bsl project about formation of incorporating company

1. LOVELY PROFESSIONAL UNIVERSITY
Course Code: BSL201 Course Title: LEGAL ASPECTS OF BUSINESS
Course Instructor: Dr. Rajni Chabbra
Academic Task No.: CA 3 Academic Task: Assignment 3
Date of Allotment: 18st April, 2022 Date of submission: : 30th April , 2022
Student’s Name:- Prashant Kumar Singh
Student’s Roll no: RQ2109B81 Student’s Reg. no: 12104497
Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by students
as specified at the time of assigning the task by the instructor)
Learning Outcomes: (we get to know a lot about how a company is formulated as per Incorporation rules and Moa
mentioned in Companies act)
Declaration:
I declare that this Assignment is my individual work. I have not copied it from any other student’s work or from any
other source except where due acknowledgement is made explicitly in the text, nor has any part been written for me by
any other person.
Evaluator’scomments (For Instructor’s use only)
GENERAL
OBSERVATION
SUGGESTION FOR
IMPROVEMENT
BEST PART OF
ASSIGNMENT
Evaluator’s Signature and Date:-
Marks Obtained: Max. Marks:- 30

2. TABLE OF CONTENTS
S.no Contents
1 Introduction
2 About Incorporation of The Company.
3 Procedure of Company formation
4 Objectives of the Company.
5 MOA of the Company.
6 Division of the Capital of the Company.
7 Conclusion.
8 Registration by E-form under the
SPICe (Simplified Proforma for Incorporating Company
Electronically) introduced by The ministry of corporate affairs
(MCA)
1.INTRODUCTION
Business is extremely important to a country’s economy because businesses provide both goods and services.
Businesses do these things much more efficiently than individuals could on their own. Businesses are the
means by which we get most of the goods and services that we, as consumers, want and need. Businesses are
also the means by which many people get their jobs. Businesses create job opportunities because they need
people to produce and sell their goods and services to consumers.
As much as the Businesses are important to the world, in the same manner incorporation of Businesses as per
the rules of the country to which the Business belongs to is very important. A company comes into existence
is generally by a process referred to as incorporation. Once a company has been legally incorporated, it
becomes a distinct entity from those who invest their capital and labour to run the company.
The most important reason to incorporate your business is to protect yourself from business liabilities. If you
are operating an unincorporated business, its creditors may be able to reach your personal assets. Assets such
as your personal residence and personal bank account can be used to pay business debts or to satisfy a lawsuit
against your business. If you incorporate, business creditors cannot reach your personal assets, as an
incorporated business and its owners are separate entities. Incorporating the business also provides the
business with tax advantage.

3. In this report, we are going to discuss about the Formulation of “SINGH PRIVATE LIMITED” as per the
incorporation rules mentioned in the Indian Companies Act,2013. We will also be discussing about the
objectives of the company, MOA, its division of capital and conclusion.
2.About Incorporation of The Company.
Company is a a legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply
to the government for an independent organization to be created, which can then focus on pursuing set
objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue
and be sued, own property, hire employees or loan and borrow money.
Incorporation / Formation of company involve a number of steps. We have tried to simplify the procedure to
the maximum extent possible.
Minimum Requirement of a Private Company:
Minimum 2 Shareholders
Minimum 2 Directors (The directors and shareholders can be same person)
Minimum Authorised Share Capital shall be Rs. 100,000 (INR One Lac)
DSC (Digital Signature Certificate) for all the Directors (for applying of DIN)
DIN (Director Identification Number) for all the Directors
Minimum Requirement of a Public Company:
Minimum 7 Shareholders
Minimum 3 Directors (The directors and shareholders can be same person)
Minimum Authorised Share Capital shall be Rs. 500,000 (INR Five Lac)
DIN (Director Identification Number) for all the Directors
DSC (Digital Signature Certificate) for one of the Directors
Brief of procedure / steps to company incorporation:
S.No. Procedure Detail
1 Obtain Digital Signature Certificate (DSC)
Obtain a Digital Signature Certificate from
authorized DSC issuing authority.
2
Obtain Director Identification No. (DIN)
[S.153]
Make Application in Form DIR-3 [Rule 9 of
Chapter XI Rules]

