affidavit from each of the subscribers to the memorandum
An affidavit from each of the subscribers to the memorandum that “
i. he is not convicted of any offence in connection with the promotion, formation or management of any company, or
ii. that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and
iii. that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;”
Step 6:
An affidavit from the named first directors of the Company in the Articles
An affidavit from the named first directors of the Company in the Articles “
i. he is not convicted of any offence in connection with the promotion, formation or management of any company, or
ii. that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and
iii. that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;”
Above Step 5 and Step 6 observed the provisions of Sec 7(1)(c)
Step 7: Address for Correspondence
If the Registered office is established, provide its address else provide the address for correspondence till its registered office is established;
Step 8:
Following Particulars of every subscriber to the memorandum along with proof of identity
Provide particulars like:
i. Name
ii. Surname or Family name
iii. Residential Address
iv. Nationality
v. Such other prescribed particulars
Of every subscriber to the Memorandum along with Proof of Identity, as may be prescribed.
In the case of a subscriber being a Body Corporate, such particulars as may be prescribed.
Step 9:
Following Particulars of the persons mentioned in the articles as the first directors of the company, along with proof ‘Director Identification Number’
Provide particulars like:
i. Name
ii. Surname or Family name
iii. Residential Address
iv. Nationality
v. Such other prescribed particulars
Of the persons mentioned in the articles as the first directors of the company along with Proof of Identity, as may be prescribed.
Step 10:
Particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms in other bodies corporate
Along with their consent to act as directors of the company in such form and manner as may be prescribed
Step 11:
Preserve above cited Documents and Information as originally filed with the Registrar till its dissolution under this Act (Sec 7 (4))
Second Area - Action from the Registrar
Registrar of the jurisdiction
Above cited Documents and Information shall be filed with the Registrar within whose jurisdiction the Registered Office of a company is proposed to be situated.
Submission of the Documents
Above cited Documents and Information shall be filed with the Registrar of the jurisdiction, for registration.
Role of the Registrar (Sec 7(2))
On the basis of the above Documents and information, the Registrar
i. Shall register all the Documents and information referred to, in the Register
ii. Shall issue a “Certificate of Incorporation” in the prescribed form to the effect that the proposed company is incorporated under this Act (Sec 7(2))
iii. Shall allot to the company a ‘Corporate Identity Number’ which shall be a distinct identity for the company and which shall also be included in the Certificate.
You might have observed above that the concerned jurisdictional Registrar:
i. Shall register the documents/information, submitted
ii. Shall issue a “Certificate of Incorporation”
iii. Shall allot a “Corporate Identity Number”
Third Area – Action from the Tribunal
Liable for action under section 447 on Incorrect Information / Incorrect Documents
Consequences on incorrect information or documents carrying incorrect information filed with the Registrar.
The persons named as the first directors of the company and the persons following:
i. An Advocate in Practice.
ii. A Chartered Accountant in Practice.
iii. A Cost Accountant in Practice.
iv. A Company Secretary in Practice.
v. A Person, First Named as a Director of the Company.
vi. A Person, First Named as a Manager of the Company. or
vii. A Person, First named as a secretary of the Company.
shall be liable for action under section 447
Consequences may be as follow:
On being satisfied or on an application, the tribunal may:
i. direct that liability of the members shall be unlimited; or
ii. direct removal of the name of the company from the register of companies; or
iii. pass an order for the winding up of the company; or
iv. pass such other orders as it may deem fit:
v. pass such orders, as it may think fit, for regulation of the management of the company
“The company shall be given a reasonable opportunity of being heard in the matter” the proviso says so.
Let us see above points, as they are in the Companies Bill 2011
Sec 7.
(1) There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:-
(a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed;
(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, 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;
(c) an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;
(d) the address for correspondence till its registered office is established;
(e) the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;
(f) the particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and
(g) the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed.
(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that subsection in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.
(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate.
(4) The company shall maintain and preserve at its registered office copies of all documents and information as originally filed under sub-section (1) till its dissolution under this Act.
(5) If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.
(6) Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of subsection (1) shall each be liable for action under section 447.
(7) Without prejudice to the provisions of sub-section (6), where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,—
(a) pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or
(b) direct that liability of the members shall be unlimited; or
(c) direct removal of the name of the company from the register of companies; or
(d) pass an order for the winding up of the company; or
(e) pass such other orders as it may deem fit:
Provided that before making any order under this sub-section,—
(i) the company shall be given a reasonable opportunity of being heard in the matter; and
(ii) the Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability.
Cross check what we can recollect?
i. Conviction of an offence in connection with the promotion of a company.
ii. Being found of a guilty of any fraud to any company during the preceding five years.
iii.Being found of a guilty of any misfeasance to any company during the preceding five years.
iv. Being found of a guilty of any breach of duty to any company during the preceding five years.
v. Conviction of an offence not in connection with the promotion of a company.
vi. Being found of a guilty of any fraud not to any company during the preceding five years.
vii. Being found of a guilty of any misfeasance not to any company during the preceding five years.
viii. Being found of a guilty of any breach of duty not to any company during the preceding five years.
-Identify which of the above statements disable one to become a director of a Company and
-Identify which of the above statements disable one to become a subscriber to the Memorandum of a Company.
Sec 7(1)(c )
Dear Reader,
Familiar with the terminology of the Companies Bill, 2011.
Certainly, you can command respect among your professional fraternity.
Understand the Act, in its own perspective.
Understand the Act, the way how it expects us.
I request you always read the Act as it is.
Thanking you.
Venkateswara Rao Sapare, Hyderabad.
This Article is 4th in my series of articles about the Companies Bill, 2011. Shortly, you may read 1st, 2nd & third.
Rest may follow soon.
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