How to Open a Company in India - Complete Guide

Product Mark

A product mark is a kind of trademark used exclusively on goods, helping consumers identify the origin of the product and ensuring its authenticity. It plays a crucial role in distinguishing one business's goods from another, contributing to brand recognition and reputation.

Product marks fall under trademark classes 1 to 34, which categorise various types of goods, including chemicals, machinery, and textiles. For example, the "Nike" logo on shoes is a product mark that signifies the brand's origin and quality. 

Service Mark

A service mark is a trademark used to distinguish one business's services from those offered by others. Unlike product marks, which apply to goods, service marks highlight the origin and quality of services, helping customers identify and trust a particular service provider.

These marks typically fall under trademark classes 35 to 45, covering various services such as advertising, financial services, and hospitality. For instance, the "Taj Hotels" emblem represents a service mark that signifies premium hospitality services. 

Collective Mark

A collective mark is a type of trademark used to identify goods or services offered by members of a group, association, or institution. It ensures that the products or services meet specific quality or ethical standards set by the organisation holding the mark.

These marks distinguish the collective efforts of a group rather than an individual business. For example, the Chartered Accountant (CA) designation in India serves as a collective mark in trademark, representing professionals certified by the Institute of Chartered Accountants of India (ICAI).

Certification Mark

A certification mark is a symbol used to certify that a product meets specific standards related to origin, material, quality, or manufacturing methods. It guarantees that the certified product complies with established benchmarks, regardless of the owner’s business.

Certification mark examples include the "ISI" mark on electrical appliances and the "Agmark" label on food products in India, both of which assure consumers of quality and safety. Such marks are commonly found on food, electronics, and toys.

Shape Mark

A shape mark protects the distinctive shape of a product, enabling consumers to associate it with a specific brand. It ensures that unique designs contributing to a product's identity remain exclusive to the brand. For instance, the iconic contour shape of Coca-Cola bottles and the unique design of Fanta bottles are classic examples of shape marks that enhance brand recognition and trust.

Pattern Mark

A pattern mark protects distinctive designs or patterns used on a product to set it apart from competitors. To qualify, the pattern must be unique and easily recognisable—generic or common patterns are often rejected. For example, the well-known Burberry check pattern on their clothing and accessories is a classic pattern mark that helps identify the brand.

Demonstrating the uniqueness of the pattern is essential for successful registration, as it ensures the design remains exclusive to the brand, reinforcing its identity in the market.

Sound Mark

A sound mark is a unique audio signature linked to a product or service, allowing consumers to identify its origin through sound. It plays a significant role in branding, often used as an audio mnemonic in advertisements. A well-known example in India is the IPL tune, which instantly evokes recognition of the Indian Premier League.

Arbitrary and Fanciful Trademarks

Arbitrary and fanciful trademarks are distinct categories that stand out for their unique qualities. A fanciful mark is a made-up term or word with no prior meaning, making it highly distinctive and easy to register. For example, "Google" and "Kodak" are fanciful marks, as these words were coined specifically for the brands and have no inherent connection to their respective products.

On the other hand, an arbitrary mark uses a commonly known word but has no direct relation to the product or service it represents. "Apple," for instance, is an arbitrary mark since it’s a well-known word but doesn’t link directly to computers or electronics. 

Geographical Indications (GI)

A Geographical Indication (GI) is not a type of trademark but a separate form of intellectual property protection. It denotes a product’s specific geographic origin and assures consumers of its quality or reputation linked to that region. GIs help preserve the uniqueness of products tied to their location. For example, "Darjeeling Tea" and "Banarasi Silk" are GIs that signify the products’ origins and qualities unique to those regions.

How to Choose the Right Type of Trademark?

1. Assess the Nature of Your Product/Service
   
   Determine the characteristics and qualities of your product or service. Understanding its nature helps in choosing the appropriate trademark type. For instance, if your product has a unique shape or design, a shape mark could be suitable. If your service stands out for its quality or reputation, a service mark might be more fitting.

2. Focus on Branding Goals and Industry Standards

Consider your branding goals—whether you aim to build recognition, guarantee quality, or differentiate your offering. Also, take into account industry practices.

For instance, if you're part of a group or association, a collective mark might be more suitable, whereas a certification mark may be necessary for products requiring quality assurance. Ensure that the trademark aligns with your long-term branding strategy.

3. Consult a Trademark Expert if Necessary

If you are uncertain about which trademark suits your business, it’s advisable to consult a trademark expert. They can assess your product or service and guide you on the best trademark type based on legal requirements and market needs. This ensures that your trademark selection is legally sound and provides optimal protection.

