If you are an entrepreneur, it is likely that you plan to form a new company. But just the thought of creating a new company seems painful.
What about the time and cost involved? Will I be able to do it myself or I need professional help? Do I have to deal with the Government Officers?
And several such questions cross your mind.
Well, what if I told you that you can form a new company in just 3 days and that too with very little cost.
Yes, a professional help is required from a practising Company Secretary. The entire process is online. So, you do not have to deal with Government Officers.
Sounds unbelievable, right! It is.
Let me show you how you can put your idea into action with a brand new company.
In 2016, Ministry of Corporate Affairs (MCA) introduced E-form No INC-32, commonly known as SPICe (Simplified Proforma for Incorporating Company Electronically).
In India, MCA has the authority to approve incorporation of company.
In this post we will know the requirements and process of formation of a private company through SPICe form.
We will work with an example, where you and your friend/spouse are planning to form a company.
Lets get introduced to certain terms and keep basic things ready.
Basic terms and requirements:
#1 – Name of the company: This is probably the first step to decide the name of your company. You should make sure that the name should not be similar to any other existing company. Also, if there is a Trade Mark already registered or in process, it is easier to get the name which has the trademarked word. The name of a private company should end in words ‘Private Limited’.
#2 – Directors of the company: The directors are the one who provide direction and are also involved in managemen the working of a company. Minimum two directors are required to form a private company. The directors should be individuals.
It is mandatory for every director to get DIN (Directors’ Identification Number). DIN is a unique number issued to every individual who wants to become a director.
Click here to know more about DIN.
#3 – Shareholders or members of the company: The shareholders are the owners of the company. Minimum two shareholders are required to form a private company. A shareholder can be an individual (Indian or foreign national). Even another company can be a shareholder.
The shareholders and the directors can be same individuals. So, if you are planning to start a company along with your friend or spouse, both of you can be shareholders as well as directors.
#4 – Digital signature: Every director and the first shareholders need to have a Digital Signature Certificate (DSC) of Class -2. DSC is a token like a pen-drive which has your signature encrypted in it and will be password protected.
Tip: You can get a DSC in a few hours, maximum a day.
#5 – Share Capital of the company: You should decide the paid up and authorised capital of the company based on the short term and long term requirements of your business. The share capital will have the components of number of shares and the nominal value per share.
Authorised share capital is the limit till which a company can add capital into the company and the paid up capital is like the first tranche of capital given to the company by the first shareholders.
Currently there is no minimum paid up capital requirement for any company and hence you should decide the amount based on your business requirements. I suggest you should have authorised and paid up capital of atleast Rs. 1 lakh. You can of course have a higher authorised capital but it can result in higher stamp duty.
So, in this case, the paid up capital of your company can be Rs. 1,00,000 divided into 10,000 shares of Rs. 10 each.
#6 – Shareholding pattern: You should decide on what will be the shareholding pattern between the shareholders. The shareholding pattern needs to have the number of shares and the percentage holding. For example,
You – 50% – 5000 shares at Rs. 10 each
Your friend/spouse – 50% – 5000 shares at Rs. 10 each.
#7 – Main objects of the company: Once you decide what will be the main business activity you need to draft the ‘main objects’ for such main business activities of your company. The Practising Company Secretary, with who you are working, to form your company can help you draft the main objects of the company.
You need to also keep ready the details of other activities necessary to support the main objects.
These main and supporting objects are mentioned in a document called the Memorandum of Association (MoA).
So, MoA is the guide for the company to know which businesses can be carried out by the company.
You can always amend your MoA later on if you decide to introduce new business in your company.
#8 – Articles of Association (AoA) – AoA is like a rule book for the company. It governs the working of the company and also sets processes for various activities to be done by the directors and the shareholders.
#9 – Registered office: You need to have a registered office address for your company. It can be your home address, an office address or a virtual office address. You will need to submit documents as proofs for this address including any No Objection Certificate (NOC) from the owner, wherever required.
Once you have these things ready, you can start the process of incorporation of your company through SPICe form.
With just this one form, you can :
- Apply for name of the company.
- Apply for DIN for all the directors
- Inform about the registered office of the company
- Apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) for the company.
Attachments in SPICe form
Lets quickly look at the mandatory attachments in SPICe form:
- Identity proof and address proof of the directors for application of DIN.
- Identity proof and address proof of the shareholders
- A letter for approval from the owner if the proposed name is based on a trade mark
- Proof of office address (sale deed / rent agreement) along with copy of utility bill that is not older than two months.
