Section 7 of Companies Act, 2013: Your Guide to the Incorporation of Company in India

Introduction: Starting Your Business Journey the Right Way

The dream of starting your own business in India is exhilarating, filled with visions of innovation, growth, and success. However, transforming that dream into a legally recognized reality requires navigating a specific set of rules and procedures. At the very heart of this formal process lies Section 7 of the Companies Act, 2013. This crucial piece of legislation serves as the cornerstone, outlining the mandatory steps and requirements for the incorporation of company within the country. For a broader understanding of setting up a company, refer to the Company Registration in India guide. Understanding Section 7 isn’t just about ticking boxes; it’s about laying a solid legal foundation for your venture, ensuring its legitimacy and smooth operation from day one. For aspiring entrepreneurs, small business owners, and startups, grasping the nuances of this section is paramount to avoid potential pitfalls and compliance issues down the road. This comprehensive guide aims to demystify Section 7, breaking down the company incorporation process in India into understandable steps, making your transition from idea to incorporated entity as seamless as possible.

What is Section 7 of the Companies Act, 2013? The Legal Foundation

Section 7 of the Companies Act, 2013, is the specific legal provision that prescribes the detailed procedure for forming and registering various types of companies in India, including Private Limited Companies, Public Limited Companies, and One Person Companies (OPC). It acts as the procedural blueprint, ensuring that every company comes into existence through a standardized and legally sound method. Compliance with Section 7 is not optional; it is absolutely mandatory. Failure to adhere to the prescribed procedures can render the company’s formation invalid, potentially leading to severe consequences, including the dissolution of the entity. This section mandates the filing of specific documents with the designated authority, the Registrar of Companies (RoC), for the respective state where the company’s registered office is proposed to be situated. Key documents include the Memorandum of Association (MoA), which defines the company’s scope and objectives, the Articles of Association (AoA), which outlines the internal rules and regulations, and various declarations confirming compliance with the Act’s requirements. Understanding these legal requirements for company incorporation India as stipulated under Section 7 is the first critical step towards establishing your business entity correctly. The meticulous process ensures transparency and accountability from the very inception of the company.

Step-by-Step Guide: The Incorporation of Company Process under Section 7

Navigating the company incorporation process in India might seem daunting initially, but the Ministry of Corporate Affairs (MCA) has significantly streamlined it, primarily through the integrated SPICe+ web form. Section 7 provides the framework, and the following steps detail the practical actions you need to take. Following these steps to incorporate a company in India methodically is crucial for a smooth registration experience and ensures you know how to register a company in India correctly.

Step 1: Obtain Digital Signature Certificate (DSC)

Before initiating any online filing on the Ministry of Corporate Affairs (MCA) portal, the proposed directors and subscribers (shareholders) of the company must obtain a Digital Signature Certificate (DSC). A DSC is the electronic equivalent of a physical signature, used to verify the authenticity of documents filed electronically. It ensures the security and integrity of online transactions and filings. DSCs are issued by Certifying Authorities (CAs) recognized by the Controller of Certifying Authorities (CCA) in India. Typically, a Class 3 DSC is required for MCA filings. The subscribers to the Memorandum of Association and all proposed directors must have a valid DSC. It’s essential to apply for this early in the process as it’s a prerequisite for subsequent steps, including DIN application (if not already possessed) and filing the main incorporation form.

Step 2: Apply for Director Identification Number (DIN)

Every individual intending to be appointed as a director of a company must possess a valid Director Identification Number (DIN). DIN is a unique identification number allotted by the Central Government to any person intending to become a director or any existing director of a company. Previously, DIN could be applied for separately using Form DIR-3. However, with the introduction of the SPICe+ form, applicants who do not have a DIN can apply for it directly within the incorporation form itself (SPICe+ Part B). For a maximum of three proposed directors, DIN can be applied for through SPICe+. If a proposed director already has a DIN, they must use the existing one. It’s crucial to ensure all proposed directors meet this requirement, as it’s a fundamental identifier within the corporate governance structure.

Step 3: Reserve Your Company Name (SPICe+ Part A / RUN)

Choosing a unique and appropriate name for your company is a critical early step. The proposed name must comply with the Companies (Incorporation) Rules, 2014, meaning it should not be identical or too similar to an existing company name or registered trademark, nor should it be undesirable in the opinion of the Central Government. You can check for name availability on the MCA portal. The application for name reservation is made using Part A of the SPICe+ form. Alternatively, you can use the separate RUN (Reserve Unique Name) web service, although integrating it with SPICe+ is often more efficient. In SPICe+ Part A, you can propose up to two names in order of preference. The RoC will examine the proposed names for availability and compliance. Once approved, the name is reserved for 20 days from the date of approval, within which you must file the main incorporation documents (SPICe+ Part B). Knowing how to register a company in India involves understanding these naming conventions thoroughly to avoid rejection and delays.

