Is your Company Incorporation Legal?

A Company or LLP incorporated in India is an “Artificial Judicial Person” and a “Separate Legal Entity” that is created through the Companies Act, 2013 or Limited Liability Partnership Act, 2008. A proper and legally valid Company Incorporation or LLP Registration in India is completed only by properly following the Companies Act, 2013 and other relevant Acts. When the documents that are filed for incorporation are not executed as per the Act or fraudulently, it can lead to criminal prosecution and winding-up of the entity. Therefore, startups and other Entrepreneurs involved in the process of company or LLP incorporation must understand the process of company incorporation and complete the incorporation procedures properly to ensure there are no complication in the future.

Process for Incorporation

Company or LLP Incorporation has four main stages. Obtaining Digital Signature Certificate for the proposed Directors, obtaining Director Identification Number for the proposed Directors, obtaining Name Approval and filing for incorporation. During the four stages, various information and documents are required from the promoters of the entity. Some of the documents required during incorporation include:

PAN Card of the Promoters

Address Proof of the Promoters

Signed & Notarized Form DIR-4, Form DIR-2, INC-9, INC-10, Consent Letters and Affidavits

MOA & AOA Subscriber Sheet

It is important that the promoters provide the above documents correctly and ensure the correct information pertaining to the promoters is being filed with the MCA.

Incorporation Documents Notarization

During the incorporation the Companies Act, 2013 mandates that certain document be executed on Non-Judicial Stamp Paper and the same be notarized by a Notary Public. It is important for promoters to note that legally, notarization of a document can be done only with the physical presence of the signee. Therefore, the person signing the documents must appear before the Notary and sign the documents in his/her presence to ensure legal validity of the documents filed with the MCA. In case, the documents are filed without Notary seal or improperly executed, the Directors of the Company can he held later for furnishing false evidence.

Know the Penalty & Risks

The penalty for providing false evidence under the Companies Act, 2013 is imprisonment which is not less than three years and fine which may extend to ten lakhs. Further, providing false evidence can jeopardize the legal existence of a business and lead to further complications under the following section:

Section 449 – Punishment for false evidence:

Section 449 states that, if any person intentionally gives false evidence—
(a) upon any examination on oath or solemn affirmation, authorised under this Act; or
(b) in any affidavit, deposition or solemn affirmation, in or about the winding up of any company under this Act, or otherwise in or about any matter arising under this Act, he shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and with fine which may extend to ten lakh rupees.

Key Points to Remember during Incorporation of Company or LLP

Company or LLP Incorporation in India is a simple and easy to understand process. So Entrepreneurs must take the time to ask question about the process, understand the procedures and ensure the Company is formed without any legal defects. The following are some of the major points to remember during incorporation:

• Understand the process of incorporation
• Understand the documents being filed by your service provider for obtaining DSC, DIN, Name Approval and Incorporation
• Properly execute the documents filed for incorporation
• Appear before a Notary Public and get notarization of legal documents to avoid unnecessary complications in the future
• Submit proper and valid identity and address proof

A company or LLP being incorporated is a tool for the Entrepreneur on which a great amount of time, energy and resources will be spent to make it an asset. Therefore, while starting on this wonderful journey, it is important to follow rules and procedures and avoid shortcuts to ensure the asset being created is without any defect.