Examples of Trademarks in Action

1. Food Industry
   
   Pepsi uses a product mark that consists of its distinctive logo, which is instantly recognisable by its red, white, and blue colour scheme. This trademark is essential in helping customers identify the Pepsi brand in a competitive market filled with various soft drink options. The product mark not only includes the logo but also the unique design of its packaging, ensuring that every Pepsi product stands out on store shelves.

2. Fashion Industry

Louis Vuitton has trademarked its iconic monogram pattern as a pattern mark. This pattern, featuring the “LV” logo repeated across their products, is instantly recognisable worldwide. The distinctive design appears on bags, luggage, and other luxury accessories, making it a signature of high-end fashion.

By using this pattern mark, Louis Vuitton differentiates itself from other brands and maintains its status in the luxury market, ensuring that customers associate the design with quality and exclusivity.

3. Technology Industry
   
   The name Microsoft is a suggestive mark. It combines “microcomputer” and “software,” hinting at its products (software for small computers) without explicitly describing them. Suggestive marks require consumers to make a mental connection between the name and the product or service.

This type of trademark is distinctive while maintaining a subtle association with the brand's offerings, making it a powerful branding tool in the technology sector.

4. Hospitality Industry
   
   Marriott International uses a service mark to represent its brand and distinguish its services in the hospitality industry. The service mark covers not only the name “Marriott” but also its reputation for providing high-quality customer service, luxury, and a wide range of hospitality offerings.
   

From hotels to resorts, Marriott’s service mark assures customers of a consistent experience, helping the brand stand out in the competitive world of hotels and travel.

Frequently Asked Questions

Company is a Separate Legal Entity

A company is recognised as a separate legal entity, distinct from its shareholders. Even if it is fully owned by a single person or a group, the company maintains its independent status. This distinction ensures the company can continue existing regardless of changes in ownership.

However, while a company has legal recognition, it is not considered a citizen and cannot claim fundamental rights granted to individuals.

Example

Suppose John and Mary start a bakery and register it as a private limited company (e.g., "Sweet Treats Pvt. Ltd."). The company can enter into contracts, own property, and sue or be sued in its own name. If the company faces a lawsuit, John and Mary’s personal assets are protected, and only the company’s assets are at risk

Corporate Taxation

As a separate legal entity, a company is taxed independently from its owners. Corporate tax rates vary based on the type of company, its turnover, and prevailing tax laws. This separation ensures that individual shareholders are not personally liable for the company's tax obligations, reinforcing financial security and stability.

Example

Tech Innovators Pvt. Ltd." earns ₹2 crores in a financial year. The company pays corporate tax at the applicable rate (e.g., 25% for companies with turnover up to ₹400 crore), separate from the personal income tax liabilities of its shareholders. The shareholders are not personally liable for the company’s tax dues.

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Limited Liability

Limited liability protects shareholders by restricting their financial responsibility to the amount they have invested in the company. This means that even if the company faces financial losses or legal claims, the personal assets of shareholders remain secure. This feature makes private limited companies an attractive option for entrepreneurs and investors.

Example

If "Green Energy Pvt. Ltd." takes a loan and fails to repay it, the shareholders are only liable up to the amount unpaid on their shares. Their personal assets, such as their homes or personal savings, cannot be used to settle the company’s debts.

Company has Transferability of Shares

Shares in a company can be transferred freely unless restricted by the company's articles of association. This feature enhances liquidity, allowing investors to buy or sell shares easily.

While shares of public companies are freely transferable, private companies may impose certain restrictions on share transfers to maintain control over ownership.

Example

A shareholder in "Family Foods Pvt. Ltd." wants to transfer shares to her son. She can do so, provided the company’s Articles of Association allow it and the required approvals are obtained. This enables her to pass on ownership without affecting the company’s existence.

Company is a Juristic Person

Under the Companies Act, a company is considered a juristic person, meaning it has legal rights and obligations similar to a natural person. However, an authorised individual must represent it in legal matters, usually a Board of Directors or a specifically empowered Director.

While a company can file lawsuits, it cannot take an oath or serve as a witness in court, as these actions require a natural person.

Example

"Urban Developers Pvt. Ltd." can purchase land, enter into contracts, and hire employees in its own name. It is treated as a legal person, distinct from its shareholders, and can enforce its rights in court through an authorized representative.

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Company has Perpetual Succession

A company's existence is independent of changes in ownership or shareholder status. Even if a majority shareholder (owning 99.99% of shares) passes away, the company continues to operate until it is formally wound up. This ensures stability and continuity in business operations.