Step 4: Prepare Crucial Incorporation Documents

Parallel to name reservation, you must meticulously prepare the foundational legal documents of the company: the Memorandum of Association (MoA) and the Articles of Association (AoA). The MoA (filed as e-Form INC-33 with SPICe+) defines the company’s constitution and scope of activities. It contains essential clauses:

Name Clause: States the approved name of the company.
Registered Office Clause: Specifies the State in which the registered office will be located.
Objects Clause: Details the main business activities the company is authorized to undertake, along with ancillary objects. This must be drafted carefully.
Liability Clause: Defines the liability of the members (usually limited by shares or guarantee).
Capital Clause: States the authorized share capital of the company and its division into shares.

The AoA (filed as e-Form INC-34 with SPICe+) outlines the internal rules, regulations, and bye-laws governing the company’s management and operations, including director appointments, share transfers, meeting procedures, and dividend policies. Both MoA and AoA must be digitally signed by all subscribers. Careful drafting of these documents is vital as they form the bedrock of the company’s functioning and governance, reflecting the specific business needs and adhering to legal requirements for company incorporation India and company formation guidelines in India.

Step 5: File the SPICe+ (INC-32) Form

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is the mandatory, integrated web form for the incorporation of company. It consolidates multiple applications into a single filing process, significantly simplifying procedures, especially beneficial for the incorporation process for startups in India. After filling Part A for name reservation (or if using RUN, after name approval), you proceed to Part B. This extensive section requires detailed information about the company, including:

Company structure (Private, Public, OPC)
Capital structure (Authorized and Subscribed Capital)
Details of the registered office address
Particulars of the proposed directors and subscribers (including DIN, PAN, addresses, etc.)
Stamp duty payment details (auto-calculated based on state and capital)

Crucially, SPICe+ is linked with the AGILE-PRO-S (INC-35) form, which facilitates mandatory registration for GSTIN (if applicable), EPFO (Employee Provident Fund Organization), ESIC (Employees’ State Insurance Corporation), Profession Tax (for specific states like Maharashtra, Karnataka, West Bengal), and facilitates the opening of a company bank account.

Numerous attachments must be uploaded along with SPICe+ Part B, including:

e-MoA (INC-33)
e-AoA (INC-34)
Declaration by first subscribers and directors (INC-9, now integrated within SPICe+)
Consent of proposed Directors (DIR-2 is generally not required as consent is taken digitally in SPICe+)
Proof of registered office address (e.g., utility bill not older than 2 months, lease agreement) along with a No Objection Certificate (NOC) from the owner if the premises are rented/leased.
Identity and residential address proofs for subscribers and directors.

The entire company incorporation process in India hinges on the accurate and complete filing of the SPICe+ form and its linked components.

Step 6: Scrutiny by RoC and Certificate of Incorporation (CoI)

Once the SPICe+ form, along with all necessary attachments (e-MoA, e-AoA, declarations, proofs), is submitted on the MCA portal (www.mca.gov.in), it undergoes scrutiny by the relevant Registrar of Companies (RoC). The RoC officials carefully verify all the submitted information and documents for compliance with the Companies Act, 2013, and its associated rules. They check the validity of DSCs, DINs, the appropriateness of the MoA and AoA clauses, proofs of address, and other declarations. If the RoC finds the submitted forms and documents to be in order and compliant with all legal requirements, they will approve the incorporation. Upon approval, the RoC issues the Certificate of Incorporation (CoI) in electronic format (Form INC-11). The CoI is conclusive evidence that the company has been legally formed and registered under the Act from the date mentioned therein. The CoI also contains the unique Corporate Identity Number (CIN) allotted to the company, which must be quoted in all future correspondence and filings. PAN and TAN for the company are usually generated simultaneously and mentioned in the CoI or communicated separately. The issuance of the CoI marks the official birth of the company as a separate legal entity.

Key Considerations & Legal Requirements for Company Incorporation India

Beyond the sequential steps, several fundamental legal requirements for company incorporation India must be met, acting as prerequisites and foundational elements guided by the company formation guidelines in India. Understanding these ensures your proposed company structure is compliant from the outset.