4. 3
Register DSC in the name of Director on
MCA portal
4 Apply for Reservation of Name [S.4(4)]
Application in Form No. INC.1 [Rule 9]. The
same shall be reserved for a period of 60 days
5
Drafting and Printing of Memorandum and
Articles of Asociation
6 Filing of INC -7, DIR 12 & INC
22Adoption of Memorandum of
Association [S.4(6)]Adoption of Articles
of Association [S.5(6)]
Discussed Later
7 Commencement of business [S.11] Mandatory to file Declaration with ROC in
Form
No. INC.21 [Rule 24]
8. Registered Office [S.12] A company shall have a registered office within
15 days of Incorporation and it shall file Form
No.INC.22 [Rule 25] to verify the same

5. 3. Procedure of Company formation
Select Name of Person: - Under Section-149(1) (a) of Companies Act, 2013. Select the name
of directors i.e. who will be directors (At least Three Name for Public Company and Two for
Private Company) [Rule-17] (The Companies (Incorporation) Rules, 2014.
For our company we gave two names as our company is a private company
1. Prashant Kumar Singh
2. Suraj Kumar Singh
out of which we get the company name as “SINGH PRIVATE LIMITED”.
Apply for Director Identification Number (DIN): - It is a unique identification number
allotted to the existing director of the company or intending to be appointment as director of a
company according to Section-152(3), Section-153 & Section-154 of the Companies Act,
2013.
It is only after the DIN is approved; the incorporation documents can be filed with the Registrar
Form No.-DIR-3. However, the name approval can be obtained prior to approval of DIN. It
takes about 7 days for getting the DIN approved, provided all proper documents are furnished.
Fees to be paid for the allotment of DIN is Rs.500.
Documents to be furnished for getting DIN application are:
· Identity proof: Copy of PAN card is mandatory.
· Address proof: Copy of passport or Voter Id or Ration card or Electricity bill or any other
address proof.
· Passport size photograph (latest) in soft copy (.JPEG format).
· Current occupation.
· Email address of applicant.
· Education qualification and contact number of applicants. · Verification to be signed by the
applicant.
For the DIN number of our company we also submitted all these documents.
Reservation of a company name: - First, the applicants are required to apply for a name in
Form No.INC-1. The fee for seeking a name approval is Rs.1000/- as prescribed and 60 days
are allowed for incorporating the company. The name should not be undesirable means it
should be identical, resembling, restricted or prohibited. A company is identified through the
name it registers. The name of the company is stated in the Memorandum of Association of the
company. The company’s name must end with “Limited” if it’s a ‘public company’ and
“Private Limited” if it’s a ‘private company’.

6. To check whether the chosen name is available for adoption, the promoters have to write an
application to the Registrar of Companies of the state. If the chosen name is available, then the
registrar allows the company to adopt the name given after completing all the legal formalities.
Here for getting “SINGH PRIVATE LIMITED” registered we went through the same process
and get our desired company name registered.
Preparation of Memorandum of Association and Articles of Association: - The
memorandum of association (MOA) should be crafted 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 MOA of a company can be referred to as its constitution or rulebook. The
memorandum states the field in which the company will do business, objectives of the
company, as well as the type of business the company plans to undertake.
Drafting of Memorandum must be done in which:-
· Name of the Company lasts with word “Limited” in case of a public limited or the last words
“Private Limited” in case of a private limited company.
· State in which the registered office of the company is to be situated.
· Object of the company for which it is proposed.
· Liabilities of the members of the company Limited/Unlimited.
· Mention the amount of share capital in case of company having a share capital.
· In case of the One Person Company the name of the person who in the event of death of the
subscriber shall become the member of the company.
According to Section-4(6) of The Companies Act, 2013 MoA shall be in respective form as
prescribed in Table A, B, C, D and E of Schedule-I as may be applicable.
Memorandum of Association (MOA) filing fee (in case of company not having share
capital)
Number of members Fee applicable
Up to 20 members 2,000
More than 20 but up to 200 members 5,000
More than 200 members (If number
of members not stated as unlimited in
AOA
5,000 Rupees 10 for every member,
after the first 200
Articles of Association is basically a document that states rules which the internal management
of the company will follow. The article creates a contract between the company and its
members. The article mentions the rights, duties, and liabilities of the members. It is equally
binding on all the members of the company.
In drafting of the AoA of company it shall contain:-
Regulation for management of the Company.
It shall also contain such, matter as may be prescribed.