Example

"Dabur India Ltd." was incorporated in 1884 and has continued to exist and operate despite changes in ownership, management, or the death of shareholders. The company’s existence is not affected by such changes and continues until it is formally dissolved

Common Seal (If Applicable)

A common seal acts as the official signature of the company, used to authenticate important documents like contracts and deeds. While the Companies Act of 2013 has made it optional for private companies, some organisations still choose to adopt it for added authenticity and formal recognition.

Example

"Metro Pvt. Ltd." adopts a common seal as its official signature. When signing a property purchase agreement, the document is stamped with the company’s common seal, signifying its authenticity and approval by the board of directors. While optional, some companies still use it for formal documents

Decree Against Company & Corporate Veil

A company is generally not liable for an employee's wrongful acts unless they occur within the scope of employment. For liability to arise, the wrongful act must be directly linked to business operations rather than simply occurring during work hours.

The "corporate veil" protects shareholders from personal liability, but courts can lift this veil in cases of fraud or misconduct.

Example

An employee of "RapidMove Logistics Pvt. Ltd." causes damage to a client’s goods while making a delivery as part of his job. The client sues the company, not the employee personally. However, if the directors used the company to commit fraud, the court could hold them personally liable by lifting the corporate veil.

Company can Own Property

A company, as a separate legal entity, can own property in its name, and its assets are distinct from those of its members. Members do not have direct ownership over company assets but may have a right to claim remaining assets after the company is wound up.

Example

"TechHive Innovations Pvt. Ltd." purchases office equipment and furniture. These assets are owned by the company itself, not by any individual shareholder or director. If a shareholder leaves, the equipment still belongs to the company.

Company can be Trustee

A company can act as a trustee if its Memorandum of Association (MoA) permits it. The objects clause in the MoA defines the company's ability to function as a trustee. Companies often act as trustees in managing trusts, employee benefit funds, or asset management services, ensuring structured administration of assets.

Example

"SecureTrust Pvt. Ltd." is appointed as the trustee to manage a scholarship fund for underprivileged students. The company manages the fund’s assets and disburses scholarships according to the trust’s rules.

Capacity to Sue and Be Sued

As a separate legal entity, a company has the right to initiate legal proceedings and can also be sued in its own name. This ensures accountability and allows the company to protect its rights, enforce contracts, and address disputes independently of its owners or directors.

Example

"PureWater Solutions Pvt. Ltd." discovers that a supplier has delivered defective water filters. The company files a lawsuit against the supplier in its own name. Similarly, if the company fails to pay its rent, the landlord can sue the company directly.

Importance of Understanding Company Features

Understanding these features is crucial for ensuring legal compliance and making informed business decisions. It helps entrepreneurs, investors, and stakeholders navigate corporate operations effectively while minimising risks. Recognising the legal and financial implications of these features enables better decision-making in establishing and managing a company.

Frequently Asked Questions

What is a Certificate of Commencement of Business?

The Certificate of Commencement of Business is a mandatory legal document that certain companies in India must obtain before they start their business activities. It is issued by the Registrar of Companies (ROC) under the Companies Act of 2013, and applies specifically to public and private companies limited by shares.

Beyond legal compliance, this certificate also plays a big role in establishing trust. It shows investors, banks, and stakeholders that your company has met all foundational requirements and is operating within the bounds of the law. It also helps prevent fraudulent incorporations by ensuring that companies follow due process from the start.

Significance of Commencement of Business Certificate

The Certificate of Commencement of Business serves multiple purposes:

• Legal Authorisation: It acts as formal approval for a company to start its operations.
  
• Regulatory Compliance: Ensures adherence to the provisions of the Companies Act of 2013.
  
• Prevention of Fraud: Minimises the risk of shell companies or fraudulent incorporations.
  
• Credibility: Enhances trust with investors, financial institutions, and stakeholders.
  
• Access to Funds: Allows the company to exercise borrowing powers and raise capital legally.
  

Commencement of Business under Companies Act 2013 – Old Act and Procedure

Under the Companies Act, 2013, companies with share capital cannot begin operations immediately after incorporation. While companies without share capital may commence business right after receiving the Certificate of Incorporation, those with share capital must secure a Certificate of Commencement of Business as per Section 11 of the Act and Rule 24 of the Companies (Incorporation) Rules, 2014.

This requirement is applicable to all newly formed public and private companies with share capital, highlighting the importance of meeting initial capital commitments and completing registration protocols before beginning operations or seeking external financing.

Position Under Erstwhile Companies Act, 1956

Previously, the Companies Act of 1956 governed the commencement of business for companies in India. Under this law, only public companies with share capital were required to obtain a Certificate of Commencement of Business. Private companies, on the other hand, were exempt and could begin operations immediately after incorporation.

The 2013 Act introduced more stringent rules, bringing private companies with share capital under the same requirements to enhance transparency and accountability.

