Top 5 Documents Needed Before Starting Your Own Company

Last Updated at: November 04, 2019
886

A recent survey reported that one of the factors causing delays in getting companies registered is not having proper documentation. This unpreparedness not just costs time, but may translate into a loss of business opportunities, especially if you’re in a fast-changing industry like the technology space. If you’re interested in establishing your own company, here are the top five documents you must keep ready:

  1. Memorandum of Association

Think of this document as the heart and soul of your company. It contains several clauses like the name clause, the capital clause, object clause, registered office clause, and the liability clause. Anything that is not in consonance with your Memorandum of Association is liable to be rejected by the company (the board of directors acting on its behalf). Although it can be amended at a later stage, amends to any charter document require a fairly complex procedure and filings. Hence, it is imperative that the Memorandum of Association is clear in its scope. Since it requires several clauses, here is the basic purpose of these clauses in brief-

Name Clause: This clause mentions the name of your company. Choosing the right name reflecting the use or qualities of your product, service or idea is probably just as important as the idea itself. It is the Registrar of Companies that acts as the deciding authority of availability of name. Even if your business name resembles another enterprises name too closely, it may be rejected. Hence, having several options is a good idea as companies sometimes spend a lot of time going back and forth on name availability.

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Capital & Liability Clause: The Capital clause mentions how much share capital the company is authorized to raise and how much minimum paid-up capital that is the amount received in exchange of shares would be. However, it is the liability clause that most of your investors would be interested in, as this is a clause that determines to what extent they can be held responsible for contribution, in case of a failure of the company.

Registered Office Clause: This clause mentions where the registered office of the company is, and it may be a good idea to consider location-based advantages – such as setting up in a special economic zone, or tax advantages available in several states.

Object Clause: This clause determines the scope of activities as it lays down the object and purpose of the company. If any activity falls outside this delineation, it may lead to legal repercussions.

  1. Articles of Association: The Articles of Association is a document, internal to the company. While the Memorandum determines the company’s relationships with outsiders like shareholders, suppliers, the Articles determine rules for the management of the company and has details such as voting rights of members, the board of directors and their power etc. There are model article formats available for the company to easily choose from.
  1. Obtaining DIN and CIN: A Director Identification Number is an important document you need if you plan on floating a company and holding the position of a director. It is required on almost every form that the Ministry of Corporate Affairs would need you to file, and hence, it’s a good idea to obtain and keep a DIN ready. CIN, on the other hand, is the Corporate Identity Number which is a 21 digits alpha-numeric code/number issued to every company incorporated in India when it gets registered by Registrar of Companies (ROC) located in various states of India.
  1. Registration under GST and obtaining a GSTIN: While you may still have no turnover to attract GST provisions, it is important to keep what is known as a state-wise PAN-based 15-digit number – the Goods and Services Taxpayer Identification Number (GSTIN). This number can be obtained free of cost and gives you access to various tax exemptions. Your company may also be assessed under the Income Tax Act for its domestic and international income, and thus a TAN – or a Tax Deduction Account Number may also be required.
  1. Securing Intellectual Property Registration: To have secured rights over your intellectual property in the form of patents can prove to be a highly valued asset for your company. Most domestic and international investors while taking a call on your start-up businesses worth, also factor in the value of the intellectual property that you may gain in future. For those into inventions of a scientific nature, it is absolutely imperative to seek a patent registration at the earliest as the average time taken from filing to the actual grant is about five years in India. Securing a domain name for your official website is also important as that’s what any prospective investor or shareholder would first look at. Trademarks also help distinguish your product from competitors and hence, an early use of the mark can help build familiarity with buyers.

 

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Top 5 Documents Needed Before Starting Your Own Company

886

A recent survey reported that one of the factors causing delays in getting companies registered is not having proper documentation. This unpreparedness not just costs time, but may translate into a loss of business opportunities, especially if you’re in a fast-changing industry like the technology space. If you’re interested in establishing your own company, here are the top five documents you must keep ready:

  1. Memorandum of Association

Think of this document as the heart and soul of your company. It contains several clauses like the name clause, the capital clause, object clause, registered office clause, and the liability clause. Anything that is not in consonance with your Memorandum of Association is liable to be rejected by the company (the board of directors acting on its behalf). Although it can be amended at a later stage, amends to any charter document require a fairly complex procedure and filings. Hence, it is imperative that the Memorandum of Association is clear in its scope. Since it requires several clauses, here is the basic purpose of these clauses in brief-

Name Clause: This clause mentions the name of your company. Choosing the right name reflecting the use or qualities of your product, service or idea is probably just as important as the idea itself. It is the Registrar of Companies that acts as the deciding authority of availability of name. Even if your business name resembles another enterprises name too closely, it may be rejected. Hence, having several options is a good idea as companies sometimes spend a lot of time going back and forth on name availability.

Get FREE legal advice now

Capital & Liability Clause: The Capital clause mentions how much share capital the company is authorized to raise and how much minimum paid-up capital that is the amount received in exchange of shares would be. However, it is the liability clause that most of your investors would be interested in, as this is a clause that determines to what extent they can be held responsible for contribution, in case of a failure of the company.

Registered Office Clause: This clause mentions where the registered office of the company is, and it may be a good idea to consider location-based advantages – such as setting up in a special economic zone, or tax advantages available in several states.

Object Clause: This clause determines the scope of activities as it lays down the object and purpose of the company. If any activity falls outside this delineation, it may lead to legal repercussions.

  1. Articles of Association: The Articles of Association is a document, internal to the company. While the Memorandum determines the company’s relationships with outsiders like shareholders, suppliers, the Articles determine rules for the management of the company and has details such as voting rights of members, the board of directors and their power etc. There are model article formats available for the company to easily choose from.
  1. Obtaining DIN and CIN: A Director Identification Number is an important document you need if you plan on floating a company and holding the position of a director. It is required on almost every form that the Ministry of Corporate Affairs would need you to file, and hence, it’s a good idea to obtain and keep a DIN ready. CIN, on the other hand, is the Corporate Identity Number which is a 21 digits alpha-numeric code/number issued to every company incorporated in India when it gets registered by Registrar of Companies (ROC) located in various states of India.
  1. Registration under GST and obtaining a GSTIN: While you may still have no turnover to attract GST provisions, it is important to keep what is known as a state-wise PAN-based 15-digit number – the Goods and Services Taxpayer Identification Number (GSTIN). This number can be obtained free of cost and gives you access to various tax exemptions. Your company may also be assessed under the Income Tax Act for its domestic and international income, and thus a TAN – or a Tax Deduction Account Number may also be required.
  1. Securing Intellectual Property Registration: To have secured rights over your intellectual property in the form of patents can prove to be a highly valued asset for your company. Most domestic and international investors while taking a call on your start-up businesses worth, also factor in the value of the intellectual property that you may gain in future. For those into inventions of a scientific nature, it is absolutely imperative to seek a patent registration at the earliest as the average time taken from filing to the actual grant is about five years in India. Securing a domain name for your official website is also important as that’s what any prospective investor or shareholder would first look at. Trademarks also help distinguish your product from competitors and hence, an early use of the mark can help build familiarity with buyers.

 

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.