7. May contain the provisions for entrenchment to the effect that specified provision of the Article
may be altered only if condition or procedures as that are more restrictive than those applicable
in the case of a special resolution are met or compiled with.
According to Section-5(6) of The Companies Act, 2013 the Article (AoA) shall be in respective
form provided in Table F, G, H, I and J of Schedule-I as may be applicable to such company.
Fee for filing Articles of association (in case of company having share capital)
Nominal Share Capital Fee
applicable
Less than 1,00,000 Rupees 200
1,00,000 to 4,99,999 Rupees 300
5,00,000 to 24,99,999 Rupees 400
25,00,000 to 99,99,999 Rupees 500
1,00,00,000 or more Rupees 600
For our Company we also have made the MOA and AoA which will be discussed in the latter
part of this report.
Printing, Signing and Stamping, Vetting of Memorandum and Articles:- The Registrar of
Companies often helps promoters to draw up and draft the memorandum and articles of
association. Above all, with promoters who have no previous experience in drafting the
memorandum and articles. Once these have been vetted by the Registrar of Companies, then
the memorandum of association and articles of association can be printed. The memorandum
and articles are consequently divided into paragraphs and arranged chronologically. The
articles have to be individually signed by each subscriber or their representative in the presence
of a witness, otherwise, it will not be valid.
For our company we also went through the same process and get the articles signed by our
subscribers in front of the witnesses for making the articles valid.
Power of Attorney:- To fulfil the legal and complex documentation formalities of
incorporation of a company, the promoter may then employ an attorney who will have the
authority to act on behalf of the company and its promoters. The attorney will have the
authority to make changes in the memorandum and articles and moreover, other documents
that have been filed with the registrar.
Here for our company we have given the power of attorney to the CEO of the company who
will be responsible for taking all the decisions of the company.
Other Documents to be Filed with the Registrar of Companies:-
The First e-Form No.32 – Consent of directors
The Second e-Form No.18 – Notice of Registered Address
The Third e-Form No.32. – Particulars of Directors

8. For our company, we also have to submit all these documents.
Statutory Declaration in e-Form No.1:- This declaration, furthermore, states that ‘All the
requirements of the Companies Act and the rules thereunder have been compiled with respect
of and matters precedent and incidental thereto.’
For our company also we filled the Statutory Declaration to ensure that we have completed all
the requirements of the companies act,2013.
Payment of Registration Fees:- A prescribed fee is to be paid to the Registrar of Companies
during the course of incorporation. It depends on the nominal capital of the companies which
also have share capital.
By a
company
having
an
authorized share capital of:-
Similarly, for our company also we paid the prescribed fee to the registrar of companies for
incorporation of our company.
Nominal
Share capital Other than OPCs and Small Companies Small Companies
Fixed For every 10,
000 or part
thereof
Fixed For every 10,
000 or part
thereof
Up to 1, 00,
000 NA 2,000 N/A
More than
1,00,000 up
to
5,00,000
5,000
400
2,000
N/A
More than
5,00,000 up
to
10,00,000
5,000
300
2,000
N/A
More than
10,00,000 up
to
50,00,000
21,000
300
2,000
200
More than
50,00,000 up
to
1,00,00,000
36,000
1,56,000
100 N/A N/A

9. Certificate of Incorporation:- If the Registrar is completely satisfied that all requirements
have been fulfilled by the company that is being incorporated, then he will register the company
and issue a certificate of incorporation. As a result, the incorporation certificate provided by
the Registrar is definite proof that all requirements of the Act have been met.
Finally, we also get the certificate of incorporation for our company which proves that we have
met all the requirements of the companies act,2013.
❖ A sample image of the “Certificate of incorporation of a company”.

