CORPORATE REGULATIONS AND ADMINISTRATION

1. Explain the features of Companies Act, 2013.

The major highlights of the 2013 Act are given below:

 The maximum number of shareholders for a private company is 200 (the

previous cap was at 50).
 The concept of a one-person company.
 Company Law Appellate Tribunal & Company Law Tribunal
 CSR made mandatory

Salient Features of the Companies Act 2013

 It has introduced the concept of ‘Dormant Companies’. Dormant companies are

those that have not engaged in business for two years consecutively.

 It introduced the National Company Law Tribunal. It is a quasi-judicial body in

India adjudicating issues concerning companies. It replaced the Company Law
Board.
 It provides for self-regulation concerning disclosures and transparency rather
than having a government-approval based regime.
 Documents have to be maintained in electronic form.
 Official liquidators have adjudicatory powers for companies having net assets
of up to Rs.1 crore.
 The procedure for mergers and amalgamations have been made faster and
simpler.
 Cross-border mergers are allowed by this Act (foreign company merging with
an Indian company and reverse) but with the permission of the Reserve Bank
of India.
 The concept of a one-person company has been introduced. This is a new type
of private company which may have only one director and one shareholder.
The 1956 Act required at least two directors and two shareholders for a private
company.
 Having independent directors has been made a statutory requirement for public
companies. 
 For a prescribed class of companies, women directors are mandatory.
 All companies should have at least one director who has been a resident of
India for not less than 182 days in the last calendar year.
 The Act provides for entrenchment (apply extra-legal safeguards) of the articles
of association.
  The Act mandates at least 7 days of notice for calling board meetings.
 In this Act, the duties of a Director has been defined. It has also defined the
duties of ‘Key Managerial Personnel’ and ‘Promoter’.
 For public companies, there should be a rotation of audit firms and auditors.
The Act also prevents auditors from performing non-audit services to the
company. In case of non-compliance, there is substantial criminal and civil
liability for an auditor.
 The whole process of rehabilitation and liquidation of the companies in the
case of the financial crisis has been made time-bound.
 The Act makes it mandatory for companies to form CSR committees, and
formulate CSR policies. For certain companies, mandatory disclosures have
been made with regard to CSR.
 Listed companies ought to have one director to represent small shareholders as
well.
 There is provision for search and seizure of documents, during the
investigation, without an order from a magistrate.
 Norms have been made stringent for accepting deposits from the public.
 Setting up of the National Financial Reporting Authority (NFRA) has been
provided for. It engages in the establishment and enforcement of accounting
and auditing standards and oversight of the work of auditors.
 The Act bans key managerial personnel and directors from purchasing call and
put options of shares of the company if such person is reasonably expected to
have access to price-sensitive information.
 The Act offers more power to shareholders in that it provides for shareholders’
approval for many major transactions.

2. Explain the stages/steps in formation of a company.

Since a company is an artificial person, it has to be formed according to legal

provisions. In India, these legal provisions have been provided in the Companies Act,
2013.
Formation of a company involves various stages which are as follows:
1. Promotion stage.
2. Incorporation stage.
3. Capital subscription stage.
4. Commencement of business stage.
All these stages are relevant to forming a public company. For forming a private
company, only the first two stages and a part of the third stage are relevant as it can
commence business immediately after incorporation and receiving money from
signatories to documents who have agreed to subscribe to the specified number of
shares.
Therefore, business commencement stage is not relevant to a private company.
Further, such a company cannot invite the general public for subscribing to its shares.
Therefore, a part of capital subscription stage is not relevant to it.

1. Promotion Stage:
The term ‘promotion’ refers to the sum total of activities by which a business
enterprise is brought into existence. At the promotion stage of a company, the
promoters conceive the idea of promoting a company and the type of activities that it
intends to undertake.
A promoter may be an individual, a group of individuals or one or more companies.
Subsequently, activities related to promoting the company are undertaken.
These activities are as follows:
 Identification of business opportunity and the type of business to be
undertaken.
 Undertaking feasibility study to determine technical, economic and legal
viability of the project to be undertaken by the company.
 Deciding the name of the company to be formed and getting this name
approved from the Registrar of Companies.
 Obtaining consent of the persons who will be signatories to documents to be
submitted to the Registrar of Companies for getting the company registered. (In
the case of a private company, 2 signatories, and in the case of a public
company, 7 signatories are required.)
 Obtaining consent of the persons who will act as first directors (2 required in
the case of a private company and 3 in the case of a public company).
 Selecting professionals who will prepare various relevant documents required
for registration of the company like Memorandum of Association, Articles of
Association, etc., and the professionals who will work as first auditors of the
company.
 Getting relevant documents prepared.

