Company Incorporation Rules 2014

Every company in India must be incorporated and registered per the provisions provided in the Companies Act 2013 (‘Act’) and its rules. The Companies Act 2013 consolidates the law relating to companies in India. The government has also passed many company rules to supplement the provisions of the Act.

The Company Incorporation Rules, 2014 (‘Rules’) regulates the matters relating to the incorporation of OPC, application for company incorporation, conversion of companies, and deciding on company name and registered office. Thus, every company in India must follow the Companies Act, 2013 and Company Incorporation Rules, 2014, before applying for company registration.

When a company does not follow the provisions provided under the Rules, the Registrar of Companies (ROC) will reject the company registration application. The important provisions of the Company Incorporation Rules, 2014, are briefly stated below.

One Person Company (OPC) Rules

Rules Regarding Member of OPC

The rules provide that only a natural person who is an Indian citizen above 18 years is eligible to incorporate or establish a One Person Company (OPC). It provides that an Indian citizen means a resident in India. A person who has stayed in India for not less than 120 days during the previous financial year will be considered a person resident in India. A natural person cannot simultaneously be a member of more than one OPC. 

Rules Regarding a Nominee of OPC

A subscriber to the Memorandum of Association of an OPC should nominate a person to be a member of the OPC in the event of the subscriber’s incapacity or death after obtaining written consent from the nominee. Only a natural person who is an Indian citizen can be the nominee for the member who established the OPC. A person can be a nominee of only one OPC at any time. 

Rules Regarding Conversion of OPC

An OPC can be converted into a public or private company but not a Section 8 company after raising the minimum number of members and directors (to two or seven directors) and complying with Section 18 of the Act. The OPC should apply conversion in e-form INC-6 along with the fees and the documents provided under Rule 6(3) of the Rules.

A private company, except a company registered under Section 8 of the Act and having an average annual turnover below Rs.2 crore, can convert to an OPC by passing a special resolution in its general meeting. The newly formed OPC should file a copy of the special resolution passed regarding conversion with the ROC within 30 days of passing the resolution.

The company’s directors should give a duly sworn declaration by way of an affidavit confirming that every member and creditor of the company has given their consent for conversion. The company should apply the conversion to OPC in e-form INC-6 along with the fees and the documents provided under Rule 7(4) of the Rules. 

Rules Regarding Penalty for OPC

When an OPC or its officer contravenes the provisions of the Rules, they will be punishable with a fine extending up to Rs.5,000 and a further fine of Rs.500 for every day during which the offence for which the contravention continues.

Company Name Rules

Names and Words that Cannot be used in Company Name

Every company must keep its name according to the provisions of the Act and these Rules. The company founders need to reserve the company name with ROC. After the ROC approves the company name, they will proceed to examine the company incorporation application and documents.

The Rules provide that the company name should not be considered undesirable. Rule 8A of the Rules provides the conditions where the company name is considered an undesirable name. The ROC will reject undesirable names. Rule 8B of the Rules lists words and expressions that cannot be used in the company name unless the company obtains previous approval from the Central Government.

Application for Reservation of Company Name

The company founders should apply for the company name reservation online on the MCA website. The company name must be reserved in the Part-A of the SPICe+ form (Simplified Proforma for Incorporating Company Electronically). The company can apply for a change of name by using the MCA’s RUN (Reserve Unique Name) service along with the fee provided in the Companies (Registration Offices and Fees) Rules, 2014.

The company founders or promoters can propose only one name in the SPICe+ form upon payment of the fees provided in the Rules for its approval by the ROC. After filing for name reservation in Part-A of the SPICe+, the company founders should file Part-B of the SPICe+ within 20 days. When the company founders do not file the SPICe+ form within 20 days, the ROC will extend the period for the reserved name after payment of the fees for such period as provided below:

• 40 days from the approval date under Rule 9 of the Rules, on payment of fees of Rs.1,000 paid before the expiry of 20 days from the approval date
• 60 days from the approval date under Rule 9 of the Rules, on payment of fees of Rs.2,000 paid before the expiry of 40 days from the approval date
• 60 days from the approval date under Rule 9 of the Rules, on payment of fees of Rs.3,000 paid before the expiry of 20 days from the approval date.

Display of Company Name on Website

When a company has its website for conducting online business, it should publish or disclose its name on its homepage. It should also display its registered office address, Corporate Identity Number (CIN), telephone number, email, fax number if any and the person who may be contacted in case of any grievances or queries on the website’s homepage.

Memorandum and Articles of Association Rules

Signing of MOA and AOA

The Memorandum of Association (MOA) and Articles of Association (AOA) of the company should be signed by each subscriber along with their name, description, address and occupation, if any, in the presence of a minimum of one witness who should also attest their signature.

If the subscribers are illiterates, they should affix their thumb impression or mark and describe it to the person writing for them. The persons writing the description of the illiterate persons should write the subscriber’s name below or against the mark and authenticate it by signing the MOA.