10. 4.Objectives of “SINGH PRIVATE
LIMITED”
Profitability: - This is one of the most important objectives of our business. We have setup
business to achieve profits for its owner or shareholders. But it does not mean that we should
earn profit in anyway either by hook or crook. We should earn profit by working under rules
and regulations or by following ethical practices only.
Growth: - Another important objective of our business is to achieve growth. The growth
should be in terms of increase in profit, revenue, capacity, number of employees and employee
prosperity, etc.
Stability: - Stability means continuity of business. Our business should achieve stability in
terms of customer satisfaction, creditworthiness, employee satisfaction etc. A stable
organization can easily handle changing dynamics of markets.
Efficiency: - An efficient or aggressive working environment. Our business will always try to
achieve the best in its field. Efficiency is considered in terms of labour productivity, energy
consumption, quality control etc.
Survival: - Our business will have the capability to survive markets jolts or shocks. Our
business will be there with a vision of long-term existence.
Supply of Quality products at Fair Prices: - Our business will ensure that there is a regular
supply of useful products with fair quality and at reasonable prices. Supply of adulterated
goods, inferior quality goods, unusable or harmful products are detrimental to the survival of
business. It must be noted that customer is now more educated and quality conscious and
expects value for his money spent. So, for our company providing quality product will be at
priority.
Avoidance of Unfair Trade Practices: - Business enterprise should not indulge in anti-social
and unfair trade practices like black marketing, hoarding, adulteration, etc. Such practices are
not only illegal but also hamper the image of business community. So, our business
organization will aim to avoid such undesirable activities.
Generation of Employment Opportunities: - Our business enterprise will create sufficient
employment opportunities without any discrimination as to caste, religion, sex, etc.

11. 5.Memorandum of Association of the
Company.
Main document of the company
It defines the objects of the company for which it is established.
It lays down the conditions upon which alone the company allowed to be formed.
Charter of the constitution of the company
It defines the scope of its activity and also states that anything beyond it is
unauthorized and illegal.
The Memorandum of Association
Must be printed
Divided into paragraphs
Signed by each subscriber
Add his name, address and description
Presence of at least one witness who is to attest the signature.
➢ Contents of MOA: -
Name of the company
Registered office of the company
Objects of the company
Liability of the members
Details of the capital of the company
Subscription or Association clause
➢ Name Clause
The company is a legal entity. Therefore, it must have its name to establish it
identity.
The name of the company should not be similar, undesirable, or which will
mislead the public. E.g. Indian National flag, name or pictorial representation of
Mahatma Gandhi or Prime Minister of India, etc.
Its use has been, therefore, prohibited by the Government under the Emblems and
Names (prevention of improper use) Act,1950.
The company can change its name by passing a special resolution and obtaining
the approval of central government.
❖ We have registered our company name by abiding all the rules mentioned in the Name clause
of the Memorandum of association.

12. ➢ Registered Office clause
Every company must have a registered office from the day it starts its business or within 30
days of getting the Certificate of Incorporation, whichever is earlier.
Memorandum of Association must state the name of the state in which the
registered office of the company is situated.
This is clause is important as it mentions the residence for the purpose of the
communication with the company.
It determines the jurisdiction of the company and also mentions the place where
all the records of company are maintained.
Where the company wants to change its registered office from one state to another
then it can do so by passing a special resolution as well as by confirmation of
Company Law Board.
❖ The details about the address of company is mentioned in the MOA of
company as per the rules mentioned in the Registered office clause.
➢ Objective clause
✓ The objective clause is considered the most important in the MOA.
It defines and limits the scope of the company's operations.
It details the company's scope of activity for the members and explains how the members'
capital will be used.
It protects shareholders’ funds and ensures the funds will be used for the specific business
purposes for which they were raised and that they won't be risked in other endeavours.
❖ We have mentioned all the objectives of our company that how the capital of the company
is divided and how the capital is going to be utilised for the growth of the company.
➢ Object clause
✓ The object clause explained why the company is establishing. Companies aren't legally
allowed to do any kind of business other than the kind of business that is specifically stated in
this clause. An object clause should contain:
A list of the main objects the company will be pursuing after it's Incorporated
Any other objects that aren't included in the main objects or incidental object
Nothing illegal
Nothing that's against the public interest
Nothing that's against the country's general rule of law

