Estimate of company registration fees

The estimate fees payable to the registrar of companies at the time of registration depend on the authorized capital of a company as per amended schedule X to the act. For the guidance of the promoters the fees payable for different sizes of companies have been worked out and indicated.

Department’s advice to registrars to be cautious when registering certain estimate companies

1. Asset Management Companies

The registrars have been advised that they should register a company as an asset management company only after satisfying that the draft Memorandum and Articles of Association of the company has been cleared by the SEBI.

2. Companies proposed to engage as registrar, investment advisors etc.

Companies which propose to engage in rendering services like Merchant Bankers, Registrars to an Issue, Portfolio Managers etc. are required to obtain a certificate from the SEBI before they commence business.

Certificate of Registration

If the registrar is satisfied that all the requirements of section 6 have been compiled with, he shall register the documents and shall certify under his hand that the company is incorporated. From the date of private limited company registration can start its business or exercise borrowing powers only after filing with the Register a statement in lieu of prospectus.

Effect of Company Registration

The company registration date is mentioned in the certificate of incorporation. The memorandum as mentioned all the functions and having perpetual succession and a common seal.

Corporate Veil

Having been a registered body, a company enjoys a corporate veil or mask over its internal character, that is to say that it is the company which is liable to the outside world for all its acts in the normal course. Consequently the creditors of the company cannot sue its members or the members have no right to the assets of an registration company in the normal course.

Lifting the corporate veil

The mask of corporate veil is not an exclusive charter. The courts have raised the corporate veil in order to find out the true nature of the transactions of a company.

Statutory Exceptions to concept of corporate veil

There are certain statutory provisions in the companies act 1956 which specify the circumstances when the corporate veil will be lifted where the individual members or directors are made liable for defaults of the company.

Section 45

In terms of this section, where a public limited company or private limited company carries on business for more than six months when the number of persons is reduced to below seven or two respectively, every such member, who is cognizant of the fact of fewer members in the company. It shall be individually liable for the payment of the whole debts of the company contracted after the said period of six months.

Section 147

Where a company contravenes sub-section (4) of section 147, every officer of the company who is in default will be personally liable in addition to payment of fine.

Section 542

If, in the course of winding-up of a company registration, it appears that any of its business has been carried on with intent to defraud its creditors or other persons. The tribunal may declare that any persons, who were knowingly parties to such fraud, shall be personally responsible for such debts as the tribunal may declare.

Taxation matters and holding company

The courts in several taxation cases have lifted the corporate veil to find out the real owners of two or more companies in order to fix liability on tax matters.

Departmental circulars to registrars of companies regarding precaution to be taken before registering certain types of companies

Asset Management Companies registration

The primary objective of setting up of an AMC is to manage the asset of mutual funds. It can also carry such financial and consultancy services which do not conflict with the fund management activity and which are only secondary and incidental. As per the guidelines, an AMC shall be approved by SEBI for doing business and its Memorandum and Articles of Association would require vetting by SEBI.

No need on the part of registrars for insisting promoters of companies proposed to engage in services like registrars, investment advisers, etc.

Some registrars are insisting upon the promoters proposing to carry on activities as merchant bankers, registrars to an issue investment advisers, Portfolio managers, etc. to obtain the prior approval of SEBI before making available the proposed name or company registration.

Distinct personality of company

The significant characteristic of an company registration is that it is constituted as a distinct and independent person in law, an artificial person entirely different from the members comprising it. A company as a legal person can enter into contracts with others like a natural person and hold property in its name. It may sue others and be sued by others for enforcement of contractual obligations.

It has, however, been held that a company is not a citizen and is not eligible to claim fundamental rights guaranteed to natural citizens by the constitution – State of Corporation of Chennai Ltd (1966).