Think of Section 7 as the admission process your company must clear before the law officially recognises its existence. Until you go through this process and get your Certificate of Incorporation (COI) from the Registrar of Companies (ROC), your company is just an idea on paper.
Under sub-section (1), seven items must be filed with the ROC: (a) the MOA and AOA, signed by all subscribers in the prescribed manner; (b) a professional declaration — signed jointly by a practising advocate, CA, CMA, or CS engaged in the company's formation AND by a person named as director/manager/secretary in the articles — confirming all legal requirements are met; (c) individual subscriber and first-director declarations confirming they have no conviction, fraud finding, or breach of duty related to any company in the preceding 5 years, and that all filed documents are true and complete; (d) a correspondence address (used until the registered office is formally set up); (e) full particulars and proof of identity of every subscriber; (f) particulars of first directors, including their DIN (Director Identification Number), address, and nationality; and (g) disclosure of first directors' interests in other firms/companies plus their signed consent to act as director. Once satisfied, the ROC registers everything and issues the COI. From that certificate date, the ROC also allots a CIN (Corporate Identity Number) — the company's permanent unique identity. The company must preserve all filed documents at its registered office till dissolution.
The fraud provisions are the most exam-heavy part. If anyone furnishes false information — whether before or after incorporation — they face action under Section 447 (fraud), which carries serious imprisonment and fines. Going further, if the NCLT is satisfied that a company was incorporated fraudulently, it can: regulate or change the company's MOA/AOA, make members' liability unlimited, remove the company from the register, or wind up the company. Critically, before passing any such order, the company must be given a reasonable opportunity to be heard, and the NCLT must consider existing obligations and transactions — protecting innocent creditors in the process. This is asked frequently as a 5-mark question in Theory/Application format.
📊 Worked example
Example 1 — Identifying who signs what
Question: Sneha, Rohit, and Mr. Iyer are incorporating "SRI Tech Solutions Pvt. Ltd." Their company secretary in practice, Ms. Nair, is handling the formation. Who must sign the declaration under Section 7(1)(b) and who must sign under Section 7(1)(c)?
Working:
- Declaration under (b) → Signed by Ms. Nair (CS in practice, engaged in formation) AND by one of the persons named as director in the articles (say, Rohit, if named as first director). Both signatures are mandatory — this is a dual-signature requirement.
- Declaration under (c) → Signed individually by each subscriber — Sneha, Rohit, and Mr. Iyer — AND by each person named as first director. Each person signs separately, confirming no fraud/misfeasance/conviction in any company in the last 5 years and that all filed documents are true.
Final Answer: (b) requires Ms. Nair + one named director. (c) requires individual declarations from all 3 subscribers and each first director separately.
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Example 2 — Fraudulent incorporation and NCLT powers
Question: "QuickBuild Pvt. Ltd." was incorporated 14 months ago. It now comes to light that its promoter, Mr. Verma, suppressed that he was found guilty of misfeasance in another company just 3 years ago — clearly within the 5-year window. The company has contracted creditor obligations worth ₹62,00,000. What are the consequences?
Working:
- Step 1 — Individual liability: Mr. Verma (promoter), the first directors named in the articles, and the professional who signed the declaration under Section 7(1)(b) are each liable under Section 447 (fraud). Punishment: imprisonment of 6 months to 10 years + fine ranging from the fraud amount up to 3× the amount involved (minimum ₹1,00,000).
- Step 2 — NCLT intervention under Section 7(7): On application, NCLT may (i) regulate management/amend MOA/AOA, (ii) make members' liability unlimited, (iii) remove QuickBuild from the company register, (iv) order winding up, or (v) pass any other suitable order.
- Step 3 — Safeguard: Before passing any order, NCLT must give QuickBuild a chance to be heard AND must weigh the ₹62,00,000 creditor obligations already contracted.
Final Answer: Mr. Verma and others face Section 447 fraud action. NCLT has 5 options including winding up, but must hear the company and consider the ₹62 lakh creditor exposure before acting.
⚠️ Common exam mistakes
- Students think only the professional signs under Section 7(1)(b) — wrong. Two parties must sign: the practising professional (CA/CS/CMA/advocate) AND a person named as director/manager/secretary in the articles. Missing either signature is a defect.
- Confusing (b) and (c) declarations — the professional declaration under (b) is about compliance with the Act; the subscriber/director declaration under (c) is the personal "clean-record" declaration about no fraud/conviction in the last 5 years. These are separate documents with different signatories.
- Getting the 5-year period wrong — the 5 years of clean record required under Section 7(1)(c) is counted backwards from the date of making the declaration, not from the date of incorporation. Don't reverse-calculate from COI date.
- Forgetting CIN allotment timing — students write that CIN is allotted when documents are filed. Wrong. CIN is allotted on and from the date mentioned in the Certificate of Incorporation (sub-section 3). That date is the company's birth date, not the filing date.
- Stopping at sub-section (5) when writing NCLT fraud answers — sub-sections (6) and (7) carry more marks. Examiners want to see the 5 NCLT options under 7(7) AND the procedural safeguard (reasonable opportunity of hearing + consideration of existing obligations). Always cover these in 5/8-mark questions.
📖 Bare Act text — Section 7, Companies Act 2013
(click to expand)
(1) There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:—(a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed;(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with;(c) a declaration from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;(d) the address for correspondence till its registered office is established;(e) the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;(f) the particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and(g) the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed.(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that sub-section in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate.(4) The company shall maintain and preserve at its registered office copies of all documents and information as originally filed under sub-section (1) till its dissolution under this Act.(5) If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.(6) Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of sub-section(1) shall each be liable for action under section 447.(7) Without prejudice to the provisions of sub-section (6), where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,—(a) pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or(b) direct that liability of the members shall be unlimited; or(c) direct removal of the name of the company from the register of companies; or(d) pass an order for the winding up of the company; or(e) pass such other orders as it may deem fit:Provided that before making any order under this sub-section,—(i) the company shall be given a reasonable opportunity of being heard in the matter; and(ii) the Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability.
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