- Declaration by first director(s). Click here to download the document.
Note:
- All the attachments have to be in .pdf format.
- The identity proof and address proof should be ‘self-attested’.
The SPICe form can be digitally signed by any one of the directors.
What about the Memorandum and Articles of Association?
Now there is a standard electronic format prescribed for Memorandum and Articles of Association in e-form INC-33 and INC-34 respectively. You need to fill in the required details.
All the shareholders have to affix their DSC on the forms which has to be witnessed by a person by signing electronically. That person can be the Practising Company Secretary too.
The forms INC-33 (MoA) and INC-34 (AoA) will be filed along with the SPICe form.
You need to pay stamp duty on MoA and AoA depending on your authorised capital and the state in which you have the registered office of the company. The Stamp duty on can be paid along with filing the forms.
The Practising Company Secretary will certify all the forms i.e SPICe, INC – 33 and INC 34.
Now let us move on to the final 3 steps of formation of your company.
- Upload SPICe form
- On successful upload of SPICe form, proceed to upload linked forms INC-33 and INC-34.
- Next pay the fees and stamp duty as displayed on the screen. There is no filing fee for those companies which have authorised capital of less than or equal to Rs. 15 lakhs.
If everything is in order, you will get approval from MCA within a couple of days. Even the PAN and TAN for your company will be issued along with the Certificate of Incorporation.
Isn’t that great?
A few words of caution:
- You can apply for only one name through SPICe form. So make sure that the name is unique and not similar to any other company.
- At the time of incorporation, you may not be able to decide on the registered office of your company. So, for time being, you can mention the correspondence address. However, you need to have your registered office within 30 days of the incorporation of your company. At that time you can mention the same address as your correspondence address. You need to file form INC-22.
- In case of any mistake or any document is pending to be attached in SPICe form, the form will be sent for re-submission. Please note that only two re-submissions are allowed.
So, you are all done and set with your new company and claim the world with your new business.
All the best!
Note: The process of formation of public limited company and One Person Company (OPC) is similar to private company. Click here to know more about OPC.
If you are planning to form a company, you can write to me at kruti@cskruti.com
Hi Kruti,
Thank you for very good article. I would like to start a company which primarily focuses on Financial Planning. I am planning to recruit few Certified Financial Planner and would like to serve many clients. For primary investment, for office, webiste, employees, content creation etc, i would like to pull investment and give share to partners. What is the best way that i can start a company for this purpose.
How much fee a company can charge for providing Financial Planning service (CFP) to individual clients, is there any limit or can we charge based on how much fund we are doing planning.
can you please let me know the detailed costs to start the company, including your fee for helping on this.
Thanks
Prasad
Hi Prasad. If you want to give share to your partners, I would recommend you go for private limited company formation. Also pls note that you have to get registered with SEBI as Investment Adviser (IA) to provide financial planning services. SEBI is yet to issue clarification / guidelines on the fee to be charged by an IA. Cost of company will depend on the your capital you want to infuse as well as the place of registered office. Pls email the details to kruti@cskruti.com and I will guide you further.
Hi Prasad. If you want to give share to your partners, I would recommend you go for private limited company formation. Also pls note that you have to get registered with SEBI as Investment Adviser (IA) to provide financial planning services. SEBI is yet to issue clarification / guidelines on the fee to be charged by an IA. Cost of company will depend on the the capital you want to infuse as well as the place of registered office. Pls email the details to kruti@cskruti.com and I will guide you further.
humm…., Delhi. And you mean to say that there is no regulation to bound the minimum number of share to give to the other share holder i.e I am free to give just one share out of total share may be 10000 or 100000 or even more and it will serve my requirement of minimum two shareholder. 🙂
Yes. You can give 1 share / 10 shares. The Government fees for incorporation of a private company in Delhi with authorised and paid up cap of Rs. 1 lakh is Rs. 3160 including stamp duty.
Great…But you didn’t tell about the cost. Also, please help me if Rs 100000 is as paid up and authorised capital, what minimum share I am bound to give to my partner, the other shareholder.
Please explain about paid up and authorised capital and share in detail in some other article. You talked about stamp duty against paid up and authorised capital. What is the rate of stamp duty.
Hi Vimlesh. Cost depends on which state you want to incorporate your company and the paid up capital. You and your partner can decide the shareholding. Stamp duty also depends on the state where the registered office of the company is located. I will shortly write about authorised and paid up cap and stamp duty. You can subscribe to my blog to get the latest article.