Certificate of Incorporation¶
The Certificate of Incorporation (COI) is often referred to as the "birth certificate" of a company. It is an essential document issued by a governmental authority, granting a company legal existence as a juridical entity.
Key Features of COI¶
- Proof of legal existence: It confirms that the company exists as a separate legal entity, distinct from its members.
- Public record: The certificate contains key information about the company, such as its name, date of incorporation, registered office, directors, and share capital.
- Legal prerequisite: It enables the company to enter into contracts, open bank accounts, and conduct other business activities lawfully.
- Issuance: It is issued immediately upon the successful registration of a company under the Companies Act.
For private companies, the COI is sufficient to demonstrate that the company has been legally incorporated. However, public companies may also require a certificate or trading/business license, depending on jurisdictional requirements.
Duties of a Company Secretary Before and After Incorporation¶
Before Incorporation¶
- Assist promoters with a detailed investigation of the business idea.
- Secure expert opinions on the feasibility of the idea.
- Help in drawing up a financial plan and conducting preliminary meetings of promoters.
- Seek approval from the registrar for the company name.
- Prepare preliminary contracts and draft the Memorandum of Association (MOA) and Articles of Association (AOA).
After Incorporation¶
- Be well-versed with the contents of the MOA and AOA.
- Prepare and file the draft prospectus or statement in lieu of prospectus.
- Organize the first board meeting and confirm the appointment of the secretary and others.
- Make arrangements for listing the company on stock exchanges and for opening a bank account.
- Prepare the company's common seal, file the prospectus, and handle the issue of the prospectus to the public.
Legal Effect of Incorporation¶
Upon incorporation, the company:
- Becomes a body corporate with perpetual succession.
- Can sue and be sued in its own name.
- Acquires the right to hold and sell property.
- Bears its debts and obligations as its own liabilities, separate from those of its members.
Conclusiveness of COI¶
The COI serves as conclusive evidence that:
- All legal requirements have been satisfied.
- The company is duly registered.
- The company officially came into existence on the date mentioned in the certificate.
Certificate of Commencement of Business¶
The Certificate of Commencement of Business is a document that historically served as an official recognition that a company met all pre-requisites to start conducting business. It's a follow-up to the Certificate of Incorporation and serves specific functions in the business establishment process. In the past, after obtaining the Certificate of Incorporation, companies were required to apply for and receive the Certificate of Commencement of Business. This certificate served as a green light from the relevant authorities, allowing the company to begin its operations, open for business, and engage in transactions.
For Private Companies¶
- India: As of 2015, private companies in India are not required to obtain this certificate due to changes in the Companies Act, which streamlined the process of starting a business.
- Global Trend: Similarly, many other jurisdictions globally have eliminated the requirement for private companies to reduce bureaucratic hurdles and encourage entrepreneurship.
For Public Companies¶
- Continued Relevance: Public companies may still need to obtain this certificate before they start business operations, especially if they intend to raise capital from the public through the sale of shares or debentures.
- Regulatory Compliance: It is also a compliance measure to ensure that the company has the minimum prescribed paid-up capital and that its directors have paid the subscription money in full.
Implications of the Certificate¶
- Legal Authority: It authorizes the company to begin its business activities, including entering into binding contracts, incurring debts, and conducting other transactions.
- Public Trust: It establishes a level of trust with the public, potential investors, and financial institutions, signaling that the company is fully established and operational.
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