The Legal Zone

Company is a popular option to start a business in India by startups and businesses with higher growth aspirations. Pvt Ltd company is incorporated under the Companies Act of 2013, and governed by the Ministry of Corporate Affairs (MCA). It is a registered corporate structure, that provides business a separate legal identity from its owners. Hence, providing key advantages like the ability to contract in its own name, and safeguard personal assets of the owners from business liabilities.

The advantages of registration may be grouped into.

1. Legal advantages.

2. General advantages.

Legal Advantages of the Registration of the Firm

1. Settlement of Claims

A registered firm can file suit against third parties. So the rights of registered firms are safeguarded by law. But an unregistered firm or its partner cannot enforce its claim against the third parties or its co-partner.

2. Protection of Rights

The rights and privileges of new partners are also protected in registered firms. But if an incoming partner fails to register himself, he will incur great risk, because he will not be in a position to file suit for his dues against his firms or his co-partners.

3. Protection of Property

The property of the retired or deceased partner continues to be liable for the acts firm does after his death or retirement until public notice is served for the change to a registrar, so there is a strong inducement for partners of registered firms to have the changes noted in the register. But there is an unregistered firm, the private property of the out-going partner will be considered liable to charge the debts despite retirement.

4. Protection to creditors

The registered firm has to maintain the correct, complete, and up to date record of its partners who will be liable for the obligations of the firm. The statement recorded in the register regarding the constitution of the firm would afford a strong safeguard against an untrue refusal of partnership and the evasion of liability to persons who want to deal with the firm.

General Advantages of Registration of Firm

1. Government Facilities

The government provided many facilities and privileges to registered firms. It gives protection to business and production, which makes it more profitable.

2. Public Confidence

People have more confidence in the registered firm than in the unregistered firm because they think that these firms are working under the supervision of the government, and there are no chances of fraud or misrepresentation on behalf of registered firms. Thus they make business contracts with them without any fear.

3. Credit Facilities

Bank and other financial institutions provide credit to registered firms without any hesitation. As these firms abide by the government rules and regulations, so they have full trust in them.

4. Legal Protection

The registered firm has full legal protection as compared to unregistered firms. As they work strictly by government rules and regulations, so they have no fear from the government to turn their work Illegal. Thus these firms work with liberty without any fear.

5. Business Reputation

Registration adds to reputation. Other firms cannot copy their products. Such firms use their trademarks, which are registered, and no other firm registered or not registered can use this trademark. These firms advertise only their trademark but not products. When people find a product up to their standard, they note its trademark. This makes the firm’s business more profitable.

Consequences or Effect of Non-Registration

The non-registration creates the following disabilities.

1. Disability of Firm

An unregistered firm cannot file suit for the recovery of the dues or the other matters against third parties.

2. Disability of Partner

The partner of a non-registered firm cannot bring a suit for the enforcement of a right against a third party or his co-partner unless the firm is registered.

3. Ability Against Firm and Partner

The third-party has full right to file a suit of their dues against the unregistered firm and the partners.

The corporate form can take many shapes in order to respond efficiently to the environment. Company Law should therefore recognize a multiple classification of companies. The Committee indicates the criteria for classification on the basis of the forms discernible today, but recognizes that such classification can never be exhaustive.

i) On the basis of size:

a) Small companies

b) Other companies

ii) On the basis of number of members:

a) One person company

b) Private companies

c) Public companies

iii) On the basis of control:

a) Holding companies

b) Subsidiary companies

c) Associate companies

iv) On the basis of liability:

a) Limited (I) by Shares (II) by Guarantee (with or without share capital)

b) Unlimited

v) On the basis of manner of access to capital:

a) Listed companies

b) Un-listed companies

The law should recognize the potential for diversity in the forms of companies and rather than seeking to regulate specific aspects of each form, seek to provide for principles that enable economic inter-action for wealth creation on the basis of clear and widely accepted principles.