13. ❖ We have mentioned all the objects for which the company is being established, keeping all
the things in mind which are mentioned in the Object clause.
➢ Liability clause
This clause states that the liability of the members is limited to the extent of the shares
subscribed by the member or shareholders if the company is formed with share capital.
Amount of capital with which the company is to be registered and its division into shares of a
fixed amount must be stated in the MOA of a company.
The capital with the company is registered is called “Authorised capital” or
“Registered capital”.
❖ We have given details about the liability of our company as per the Liability clause of the
Memorandum of association.
➢ Capital clause
✓ The capital clause lists information about the total capital held by the proposed company.
This amount is called the company's authorized capital. Companies aren't permitted to collect
more money than the amount listed under authorized capital. The way the capital is divided
into equity share capital and preference share capital also needs to be listed in the capital clause.
The number of shares the company puts in equity share capital and preference share capital,
alongside their value, needs to be included in the MOA.
❖ We have given details of the company’s capital as per the Capital clause of the MOA.
➢ Association clause
✓ The association clause explains that any individual signing the bottom of the MOA wants to
be part of the association that's being formed by the memorandum. The MOA has to be signed
by at least seven people or more if it's a public company. It has to be signed by at least two or
more people if it's a private company. The signatures also have to be affirmed by witnesses.
There can be one witness for all of the signatures, but none of the subscribers can witness the
signatures of the others. All subscribers and witnesses must provide their addresses and
occupations in writing.
❖ The MoA was duly signed by the members as per the rules mentioned in the Association
clause.
6.Division of the share capital of the
company

14. Share Capital means the amount invested by the owners of the company for running the
business. Shareholders are considered as the owners of the Company. As there are more than
one shareholder / owner in a company, the total capital of the company is divided in into small
units called ‘Share’ for ease of distribution and identification.
Different types of share capital of the company: -
Authorized Share Capital
The Authorized Capital is the maximum amount a company can raise from its shareholders as
Share Capital. This amount is referred in Capital Clause of Memorandum of Association
(MOA) of the Company. In case the company is required to raise more capital, the company
can increase the authorized capital by altering its MOA with the approval of its members.
Authorized Capital can be classified into different classes of shares with face value not less
than ₹ 1.00.
Issued Share Capital
Company can allocate a portion of its authorized capital from time to time to the investors and
shareholder and collect capital investment by way of issue of shares. It is not necessary to issue
full amount of authorized capital at a time. Issued Capital is the amount offered by the company
from time to time proposed investors.
Shares can be issued at face value (par value) or at a Premium. Also, the company has to issue
Share Certificates to the shareholders within 60 days of share issue.
Subscribed Share Capital
The total amount of capital that the investors / shareholders are greed to pay is called as
subscribed capital of company. The subscribed capital shall be always equal or less than the
issued capital of the company.
Called up Share Capital
Called-up capital refers to the particular amount of capital which has been called for payment.
The company issuing the shares may call-up the capital partly or fully. If the shares are partly
called, the remaining part is considered to be yet to be called and hence named as partly paid-
up share capital. Once the shareholder pays the remaining amount of share capital, it is
considered to be fully paid up.
Paid up Share Capital
The paid-up capital refers to any amount of money which has been paid-up with respect to the
shares which are being called by the company. The shareholders receive Shares in the company
for the capital payments. Paid-up capital can never be more than the authorized capital of the
company.
The capital distribution of “SINGH PRIVATE
LIMITED”
Classification of Share Capital Amount-₹
Authorized Capital of Company 10,00,000.00

15. Issued Capital of Company 4,00,000.00
Subscribed Capital of Company 4,00,000.00
Called up Capital of Company 4,00,000.00
Paid-up Capital of Company 3,00,000.00
➢ Key points in this Table:
Registered Capital is Rs.10 Lakhs
Issued / Subscribed / Called up Capital is Rs.4 Lakhs
Paid Up Capital is Rs.3 Lakhs Only. Company Can issue further shares up to Rs.6 Lakhs
7.Conclusion
The incorporation of the business is the most important thing which is to be done by anyone
who is planning to start a company. Not only incorporation provides the protection for the
owners of the company, but it also provides a number of advantages to the company like
Corporate Personality, Have Easier Access to Capital, Gain Anonymity, Perpetual Existence,
Enhance Your Business’ Credibility etc.
By this report we came to learn a lot about the importance of incorporation for any organisation
either its private or public. We also learned the process for incorporating a company as per the
companies act,2013. For any company to get itself registered as a legal entity have to follow
all those steps mentioned in the procedure of company formation in India as per the company
act,2013.
Also, we get to learn about the basic objectives of a company for which a company is formed.
Basically, most of the companies are having objective of profitability and growth but they also
carry the social responsibilities which are to be performed by the corporates for the welfare of
the society such as generating good amount of employment opportunities so that much number
of people of the society can have job. The company’s social objectives also include providing
good quality products to the customers so that the health of the people could not get affected.
Apart from these we also learned about how the MOA of a company is formed as well as what
are the different clause mentioned in the MOA of a company. We got to know the details
mentioned in each clause of the MOA.