Minimum Requirements (Directors, Members, Capital)

The Companies Act, 2013, specifies minimum requirements regarding the number of directors and members (shareholders) based on the type of company being incorporated. It’s crucial to ensure these minimums are met:

Company Type	Minimum Directors	Minimum Members/Subscribers
Private Limited Company	2	2
Public Limited Company	3	7
One Person Company (OPC)	1	1 (plus 1 Nominee)

Furthermore, at least one director in every company must be resident in India, meaning they must have stayed in India for a total period of not less than 182 days during the previous calendar year. Regarding capital, it’s important to distinguish between ‘Authorized Capital’ (the maximum amount of share capital the company is authorized to issue, as stated in the MoA) and ‘Paid-up Capital’ (the amount of capital actually paid up by the shareholders). While previously there were minimum paid-up capital requirements, these have been removed by amendments. Currently, there is no minimum paid-up capital requirement to start a Private or Public Limited Company. For more details on capital requirements, see How Much Capital is Required to Start a Private Limited Company?. However, the authorized capital figure impacts the government filing fees and stamp duty payable during incorporation, so it must be decided thoughtfully.

Registered Office Address

Every company must have a registered office address within India from the date of its incorporation, or at least within 30 days of incorporation (though providing it during incorporation via SPICe+ is standard practice). This address serves as the official address for all communications and notices sent to the company. You must provide proof of this address during the incorporation process. Acceptable proofs typically include:

A recent utility bill (electricity, gas, telephone, mobile bill) in the name of the premises owner or the company itself, not older than two months.
If the premises are rented or leased, a copy of the registered lease deed or rent agreement.
A No Objection Certificate (NOC) from the owner of the premises authorizing the company to use the address as its registered office.

Ensuring you have a valid registered office address and the necessary supporting documents is a critical legal requirement. The RoC verifies these proofs carefully before approving the incorporation.

Declarations and Certifications

The incorporation process under Section 7 involves submitting certain declarations to affirm compliance with legal provisions. A key declaration, previously filed as Form INC-9, is now integrated into the SPICe+ web form itself. In this declaration, each subscriber to the memorandum and every first director named in the articles affirms that they are not convicted of any offence in connection with the promotion, formation or management of any company, have not been found guilty of any fraud or misfeasance, and that all documents filed with the RoC are correct and complete. Additionally, the SPICe+ form requires a certification by a practicing professional – typically a Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant (CWA) – who has been engaged in the formation process. This professional certifies that all requirements of the Companies Act, 2013, and the rules thereunder relating to registration have been complied with. This professional certification adds a layer of accountability and assurance regarding the compliance of the filed documents.

Focus: Incorporating a Private Limited Company in India

The Private Limited Company structure is overwhelmingly the most popular choice for startups and small to medium-sized businesses in India, and for good reason. Its key advantages include offering limited liability protection to its owners (shareholders), meaning their personal assets are shielded from business debts, establishing a separate legal identity distinct from its owners, which enhances credibility and continuity, and generally making it easier to raise equity funding compared to proprietorships or partnerships. The process of incorporating a private limited company in India closely follows the general steps outlined earlier under Section 7. You’ll need a minimum of two directors (one resident) and two members/subscribers, obtain DSCs and DINs for them, reserve a unique name via SPICe+ Part A, draft the MoA and AoA tailored to a private company’s structure (including restrictions on share transferability as required by law), and file the integrated SPICe+ Part B form along with AGILE-PRO-S and all necessary attachments. This structure perfectly aligns with the typical needs of the incorporation process for startups in India. It’s also important to remember key post-incorporation compliances specific to Private Limited Companies, such as holding the first board meeting within 30 days of incorporation, opening a corporate bank account, and appointing the first statutory auditor within 30 days of incorporation.

Understanding the Costs: How Much Does It Cost to Incorporate a Company in India?

A common question among entrepreneurs is: how much does it cost to incorporate a company in India? The total cost isn’t a single fixed figure; it’s an aggregation of various components and can vary significantly based on several factors. Understanding these components helps in budgeting for your company formation:

Government Fees:
- RoC Filing Fees: These depend on the authorized share capital of the proposed company. The SPICe+ form fee is generally nil for companies incorporated with an authorized capital up to ₹15 Lakhs, promoting ease of starting a business. However, fees apply for higher authorized capital slabs.
- Stamp Duty: This is a significant variable cost levied by the respective state government where the company’s registered office is located. Stamp duty is payable electronically on the MoA and AoA and differs vastly from state to state. It’s often linked to the authorized capital. For example, stamp duty in Delhi might be different from that in Maharashtra or Karnataka for the same authorized capital.
Professional Fees:
- Since the incorporation process involves legal nuances, document drafting (MoA, AoA), compliance checks, and mandatory professional certification on the SPICe+ form, most entrepreneurs engage a professional firm (like TaxRobo, Chartered Accountants, Company Secretaries, or Law Firms). Their fees cover consultation, document preparation, filing assistance, and coordination with the RoC. These fees vary based on the firm’s expertise, location, and the complexity of the incorporation.
Other Costs:
- Digital Signature Certificate (DSC): Fees for obtaining Class 3 DSCs for directors/subscribers (typically valid for 1-3 years).
- Name Reservation Fees: While name reservation via SPICe+ Part A is integrated, if you use the separate RUN service, a nominal fee (around ₹1,000) applies per attempt.
- Notary Charges: Minimal costs might be incurred for notarizing certain affidavits or documents if required.

