Setting up a company and starting a business

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Once the type of entity is chosen then comes the entire process of actually constructing and putting all the pieces together. Similar to the concept of constructing a house, setting up the company also is an amalgamation of various pre and post incorporation compliances. 

In this note, we have addressed the process for setting up a private limited company since it is most relevant in the context of a startup.

DIN or Director Identification Number

DIN is a unique identification number required to become a director.  It is typically mentioned on all documents that the director signs / attests.
DIN once obtained is valid permanently unless cancelled.

DSC or Digital Signature

All online submissions need to be digitally signed using a DSC. At the time of incorporation, digital signatures must be affixed by each director and subscriber to the Memorandum (in case of Indian subsidiaries).

3 different variants of DSC are available. The DSC has to be registered with the MCA for the purpose of MCA filing. For documents to be filed with the MCA, Class 2 DSC is used.

Name of the Company

Step 1 is to reserve a name. This can be done in the SPICe+ Form( Part A) or  filing an individual form prior to filing the application for incorporation.

MOA and AOA or Charter Documents

Memorandum of Association(MOA)
Defines the business and what activities the company can do.  MOA needs to be carefully drafted by a good consultant. Should be generic and cover adjacent businesses.

Articles of Association(AOA)
By-laws of the company.  Covers internal rules and regulations, governance principles, management controls, transfer provisions and mutual rights and obligations of the shareholders.

Office Premises

Company should have a registered office.

Registered office is where third parties can serve notices. Notices are deemed served if delivered to the registered office.

Certificate of Incorporation or CIN Number

CIN is issued once the company is incorporated.  It is the unique Corporate Identification Number.

The CIN sets out information regarding the company’s nature of business, legal status, details of incorporation etc.

Certificate of Commencement of Business

Before commencing business, a declaration has to be filed with the Registrar in Form INC-20 that:

  1. All information and documents furnished thus far are true, correct and complete.
  2. All subscribers to the Memorandum have made payment towards the shares.
  3. Company has verified its registered office address with the ROC.

PAN / TAN

PAN is the unique identification for the tax authorities and can be used as proof identity etc.

TAN is the unique number used to deposit tax deducted in respect of payments made to third parties.

GSTIN

GST number is generated and displayed on the MCA Portal once CIN is alloted and PAN is allotted by the income tax department.

Note that the office address as registered in the SPICe+ form is taken as the principal place of business.

Opening a Bank Account

It is mandatory for companies to open a bank account with an integrated bank at the time of incorporation.

Currently Kotak Mahindra Bank,Punjab National Bank, ICICI Bank, HDFC Bank and Bank of Baroda have been integrated with AGILE- PRO e form for opening a bank account at the time of incorporation.

Post incorporation, the companies can open a bank account with any other bank.

DIN or Director Identification Number

Process & Sequencing

Application for DIN can be made (a) in Form DIR-3 or (b) at the time of incorporation in Form INC-32 (SPICe+) on the MCA portal. A maximum of 3 Directors can apply for DIN at the time of incorporation.

Resident / Non-Resident Implications

If the applicant is a non-resident, all documents of proof of identity and proof of residential address have to be notarised and apostilled. For identity, passport is mandatory.

Online/Manual
  • Application for DIN can be filed online on the MCA portal.
  • Along with the application a photograph and physically signed self- attested proof of identity and residence has to be submitted.
  • For identity PAN is compulsory for a resident director. 
  • Address proof can be copies of Aadhar or utility bills – telephone, gas, electricity bills etc., not older than two months.

DSC or Digital Signature

Process & Sequencing

DSC is issued by a certifying authority. National Informatics Center (NIC), IDRBT Certifying authority, E-mudhra, NSDL, Capricorn, CDAC, (n)Code Solutions CA and Sify SafeScrypt CA services, are certifying authorities.

Resident / Non-Resident Implications

Both resident and non-resident directors have to mandatorily hold the DSC.
The process for acquiring the DSC is the same for both.

Online/Manual
  • Application for DSC can be filed online or manually. Manual application must be filed along with self-attested proof of supporting documents like Aadhar, PAN, Bank account details and other government proof of identity and residence.
  • Foreign applicant; Proof of address and residence have to be notarised and apostilled
  • Applicants can also use Aadhar eKYC based authentication. No additional documents are required here.