16. We also learned about the different types of capital available in a company. How the total
capital is divided into different kinds of capital. Not only this but we also learned the different
kinds of share that are issued by a company.
Overall this report provides a good learning experience for everyone and mostly to those who
are looking to start a company of their own. This report will guide them in the formation of
their business.
8.Registration by E-form under the SPICe
The ministry of corporate affairs (MCA) has recently introduced an E-form under the SPICe
(Simplified
Proforma for Incorporating Company Electronically) scheme by notifying under companies
(Incorporation) Fourth Amendment Rules, 2016. Through this E-form, INC-32 along with
MOA in a company can be incorporated E-form INC-33 and AOA in E-form INC-34. This
simplified e-form has been introduced to further simplify the incorporation of a company
electronically.
Through this amendment, MCA has introduced filling of pre-drafted MOA and AOA
electronically. The major change brought by MCA for simplifying incorporation of company
was brought in 2015 where the incorporation is by filling E-form INC-29 as against the 5
forms (i.e. DIR-3 for application for obtaining DIN, INC-1 for approving the name of
company, INC-7 for registration of company with MOA and AOA, INC-22 for registered
office and Form DIR-12 for first directors of company) filed before the change.
Due to this change, the whole process of incorporation in a single form would take about 48
hr for approval. MCA to facilitate the incorporation process introduced SPICe E-form INC-
32to provide more facilities than the Form INC-29 by introducing filing of Memorandum and
Article of Association electronically. So now we can incorporate a company by following:
1. INC-7, DIR-12 & INC-22
2. INC-29 (Substituted by INC-32)
3. INC-32
We can form following companies using INC32 form
1. Part I Company
2. Producer Company
3. Section 8 Company (was not available in INC-29)
4. New Company – Public or Private or OPC
Purpose of the INC32 E-Form
Form INC-32 deals with a single form for the reservation of name, incorporation of a new
company or for allotment of DIN. It is accompanied by the documents that support it like
details of Directors & subscribers, MoA and AoA etc. if the form is processed and is
complete then the company will be registered and CIN as well as DIN will be given to the

17. Company and the proposed Directors. While incorporating a company minimum 3 directors
are allowed for using this form for application for allotment of DIN.
Mandatory Attachments for the form
• Affidavit and declaration by first subscribers and directors.
• Proofs of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with
rent receipts).
• A copy of the utility bills (not older than two months).
Point 1 : Even if you have applied in form INC-1, still you can file INC-32. This feature was
not available in E-Form INC-29. We can also apply for the name of the company though form
INC-32.
Point 2 : MOA and AOA are provided differently in electronic form E-Form INC-33 and E-
Form INC-34.
In E-form INC-33, you have to mention the objects of the company and in E-Form INC-34 you
have to provide for pre-drafted clauses of AOA.
Point 3 : The subscribers and the witness of MOA and AOA will affix their digital signature
on the E- Form INC-33 and INC-34.
Point 4 : Information under form INC-32 is more than Form INC-29. It not only fulfils the
purpose of 5 forms at one time but also facilitates MOA and AOA filing
Point 5 : The MCA has provided the procedure for the conversion of a company limited by
guarantee into a company limited by share.
Point 6 : Date of signing MOA & AOA will be the date of affixing Digital signature.
Point 7 : In Form INC-34 you have to select the table which is applicable to you and then the
clauses will appear for the same.
Process and detailed procedure by MCA E-form under the SPICe (Simplified Proforma for
Incorporating Company Electronically) scheme by notifying under companies (Incorporation)
Fourth Amendment Rules, 2016.