Factors influencing the total cost:

Type of Company: Requirements might slightly differ.
Authorized Capital: Directly impacts RoC fees and State Stamp Duty.
State of Registration: Stamp duty rates vary significantly by state.
Number of Directors/Subscribers: Affects the number of DSCs needed.
Chosen Professional Service Provider: Fees differ based on the firm.

While providing an exact figure is difficult due to these variables, a rough estimate for incorporating a basic Private Limited Company with minimal authorized capital might range from ₹6,000 to ₹20,000 or more, primarily depending on state stamp duty and professional fees. It’s always advisable to get a detailed quote breaking down these costs. For a detailed breakdown of incorporation costs, you can visit Cost of Incorporation of a Company in India.

Conclusion: Embarking on Your Corporate Journey

Successfully navigating Section 7 of the Companies Act, 2013, is the foundational step in transforming your business idea into a legally recognized corporate entity in India. The structured incorporation of company process, significantly streamlined through the SPICe+ framework, ensures that your venture starts on solid legal footing. Diligently following the correct steps to incorporate a company in India – from obtaining DSCs and DINs, securing a unique name, meticulously drafting the MoA and AoA, to accurately filing the SPICe+ form – is crucial for ensuring compliance right from the beginning. While the digital platform simplifies many aspects, the complexities involved in legal drafting, understanding state-specific requirements like stamp duty, and ensuring all declarations and certifications are accurate often necessitate professional guidance. Engaging experts can help minimize errors, avoid potential rejections or delays by the RoC, and save you valuable time and resources, allowing you to focus on building your business. Your entrepreneurial journey deserves a strong start built on compliance and clarity.

Ready to start your company the right way? Let TaxRobo simplify the incorporation of company for you. Our experts ensure a smooth, compliant, and efficient registration process. Contact us today for expert assistance!

Frequently Asked Questions (FAQs) about Company Incorporation

Q1: How long does the company incorporation process in India typically take?

Answer: Once all necessary documents are prepared and submitted correctly via the SPICe+ form, the company incorporation process in India typically takes around 7 to 15 working days. This timeline depends heavily on the processing speed of the Registrar of Companies (RoC) in the respective jurisdiction and the accuracy and completeness of the submitted documents. Any discrepancies or requests for clarification (resubmission) from the RoC can extend this timeline.

Q2: What is the minimum capital required for incorporating a private limited company in India?

Answer: Currently, there is no minimum paid-up share capital requirement mandated by the Companies Act, 2013 for incorporating a private limited company in India (or a public limited company). You can start a company with any amount of paid-up capital. However, you must specify an ‘Authorized Capital’ in the Memorandum of Association (MoA). The amount of authorized capital chosen will affect the government filing fees and the stamp duty payable during incorporation.

Q3: Can a foreign national be a director in an Indian company?

Answer: Yes, a foreign national can be appointed as a director in an Indian company. However, they must obtain a valid Director Identification Number (DIN). Additionally, the Companies Act, 2013 mandates that every company must have at least one director who is resident in India. A resident director is defined as someone who has stayed in India for a total period of not less than 182 days during the previous calendar year.

Q4: What is SPICe+ and why is it important for incorporation of company?

Answer: SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus), Form INC-32, is the mandatory, integrated web-based form for the incorporation of company in India. Its importance lies in its consolidation of multiple applications into a single window. It covers Name Reservation (Part A), Incorporation application (Part B), DIN allotment for directors, mandatory issuance of PAN and TAN for the company, and through the linked AGILE-PRO-S form, applications for GSTIN, EPFO registration, ESIC registration, Profession Tax registration (in applicable states), and opening of a company bank account. It has significantly streamlined the entire incorporation process.

Q5: Do I absolutely need a professional (CA/CS) for how to register a company in India?

Answer: While technically an individual could attempt to navigate parts of the process like obtaining DSC or understanding the forms, engaging a practicing professional (Chartered Accountant, Company Secretary, or Cost Accountant) is highly recommended and practically necessary for several reasons. Professionals assist in correctly drafting the complex legal documents (MoA/AoA), ensure all legal requirements for company incorporation India are met, provide the mandatory professional certification required on the SPICe+ form, help choose the appropriate authorized capital, calculate correct stamp duty, and manage interactions with the RoC smoothly, significantly reducing the chances of errors or delays. Their expertise ensures compliance and efficiency throughout the process of how to register a company in India.

Section 7 – Incorporation of Company