2. Incorporation Stage
Incorporation or registration stage involves putting an application for registering the
company before the concerned Registrar of Companies and getting it registered.
Incorporation stage involves the following activities:
 Filing registration application with the Registrar of Companies along with
relevant documents 
  Scrutiny of the application and documents by the Registrar of Companies.
 Registering the company by the Registrar if all requirements are fulfilled and
entering the name of the company in the relevant register.
 Issue of Certificate of Incorporation by the Registrar of Companies.
On issue of the Certificate of Incorporation, the company comes into existence as an
artificial person.

3. Capital Subscription Stage

After a company is registered, it proceeds to get money through allotment of share
capital to members. Initially, shares are allotted to persons who are signatories to
documents and have agreed to subscribe to the prescribed number of shares. The
procedure for subsequent allotment of shares varies for a private company and a
public company. In a private company, subsequent shares are allotted through
personal contacts. In a public company, shares may be allotted through public issue of
shares.

4. Commencement of Business Stage

For commencing the business, a public company has to obtain the Certificate of
Commencement of Business from the concerned Registrar of Companies.
For this purpose, the company is required to submit the following documents:
 A declaration that the shares to be subscribed on cash basis have been allotted.
 ii. A declaration that all the Directors have paid in cash for the shares
subscribed by them.
 iii. A declaration, signed either by a Director or Secretary of the company, that
the above requirements have been complied with.
The Registrar of Companies scrutinises the above documents and issues the
Certificate of Commencement of Business if all requirements are as per the provisions
of the Companies Act.

3.What are the steps in online registration of companies?

Company Registration is governed by Ministry of Corporate Affairs, Companies Act

2013 and Companies Incorporation Rules, 2014. The criteria for registration of
diverse business forms is different. The whole process of registration is electronic
now. Hence, there is no physical submission of the document to any government
office. You just need to have login credential of MCA portal (mca.gov.in) where you
can submit e-forms for company registration. Depending on the category of business
the forms can be uploaded to this website.

1.Name reservation for a company

A new reservation system has been launched by Ministry of Corporate Affairs on 26th
January 2018. New Web service RUN (Reserve Unique Name) is introduced to
reserve the name for a company for 20 days. Once the name is approved the
incorporation process starts. At this stage, DSC (Digital Signature Certificate) of
Directors is not required. Prior to this form, Applicants need to file form INC 1 for
name reservation where DSC was mandatory.

2. Apply for DSC

The Directors of the company needs to apply for DSC once the name is approved by
the ministry. Class 2 digital signature is enough for submission of MCA Forms. The
DSC is an instrument issued by certifying authorities by which the directors can sign
electronic documents.

3. Preparation of MOA, AOA, and other Documents

Once the name is approved, the company needs to prepared Memorandum and
Articles of Association. All these documents contain information about the company’s
business and its objective. The memorandum of Association tells about the main
object of the company and how the company will do its business. It comprises of paid
up and authorized capital of the company. A number of shares issued to proposed
directors are also stated in the MOA.

Articles of Association contain information regarding the internal management of the

company. It speaks about the daily operation of the company. For submitting MOA
and AOA of the company, the applicant needs to file Form 33 and Form 34. This
forms need to be digitally signed by the directors of the company and should be
witnessed by one person.

4. Application for PAN and TAN

 A new system is launched by MCA wherein no separate application or forms need to

be submitted for securing PAN and TAN of the company. Spice form includes a
section wherein the Area Code for PAN and TAN is filled and based on this
information PAN and TAN is issued.

5. Certificate of Incorporation

 Once all the forms are uploaded on MCA portal, the documents are scrutinized by the
Officer and after verification approves the uploaded form. After approval, a certificate
of incorporation is sent via email to the directors of the company. Once the Registrar
issues the Certificate of Incorporation, the directors can conduct their business
activity.

4. What is SPICe form?

SPICe is the abbreviation for Simplified Performa for Incorporating Company

Electronically. This is the form which was introduced in the year 2016 for ease of
forming and incorporating companies under the Companies Act, 2013. It had a great
positive impact as the duration and complexity of formation and incorporation of
companies reduced largely. Multiple forms were combined and brought together in
one single form and it eased the long process of company incorporation. All
companies formed under Companies Act, 2013 could apply through this form.

Ministry of Corporate Affairs, announced the introduction of new form, under the
Ease of Doing Business (EODB) initiative, which shall replace the existing SPICe
form. This form will be known as SPICe Plus (SPICe+) form. The new SPICe+ form
will be even more helpful and time saving. This form will also bring some changes in
the RUN (Reserve Unique Name) service.

Form SPICe+ (SPICe Plus) – A Single Application Helps in:

 Name reservation
 Incorporation of a new company
 Applying for DIN allotment
 Profession Tax (Maharashtra)
 Bank Account Opening
 TAN (Tax Deduction Account Number)
 Registration under ESIC and EPFO
 GSTIN(Goods and Service Tax Identification Number)