In India, the incorporation of a company is governed by the Companies Act 1956, which is administered by the Central Government of India. It applies to whole of India and to all types of companies, whether registered under this Act or an earlier Act. But it does not apply to universities, co-operative societies, unincorporated trading, scientific and other societies. Incorporation is the most important piece of legislation which empowers the Central Government to regulate the formation, financing, functioning and winding up of all types of companies. Under the Companies Act, an entrepreneur can form two types of companies, namely a private company or a public company.
The Registrar of Companies (ROC) primarily controls the task of incorporation of new companies and the administration of running companies. For registration and incorporation of a company, an application has to be filed with the Registrar of companies of the State in which the company is proposed to be incorporated. The Application for the registration is to be accompanied by the list of selected names, Memorandum of Association, Articles of Association, and other requisite documents.
The Registrar of Companies (ROCs) appointed under Section 609 of the Companies Act 1956, covering various States and Union Territories, are vested with the primary duty of registering companies floated in the respective States and the Union Territories, and ensuring that such companies comply scrupulously with the statutory requirements under the Act.
What is a Company?
A Company is a voluntary association of interested and competent people established for a distinct business objective, name, and range of liabilities. A company commands a legal existence, and is a juristic body or person. Hence, a company is duly empowered to file a suit, and can be represented by a competent authority or person before a Court of law or any other place of justice. However, since a company is not considered as a citizen, it cannot claim any fundamental rights given to citizens. A company is formed and registered under the rules and regulations of The Company Act, 1956.
A Company is a separate legal entity quite distinct from its members and shareholders. There is a distinguished and concrete difference between the ownership and the control over the affairs of the company. Members and shareholders are undoubtedly the legitimate owners of the company, but a company is actually managed, directed, and governed, by the directors who are elected unanimously by all the members of the company.
Characteristics of a Company
Any Company Private or Public formed and registered according to The Company Act of 1956 has the following salient features:
A separate legal entity
An artificial legal body or person
An organized and incorporated body
Limited range of liabilities
Right to enter in contracts
Right to own property
Right to sue
Flexibility of investment
The outstanding advantages of a Company over other forms of business associations or organizations are as follows:
A Company, private or public, is a separate legal entity, independent from the right of ownership of its members from time to time.
All members of company are not empowered to commit any act or omission, or take any action personally on behalf of the company, as a company commands an independent legal personality and identity.
Since a company is a rightful legal entity, therefore it can preferably sue, and also be sued in its registered name.
A company commands the power to own, acquire, sale, or alienate any property in its registered name. No members of the company can ever make any claim over such property of the company, as long as the company is a going concern.
A company is fortified by law to follow the continuity and perpetual succession. And therefore, a company continues to perform it functions naturally and unaffectedly despite the changes, retirement, death, or disability of one or more of its members, in the course of time.
Changes or modifications in the members' interest and in the memorandum of the company are possible to be made but, without affecting adversely the property, activities, business or existence of the company.
Transferability of the company's shares supports and encourages its liquidity and investment, as long as by doing so, there is no any harm to the economic stability of the company.
The members and shareholders of the company can share the profit equitably in precise proportions by way of dividends, and also the company assets, as per their contributions to the company, in the case of winding up of the company.
Larger the number of shareholders, greater the company's fund, and better the growth opportunities.
Highly productive, prolific, and efficient incorporation of the company, results in better professionalism, requisite banking and financial assistance, management, lenient taxation, and well-rounded administration of the company.
A registered company can be dissolved but only according to the provisions of law.
There can be legally recognized interactions and transactions between the company and any of its members or employees, depending on and varying according to the arrangements and provisions of the company Act.