Incorporation of a Company under Companies Act, 2013
🔷 1. What is Incorporation of a Company?
Incorporation is the process of legally forming a company, which involves registration under the Companies Act, 2013. Upon incorporation, a company becomes a separate legal entity distinct from its members, capable of owning property, entering into contracts, suing and being sued.
🔷 2. Legal Framework for Incorporation
The Companies Act, 2013 governs the incorporation process primarily under Chapter II (Sections 3 to 22).
Key Sections:
Section 3: Formation of Company
Defines a company as a body corporate formed and registered under this Act or any previous law.
Section 7: Incorporation of Company
Requires filing of documents with the Registrar of Companies (ROC).
Documents include:
Memorandum of Association (MoA)
Articles of Association (AoA)
Details of Directors and Subscribers
Once ROC is satisfied, Certificate of Incorporation is issued.
Section 8: For companies with charitable objectives (like NGOs).
🔷 3. Steps in Incorporation
Name Approval:
Application to the ROC for approval of the company name (via RUN or SPICe forms).
Preparation of MoA and AoA:
MoA defines the company’s scope and objectives.
AoA contains rules for internal management.
Filing of Incorporation Forms with ROC:
Along with prescribed fees, directors’ details, address proof, and identity proofs.
Certificate of Incorporation:
ROC issues this certificate upon satisfaction, which marks the legal existence of the company.
🔷 4. Significance of Incorporation
Separate Legal Entity (Salomon Principle):
Incorporated company has its own legal personality, separate from shareholders/directors.
Limited Liability:
Liability of members is limited to their share capital.
Perpetual Succession:
Company continues irrespective of changes in membership.
🔷 5. Relevant Case Law
✅ Salomon v. Salomon & Co. Ltd. (1897) AC 22 (UK Case)
The foundational case establishing the principle that a company is a separate legal entity distinct from its members.
This principle is fundamental to the incorporation process under Indian law.
✅ K.K Verma v. Union of India (1977)
Citation: AIR 1977 SC 1484
Supreme Court held that incorporation requires compliance with statutory formalities, and once incorporated, the company has its own legal personality.
✅ Rajasthan State Industrial Development & Investment Corporation Ltd. v. Diamond & Gem Development Corporation Ltd. (1992)
Citation: AIR 1992 SC 1417
The Court emphasized the importance of the Certificate of Incorporation issued by ROC.
Held that the company comes into existence only after incorporation under the Companies Act.
✅ Re Delhi Safe Deposit and Investment Co. Ltd. (1964)
The company can act only through its authorized agents after incorporation.
No person can claim rights or liabilities as a company before incorporation.
🔷 6. Doctrine of Indoor Management
Though beyond incorporation strictly, it's worth noting:
Under the Turquand Rule, outsiders dealing with a company can assume that internal procedures have been duly complied with.
This protects third parties and facilitates business.
🔷 7. Consequences of Incorporation
The company can enter into contracts, own assets, incur liabilities.
Can sue or be sued in its own name.
Members are protected by limited liability.
🔷 Summary
| Aspect | Explanation |
|---|---|
| Governing Law | Companies Act, 2013 |
| Documents Required | MoA, AoA, Director details, ID proofs |
| Authority | Registrar of Companies (ROC) |
| Key Outcome | Issuance of Certificate of Incorporation |
| Legal Effect | Separate legal entity, limited liability, perpetual succession |
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