Certificate of Commencement of Business Under Companies Act 2013

To obtain this certificate under the current law, companies must meet two critical requirements:

1. Declaration by a Director: The director must declare that every subscriber to the memorandum has paid for the shares they subscribed to.
   
2. Registered Office Verification: The company must file verification of its registered office with the ROC.
   

Only after fulfilling these conditions can the company apply for the certificate and begin lawful operations.

Eligibility Criteria for Commencement of Business Certificate

The Certificate of Commencement of Business (COB) is mandatory for the following categories of companies:

• Companies Incorporated on or after November 2, 2018: Any company registered after this date is required to obtain the COB Certificate within 180 days from the date of incorporation.
  
• Companies with Share Capital: Regardless of industry or business type, all companies with share capital must apply for and secure the COB Certificate before starting operations.
  

Which Company is Not Required to File a Certificate of Commencement of Business?

The following categories of companies are exempt from filing for the Certificate of Commencement of Business. These include:

• Companies Incorporated Before November 2, 2018: This exemption applies to companies that were established prior to the implementation of the Companies (Amendment) Ordinance, 2018, specifically before November 2, 2018.
  
• Companies Registered After November 2, 2018, Without Share Capital: Companies that were incorporated after November 2, 2018, but do not have a share capital structure, meaning they haven’t issued any shares, are also exempt from obtaining the COB Certificate.
  

Documents Required to Obtain Commencement of Business Certificate in India

To apply for the Certificate of Commencement of Business, companies must submit the following documents:

• Form INC-20A: A declaration filed by a director.
  
• Board Resolution: Approving the commencement of business.
  
• Proof of Capital Subscription: Evidence that all subscribers have paid their share value.
  
• Registered Office Proof: Utility bill or rental agreement confirming office address.
  
• Certificate of Incorporation: Issued by the ROC.
  

Application Process for Commencement of Business Certificate

Here’s a detailed walkthrough:

1. Log in to the MCA Portal
   Visit the official website of the Ministry of Corporate Affairs (MCA). Log into the MCA portal using your registered credentials (User ID and Password). If you are not registered yet, you must create an account first.
   
2. Navigate to the e-Filing Section
   After logging in, go to the 'MCA Services' tab and select the 'e-Filing' option. This section contains all the necessary forms and submission options for company-related filings.
   
3. Download and Fill out Form INC-20A
   Locate and download Form INC-20A- the specific form used for the Declaration of Commencement of Business. Carefully fill in all the required details, such as company information, paid-up share capital details, and confirmation of compliance with registration requirements.
   
4. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
5. Attach the Required Documents
   Upload the necessary supporting documents, which typically include:
   
   • The director’s declaration that the subscribers have paid all share capital
     
   • Proof of registered office verification (such as a utility bill, rent agreement, or ownership document)
     
6. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
7. Submit the Form and Pay the Prescribed Fee
   Once the form and attachments are ready, submit them through the portal. Pay the applicable government fee based on your company's authorised share capital. The payment can usually be made online through various options available on the MCA portal.
   
8. Receive the Service Request Number (SRN)
   After successful submission, the system will generate a Service Request Number (SRN). Save this number carefully, it will help you track the status of your application and any future correspondence regarding your Certificate of Commencement of Business.
   

Time Limit for Filing the Declaration of Commencement of Business

As per Section 11 of the Companies Act, 2013, the declaration must be filed within 180 days from the date of incorporation. Failure to do so can lead to:

• Penalties for the company and its officers.
  
• Potential strike-off from the ROC register
  

Form INC-20A

Form INC-20A is the declaration form filed to confirm the commencement of business. It must be signed by a director and certified by a professional (CA/CS/CWA). The form includes:

• Company details
  
• Paid-up capital confirmation
  
• Registered office address verification
  

Fee For Filing Form 20A and Receiving Commencement of Business Certificate

The fee for filing Form INC-20A depends on the company's authorised share capital:

Consequences of Not Filing Certificate of Commencement of Business

Failing to file Form INC-20A within the 180-day window leads to:

• Penalty of ₹50,000 for the company.
  
• ₹1,000 per day penalty for each defaulting officer, up to ₹1 lakh.
  
• ROC may strike off the company’s name if it remains inactive under Section 11(3).
  

Conclusion

Obtaining the Certificate of Commencement of Business is a critical step that validates your company's readiness to operate in India’s regulatory landscape. For public and private companies with share capital, understanding and complying with this requirement ensures legal clarity, business credibility, and uninterrupted growth. By following the correct process, submitting the necessary documents, and meeting deadlines, companies can avoid heavy penalties and begin their entrepreneurial journey on the right foot.

Frequently Asked Questions