When the subscribers are a body corporate, the MOA and AOA should be signed by the director, employee or officer duly authorised by the body corporate by a resolution of the board of directors. When the subscriber is a Limited Liability Partnership (LLP), it shall be signed by a partner of the LLP duly authorised by a resolution approved by all the partners. When the subscriber is a foreign national outside India, it should be notarised before the Notary (Public) of the country of origin.

Declaration for First Subscribers of MOA and AOA

An advocate, a cost accountant, a Chartered Accountant, or the company secretary in practice should declare in form INC-8 for Section 7(1)(a) of the Act.

Each subscriber to the MOA and the first directors named in the AOA should also submit a declaration in form INC-9. The particulars of all subscribers to the MOA provided in Rule 16 should be filed with the ROC. 

The particulars of persons mentioned in the AOA as first directors of the company and their interests in other bodies corporate or firms, along with their consent to act as directors of the company, should be filed with the ROC in form DIR-12 with the fees provided in the Companies (Registration offices and fees) Rules, 2014.

A company should also send a copy of MOA and AOA to a member upon fee payment within seven days of making the request.

Application for Incorporation Rules

The company founders should apply for incorporation of the company, i.e. SPICe+ form on the MCA website along with the e-Memorandum of Association (e-MOA) in form INC-33 and e-Articles of Association (e-AOA) in form INC-34 with the ROC.

A company registered under Section 8 of the Act should file the SPICe+ form along with form INC-13 (MOA) and form INC-31 (AOA). The ROC will provide the certificate of incorporation in form INC-11. The certificate of incorporation will mention the company PAN (Permanent Account Number) issued by the income tax department.

The company incorporation application should be accompanied by the e-form AGILE-PRO (INC-35), consisting of an application for registration of the following:

• GSTIN
• EPFO
• ESIC 
• Profession tax registration 
• Opening bank account 
• Shops and establishment registration

Registered Office Rules

The company should file an application for verification of its registered office in form INC-22 to the ROC along with the fee and documents provided under Rule 25 of the Rules. The Rules provide the procedure to be followed for the change of registered office from one ROC to another ROC with the same state under Rule 28. Rule 30 provides a company’s procedure to change the registered office from one state to another.

Conversion of Company Rules

Conversion of Section 8 Company

A company registered under section 8 should pass a special resolution to convert itself into any other company at a general meeting. The special resolution should approve its conversion to another type of company. A certified copy of the special resolution and a copy of the notice convening the general meeting, including the explanatory statement, should be filed with the ROC and the Regional Director. 

The explanatory statement should state the reasons for opting for such conversion and other details specified in Rule 21(2) of the Rules. Rule 22 of the Rules also provide other conditions to comply with by a Section 8 company seeking conversion into any other kind.

Conversion of Unlimited Liability Company

A company should pass a special resolution in a general meeting to convert a company with unlimited liability (with or without share capital) into a limited liability company by guarantee or shares. The company should publish a notice of the proposed conversion in two newspapers in the district of the company’s registered office within seven days from passing the special resolution.

The company should seek objections to such conversion from the interested persons and dispatch a notice to its creditors and debentures holders on the date of the general meeting by registered or speed post or courier. The objections, if any, should be sent to the ROC.

The company should apply conversion in form INC-27 within 45 days of passing the special resolution with the ROC along with the fees as provided in the Companies (Registration offices and Fees) Rules, 2014, and attach the documents as provided in Rule 37(3) of the Rules. 

The ROC will decide whether the approval for conversion should be granted or not. Consequently, the ROC will issue the certificate of incorporation for conversion of an unlimited liability company into a company limited by guarantee or shares upon approving such conversion.

Conversion of Company Limited by Guarantee into Limited by Share

A company, except Section 8 company, can convert into a company limited by shares. However, such a company should have a share capital equal to the guaranteed amount. The company members should pass the special resolution authorising such a conversion. It should omit the guarantee clause in its MOA and alter the AOA as applicable for a company limited by shares. 

The company should file the special resolution and an application in form INC-27 to the ROC. The company must enclose the list of members with the shares held and the altered MOA and AOA with form INC-27. The ROC will issue a certificate of incorporation after filing form INC-27.

Conversion of Public Company into Private Company

A public company proposing to convert into a private company by altering its AOA as per Section 14 of the Act should file e-form RD-1 with the Regional Director within 60 days of passing the special resolution. It should file e-form RD-1 along with the fee provided in the Companies (Registration Offices and Fees) Rules, 2014 and the documents provided under Rule 41. 

The company should advertise the proposed conversion in a vernacular newspaper and an English newspaper in the state in which the company’s registered office is situated 21 days before applying for conversion with the Regional Director. 

When there is no objection to conversion, the Regional Director will pass an order approving the application. The Regional Director will allow conversion upon completion of inspection, inquiry or investigation, as a consequence of which no prosecution is pending or envisaged. The order of the Regional Director should be filed with the ROC in form INC-28 within 15 days from the receipt of approval, along with the fee provided in the Companies (Registration Offices and Fees) Rules, 2014.

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