Company Incorporation To Become Simplified

Company Incorporation

To provide recommendations on improvement of issues arising from the implementation of Companies Act, 2013, the Companies Law Committee was setup by the Government. The Companies Law Committee had recently released a report with recommendations on procedural changes to the incorporation process to make the registration process simplified. In this article, we look at some of the main changes processed by the Companies Law Committee to make the process for company incorporation easy.

Generic Object Clause in MOA

The Companies Act, 2013 requires the memorandum of association of a company to state the objects of the company for which it is proposed to be incorporated or any matter considered necessary for its operation. The Companies Law Committee has proposed to allow companies the additional option to have a generic object clause, i.e., “to engage in any lawful act or activity or business as per the law for the time being in force” in the MOA. This change proposed by the Companies Law Committee will ensure that companies can be easily incorporated and be allowed to undertake a wide variety of lawful activity to do business without any restrictions.

Name Reservation Period

As per the Companies Act, 2013, a name approval is valid for a period of sixty days from the date of the application. The Companies Law Committee has proposed for name reservation to be valid for a period of twenty days from the date of approval. This change proposed by the Companies Law Committee will ensure that the companies are being incorporated quickly in India.

Incorporation Affidavits

Currently to incorporate a comapny, an affidavit from each of the subscribers and from persons named as the first directors,must be submitted to the ROC. The affidavit must specify that he/she is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief.

The Company Law Committee has proposed that instead of an affidavit, self declaration from each of the subscribers and from persons named as the first directors, be submitted for incorporation. Obtaining an affidavit in India is a very tough process and doing away with the affidavit requirement will make company registration process simpler.

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Frequently Asked Questions

Common questions about Company Incorporation Simplified in India.

The purpose of the recommendations made by the Companies Law Committee is to simplify and streamline the process of company incorporation in India by addressing procedural issues arising from the implementation of the Companies Act, 2013.

The Companies Law Committee has proposed to allow companies the option to have a generic object clause, such as "to engage in any lawful act or activity or business as per the law for the time being in force" in the MOA, instead of specifying a limited set of objects.

The proposed change to allow a generic object clause in the MOA will benefit companies by enabling them to undertake a wide variety of lawful activities without being restricted by the objects stated in the MOA, providing greater flexibility and scope for business operations.

Currently, under the Companies Act, 2013, a name approval for a company is valid for 60 days from the date of application. The Companies Law Committee has proposed to reduce this validity period to 20 days from the date of approval.

The proposed reduction in the name reservation validity period to 20 days will help ensure that companies are being incorporated more quickly in India, thereby streamlining and expediting the overall incorporation process.

Currently, to incorporate a company, an affidavit from each of the subscribers and from persons named as the first directors must be submitted to the Registrar of Companies (ROC), stating that they have not been convicted of any offenses or found guilty of any fraud or misfeasance. The Companies Law Committee has proposed to replace this affidavit requirement with self-declarations from the subscribers and first directors.

The proposed change to replace affidavits with self-declarations during company incorporation will simplify the process by eliminating the need to obtain affidavits, which can be a cumbersome and time-consuming process in India.

The overall objective of the recommendations made by the Companies Law Committee is to make the process of company incorporation in India simpler, more streamlined, and more efficient by addressing procedural issues and reducing administrative burdens.

Businesses can benefit from the proposed changes to the incorporation process in several ways, such as increased flexibility in business operations due to the generic object clause, faster incorporation timelines due to reduced name reservation periods, and a simpler incorporation process due to the elimination of affidavit requirements.

The article does not mention any other specific recommendations made by the Companies Law Committee regarding company incorporation. However, it suggests that the report includes additional recommendations aimed at improving and simplifying the incorporation process in India.