Overview:

Replacing the previous companies’ act of 1956, the amended act of 2013 has seen its importance over the years in corporate law and its developments. On the other hand, limiting the liability of the members or partners becomes plays a major in corporate business management. Limited liability partnership does this for those partners who want to reduce or limit their liability. But, how are these companies and LLPs being formed or incorporated before becoming separate legal persons in the eyes of the law? This article will be looking into such requirements and procedures as follows.

Procedure for formation of following companies:

1. One Person Company:

Chapter 2 of the Companies act of 2013 deals with the incorporation of companies which is applicable to all private, public and one person company. Section 3(1) (c) of the act states that a company shall be formed by one person in case of one person company, which is again a private company and such one person shall subscribe his/her name in the memorandum of association of such company.

Before this, one person who subscribes to the one person company should be a natural person, an Indian citizen and must have stayed in India for a period not less than 182 days in a year. Hence, these conditions have been changed as it was considered so stringent for the purposes of incorporation in India and to ease the mode of business here.

To know the requirements for the formation of one person company, proviso to section 3 has to be referred. It says that in case of formation of One Person Company, the consent from another person who shall act as a secondary person to the first subscriber and he shall take over the subscriber’s place in case of his death or his incapacity to contract. Such consent must be filed to the registrar of the companies at the time of incorporation of One Person Company along with MOA and AOA.
Such a second subscriber shall have the right to withdraw the consent at any time in the prescribed form, and such subscriber of one Person Company shall change the name at any time with prior notice. It has also been noted that it is his duty to inform the company regarding the new nomination as prescribed, and the company should intimate the same to the registrar in the prescribed form. As per the companies act, such name change shall never be considered as making alteration to the memorandum of the company. Post such requirements are fulfilled; the registration of one Person Company shall be done similar to the registration of the private company, which is as follows.

2.Private company:

The first requirement for the incorporation of a private company is that, as per section 3, the number of members should be at least 2, and they should subscribe their names to the memorandum of such a private company. Secondly, the memorandum should contain Private limited as it is a private company and whether such a company is limited by shares or limited by guarantee. Thus, sections 4 and 5 of the companies should have adequately complied as it deals with the aspects (MOA & AOA) which the company should do and how should that be done.

Section 7 of the companies act deals with the procedure for incorporation of the company and further receiving the certificate of incorporation. Similar to an LLP, the incorporation documents should contain the signature of respective members and should be submitted to the registrar of companies along with memorandum and articles. If such requirements and compliances under section 7 are fulfilled, then the registrar shall register the company and provide the certificate of incorporation.

3.Limited Liability Partnerships:

Unlike the laws applicable to the above two companies, laws and procedure for the formation of a Limited Liability partnership has been provided under a separate act dedicated solely for LLPs, which is the Limited Liability Partnership act of 2008.

Section 6 of the act makes a requirement of the minimum number of partners to be part of an LLP. It states that LLP needs at least two partners for the purpose of incorporation, and in case there is a reduction in the number of the partner from two to one after six months from the date of formation of such LLP, then the lone partner who runs such business shall be personally held liable during such period under the act.
Chapter 3 of the said act of 2008 specifically deals with provisions relating to the incorporation of LLPs and the matters connected therewith. Section 11 and 12 of the act deals with the requirement of an incorporation document and the registration of such incorporation document. Similar to a certificate of incorporation, the incorporation document of an LLP shall be registered as per section 12. Section 11 states that for incorporation of a Limited liability partnership, two or more persons should subscribe and sign their respective names in the incorporation document and such document should be submitted to the registrar of the state in which the registered office of the LLP is situated. An incorporation document should be in the form as prescribed, contain the name of such Limited liability partnership, nature of business carried on, address of registered office of the LLP, name and address of each partner subscribed to the incorporation document and the address and name of designated partners. While submitting such document, any person, or chartered accountant, cost accountant or advocate who is part of the incorporation of that LLP shall make sure that all the rules and regulations under the act are properly complied with.
Lastly, section 12 deals with the registration of the Incorporation document, which was submitted before the registrar of the state. Once all the requirements under section 11 are fulfilled, then the registrar within the respective period shall issue a certificate of incorporation of such LLP. Such a certificate should contain the signature and the seal of the registrar to ensure the LLP is authenticated and incorporated as per the act.