Name of the Company

Process & Sequencing

If filed individually, the form provides flexibility for adding 2 proposed names. If in SPICe+ Form(Part A), only one name can be proposed.

Resident / Non-Resident Implications

Not Applicable

Online/Manual

Completely Online

MOA and AOA or Charter Documents

Process & Sequencing
  • MOA is filed in Form INC-33 with the ROC(Registrar of Companies).
  • AOA is filed in Form INC-34 with the ROC.
  • Both MOA and the AOA are digitally signed by each member subscribing to the Memorandum.
  • They have to be authenticated by an Advocate, a Chartered Accountant, Cost Accountant, or Company Secretary engaged in the formation of the company.
Resident / Non-Resident Implications
  • In case of Indian subscribers, e-MOA and e-AOA needs to be prepared and can be signed digitally with DSC.
  • In case of foreign subscribers, the MOA and AOA needs to be physically signed, notarized and apostilled.
Online/Manual
Both MOA and AOA can be submitted online in case of resident subscribers.

Office Premises

Process & Sequencing
  • The registered office address can be notified to the Registrar in SPICe+ Form INC-32 at the time of incorporation.
  • If the company does not have an official address at the time of incorporation, then the temporary address of correspondence has to be provided. The company has to then register an office premise within a period of 30 days from the date of incorporation. The intimation for verification of such registered office premise has to be filed in Form INC- 22 to the Registrar within 30 days from the date of incorporation .
Resident / Non-Resident Implications

Not applicable

Online/Manual

Verification of registered office address can be filed online with the following supporting documents:

  • Rent agreement with the owner of the property in the name of the proposed company.
  • Utility bill(electricity/ /gas/telephone bill) of the proposed registered office premise in the name of the owner of the property (not older than 60 days).
  • NOC from the owner of the Property.

Certificate of Incorporation or CIN Number

Process & Sequencing
  • No action from applicants. Process by the ROC.
  • On incorporation, the Registrar sends an email with the Certificate of Incorporation to the registered email ID of the company.
Resident / Non-Resident Implications
Not applicable
Online/Manual
Not applicable

Certificate of Commencement of Business

Process & Sequencing
  • Log into the MCA website to file Form. INC-20 A with the Registrar.
  • Declaration has to be provided within 180 days from the date of incorporation.
  • All information declared by the Directors in the Form has to be further verified by a Chartered.
  • Accountant, Cost Accountant or a Company Secretary.
Resident / Non-Resident Implications

Not applicable

Online/Manual

Can be filed with the Registrar online.
Proof of payment towards the shares subscribed has to be attached.

PAN / TAN

Process & Sequencing
  • Can be applied in SPICe+ Form INC-32 at the time of filing the Incorporation application .
  • Once the company is incorporated, the Income tax department allots PAN and TAN.
  • The details of PAN and TAN allotted to the company is reflected in the Certificate of Incorporation.
Resident / Non-Resident Implications
Not applicable
Online/Manual
Completely online

Opening a Bank Account

Process & Sequencing

Can open a bank account using the AGILE-PRO e form (INC-35) linked to the SPICe+ form at the time of incorporation.

Once the company is incorporated and has obtained Certificate of Incorporation and PAN, all necessary information required for the purpose of opening a bank account is automatically sent to the selected bank for processing.

Resident / Non-Resident Implications

AGILE-PRO e form and SPICe+(Part B)Form needs to be digitally signed by the resident director who is also the authorised signatory.

Both forms need to be signed by the same authorised signatory.

Online/Manual

Completely online

The details of the proposed director (i.e. DIN, PAN, name, mobile number, Email id) who will act as an authorised signatory and a passport size photograph in JPG format have to be submitted.

Understanding that the set of procedures involved could hamper the startups ecosystem, the Government of India has introduced various initiatives to simplify the incorporation process. This has allowed entrepreneurs to set up the companies and start the business without diverting their entire focus on compliance.

Follow the steps of this article to bring the company into existence. To start transacting, there are additional procedures that are involved. Have a look at our blog on post incorporation compliances to bring your company to its full scale.

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