EFFECTS OF REGISTRATION OF A COMPANY

July 6, 2023

This article is written by Mr.Archak Das, BBALLB student studying in Adamas university, Kolkata. The author is a 2nd year law student.

INTRODUCTION

It is best for a company to register after incorporation in the legal world. In a sense, incorporation and registration go hand in hand, whereas a business that is not registered cannot make many claims, such as taxable ones. The business is not even allowed to sue any third parties. It is preferable to register your company under the Company Act of 2013 or by any other recognized statutory Act due to the numerous disadvantages an unregistered company frequently faces. There are procedures for registering and incorporating a company. First, an application must be submitted to the Registrar of Companies (ROC), and it must be accompanied by the member names, the memorandum of association, the articles of association, and other necessary paperwork. The state’s registrar of companies in which the company is intended to be incorporated.

This article shall briefly explain the steps involved in the registration of a company, the importance of such steps for the company and also covering the effects of registration of such companies.

STEPS IN REGISTRATION OF COMPANY

According to company law, the body corporate is given legal recognition through the registration of the company. Section 7 of the 2013 Companies Act provides detailed instructions on the registration process. The conditions for the company’s incorporation are spelled out in this clause. The documents’ specifics are as follows:

Memorandum of association, which is the company’s constitution and is duly stamped; for a public company, the minimum number of signatories is 7, while for a private company, the minimum number is 2;
Articles of Association, which are included in the MOA filing;
A list of directors that includes information about their names, jobs, and addresses;
Written authorization from the directors, which must be submitted to the company’s registrar;
Verification document that must be digitally signed by an attorney, company secretary, or recognized chartered accountant.
After receiving all necessary paperwork, the registrar will issue the company a certificate of incorporation in the appropriate format and register it with the Act.
The registrar must assign the company a unique corporate identity on the day the certificate of incorporation is issued.
A copy of each document submitted during the company’s incorporation must be kept on file until it is dissolved.

A member is guilty of fraud under Section 447 of the 2013 Companies Act if they provide false information about any matters of which they are aware. In any case, under Section 447 of the Companies Act of 2013, the promoters, the person named as first director, and the person making the declaration will be held liable for committing fraud if it is established that the company incorporated provided any information in a false, inaccurate, or fraudulent manner.

In the event of fraud, a tribunal will be established, and after giving the company a fair chance to be heard, it will issue any orders it deems appropriate and necessary. The tribunal has the following orders to impose:

a) Regulation of the organization’s and its members’ management.
b) Liability of the participants.
c) Removing a company’s name from the register of corporations.
d) Closing of a business.
e) As the court deems appropriate.

IMPORTANCE OF REGISTRATION

Separate legal entity

A company develops a distinct personality upon incorporation. It has more legal authority since a corporation can hold property and amass debts without individual members of the company being held accountable to the debts of the company’s creditors.

Perpetual succession

Any changes to its membership, personnel, members, or shareholders cannot influence its continued existence after it has been incorporated as long as it complies with the Companies Act.

Limited liability

Members’ liability for the company’s debts is restricted, or restricted to the face value of the share they purchased.

Can sue or be sued

Legal action can be taken in a person’s name. Comparably, a business that is a separate legal person can file a lawsuit in its own name against another person. This covers renaming your business as well as mergers and demergers.

Easy transferability of shares

Shares of a corporation are only as many as were purchased. A shareholder may transfer it to a different individual. The shareholder has sole discretion over the transfer of shares.The buyer of shares would receive a signed copy of the share transfer form and share certification. Theoretically, a public limited company’s shares may be transferred without restriction. So, a shareholder may transfer his shares to anybody he chose.

Borrowing funds

It has more options as a firm to borrow money for its operations. Debenture certificates, private placements, the issuance of preferred share capital, etc. are all possible. take public deposits and borrow money from banks even though banks prefer to lend to corporations over sole proprietorships and firms.

Tax benefits

Only the net profit is subject to taxation, and the taxable net profit is the one that remains after all costs have been offset, including director salaries and other costs. As a result, the net taxable income is significantly reduced, and the net profit of the company is subject to little or no tax.

Big Project cost and Risk factors

Banks and financial institutions prefer registered companies and insist on having a legally registered corporation for firms that require substantial capital outlays, the use of high-tech systems, and high financial stakes.

EFFECTS OF REGISTRATION OF A COMPANY

The following outcomes of a company’s registration are listed in Section 9 of the 2013 Companies Act:

The subscribers to the Memorandum and all subsequent members of the company are a body corporate as of the date of formation.
A registered corporation has the same rights as an organization that has been incorporated under the Act. Also, the business enjoys perpetual succession and the authority to acquire, keep, and dispose of all types of property. Also, it may negotiate, bring a lawsuit, and be sued using the aforementioned name.
The company is a separate legal entity from the incorporators as of the date of creation, in addition. The Memorandum and Articles of association also establish a legally binding contract between the firm and its members. It has eternal existence up until it dissolves or the Registrar strikes it from the register.

CONCLUSION

It is best for a company to register after incorporation in the legal world. In a sense, incorporation and registration go hand in hand, whereas a business that is not registered cannot make many claims, such as taxable ones. There are procedures for registering and incorporating a company. It has more legal authority since a corporation can hold property and amass debts without individual members of the company being held accountable to the debts of the company`s creditors. Any changes to its membership, personnel, members, or shareholders cannot influence its continued existence after it has been incorporated as long as it complies with the Companies Act. Members` liability for the company`s debts is restricted, or restricted to the face value of the share they purchased. The transfer of shares is at the shareholder`s discretion. Theoretically, a public limited company`s shares may be transferred without restriction. So, a shareholder may transfer his shares to anybody he chose.

References

July 6, 2023