Blog Details

Author - Associate Aashi Agrawal

Along with certain risks, there come many advantages with incorporating a company, business, trade or commerce. The structured procedure of incorporation results in creating a legal entity that is referred to as ‘corporation’. Incorporation allows a company to become a legal person in the eyes of law and separates it from its incorporators from the date of incorporation. Additionally, incorporation provides the corporation for personal assets protection, tax benefits. opportunities for raising capital and much more.

Incorporation, in literal terms, means formation. Incorporation of a company refers to a legal process for forming a corporate and separate legal entity. The formed corporations are then identified with terms like “Inc” or “Ltd”. From the date of the incorporation mentioned in the certificate of incorporation, the corporation is formed as a body corporate by the name provided in its Memorandum of Association and is capable of exercising all its functions under Companies Act, 2013 such as the power to hold, acquire and dispose of the property in its own name.

Section 3(1) of the Companies Act, 2013, provides that a company may be formed for any lawful purpose by:

• seven or more persons, for forming a Public Company

• two or more persons, for forming a Private Company, or

• one person, for forming a One Person Company

Section 7 of the Companies Act, 2013, provides procedural aspects for the incorporation of a company. 

A Certificate of Incorporation given by the Registrar shall be conclusive evidence that all the requirements of the act have been complied and the company has come into existence with the right and liabilities of a natural person in the eyes of law.

A major amendment has been made regarding Companies (Registration Offices and Fees) Rules, 2004 on 20th January 2018 which has come into force from 26th January 2018. The key amendment by MCA vide Notification No. G.S.R 48(E) provides a provision for the incorporation of all companies with authorized capital up to Rs. 10 lacs (in case of a company having share capital) or up to 20 members (in case of a company not having share capital) without payment of any registration fees, i.e. with zero fees.

The registration fee payable by the company to the government consists of different components:

• Fee payable for obtaining company name application

• Company registration fee (Form No.INC-32-SPICe)

• The filing fee for various documents (Form No.INC-33-SPICe for Memorandum of Association and Form No.INC-34-SPICe for Articles of Association)

• Stamp duty

Before this amendment, the total payable amount on registration including all the above-mentioned components amounted to RS.30950.

After this amendment, charges on Form NO. INC-32-SPICe, Form NO. INC-22-SPICe and Form NO. INC-34-SPICe are NILL. Hence, the total amount payable on registration on companies with an authorized capital up to Rs. 10 lacs is Rs. 3050.

However, if the company registered with ZERO fees at the time of registration increases its capital at any time, it is liable to pay a fee on the capital increase at the regular rate and also the fee that was exempted at the time of registration.

This amendment by the MCA is helping to promote entrepreneurship and encourage youth to come forward with their brilliant business ideas.

Thus, incorporation provides certain advantages to the company and also binds the incorporators from taking personal advantages in the name of the corporation.