Important Keywords: Company Registration in India, Register Private Limited Company online, Company Incorporation in India, MCA SPICe+ form process, Documents required for company registration.
Words: 4,087, Read time: 22 minutes.
Last updated: May 2026.
Table of Contents
Overview: Company Registration in India
Registering a company in India has been made significantly easier by the government's introduction of a single-point application for the task SPICe+ on the MCA portal.
As we know that India is one of the world's fastest-developing economies, providing several prospects for new business. As a result, new firms are always attempting to join the Indian Markets or expand their current enterprises to capitalise on India's competitive edge. The Companies Act, 2013, oversees all such businesses and requires them to register, whether they are a foreign corporation trying to set up a company in India or an Indian firm looking to grow.
At Finodha, we help people like you register companies quickly and easily. Our team knows everything about the process and can guide you step-by-step. Whether you're just starting out or planning to grow your business, we're here to help.
What is Company Incorporation in India?
Company incorporation in India means officially registering your business under the Companies Act, 2013. This gives your business a legal identity, protects personal assets, and allows you to:
Open a company bank account
Raise funds
Apply for GST, MSME registration, and other licenses
Gain credibility with investors, customers, and government authorities
How to choose a business structure and apply for company Registration in India?
Before beginning the registration process, it is important for you to first and foremost understand the category under which your business will fall. Here are the different business structures in India: -
Limited Liability Partnership (LLP)
An LLP is registered under the Limited Liability Act of 2008, and the business is considered a separate legal entity that has a partnership arrangement, which limits each partner’s liability to the amount they put into the business.
Private Limited Company (PVT)
A Private Limited Company is basically a separate legal entity from its founders, directors and stakeholders (as shareholders) in the eyes of the law. A Private Limited Company is a separate legal entity distinct from its shareholders and directors. One Person Company (OPC)
The Government aimed to make it easier for anyone to start a company on their own by introducing the option to do so in 2013. If there is only one owner of your company, you may continue to run your business as per the corporate structure as the sole owner of your company. Registered under the Companies Act, 2013, an OPC is preferred by small businesses looking to raise capital.
Public Limited Company (PLC)
A Public Limited Company is a type of business where anyone from the public can buy its shares on the stock market. This means many people can own a part of the company. These companies must follow strict rules and laws set by the government.
Each has different legal, tax and compliance implications. Your choice depends upon your goals, team size and financial plan.
Mandatory documents to register a company in India
All Directors or partners must submit:
PAN Card (Compulsory identity proof for all Indian directors and Partners.)
Aadhar Card, Passport, Driving License, and/or Voter ID Card
Address proof of directors – One of the following: Utility bill (e.g. electricity, water, or gas) Updated bank statement (not more than 2 months old)
Rent agreement (if the premises are rented)
Passport-sized photographs – Required for uploading during registration of a company in India.
Digital Signature Certificate (DSC) – Required for filing forms and compliance submissions online.
Director Identification Number (DIN) – A unique number that is given by MCA to the directors of a company.
Note:
All above-mentioned documents must be self-attested by the involved stakeholders
It is also advisable to submit the latest bills and documents, where the electricity bill should not be more than 2 months old.
How to register a private company in India?
Apply for a Digital Signature Certificate.
Review and file an application for name availability.
Submit the e-MOA and e-AOA.
Apply for PAN and Tax Collection and Deduction Account Number (TAN).
Get the Certificate of Incorporation.
Open a current bank account in the company’s name
Why should you understand the stages of formation of a company?
Understanding the stages of company formation is not just helpful—it’s essential.
A properly registered company gives your business a legal identity, builds credibility, and protects your personal assets through limited liability. It shows the world you’re serious, professional, and ready to grow.
When your company is legally set up, it’s easier to raise funds, win investor trust, open bank accounts, and form strong partnerships. You also stay compliant with tax laws and government regulations—avoiding fines, delays, or rejection by the Ministry of Corporate Affairs (MCA).
But here’s the catch: skipping or mishandling any step can cost you time, money, and opportunities. That’s why every entrepreneur must learn and follow the complete legal company setup stages.
One-by-One process for company registration in India
Name application & approval
The name you choose for your company should be unique and give an idea of what your business does. You can check and apply for the name on the Ministry of Corporate Affairs (MCA) website.
The MCA will approve or reject based on availability and guidelines
Use SPICe+ Part A (under the MCA portal) to propose two names
Include keywords that reflect your business type
Apply for a director identification number (DIN)
If you’re incorporating a Pvt. Ltd. Company or OPC, the proposed directors must have a DIN, which can be applied for through the SPICe+ form during registration.
Obtain digital signature certificate (DSC)
The first step is obtaining DSCs for the proposed Directors of the company. This is essential for electronically signing documents.
All directors /Partners must have aDSC, which is used to digitally sign forms. This can be obtained online through certified agencies.
Memorandum of Association (MoA) & Articles of Association (AoA)
Drafting and submitting the MoA and AoA, which outline the company's objects and internal rules and byelaws, respectively.
MOA: MoA explains what your company can do.
AOA: (AoA) explain how a company will work internally, as per Section 5 of the Companies Act, 2013.
Issuance Of incorporation certificate
File the incorporation application (SPICe Form) along with the necessary documents with the MCA. This form also covers PAN and TAN applications for the company.
If all documents are in order, the Registrar of Companies (ROC) will issue:
Certificate of incorporation (COI)
Company identification number (CIN)
PAN and TAN (automatically generated)
This means your company is officially registered.
“Post-Incorporation” compliance section
This is often overlooked. Add details like:
Open a current bank account with incorporation documents (COI, PAN, TAN, MOA, AOA)
Appoint a Statutory Auditor at the first board meeting as per Section 139. File Form ADT-1 within 15 days with the auditor's consent.
Issue Share Certificates to MOA subscribers as per Section 46. (Within 60 days)
File Form INC-20A. (Commencement of Business as per sec.10A) within 180 days
Attach bank statements and the CA certificate. Required before business operations
5. Annual Compliance: -
File an annual Income Tax Return
Conduct Annual General Meeting (AGM)
Complete Director's KYC (Form DIR-3 KYC) annually
File Annual Return (Form MGT-7/7A) and
Financial Statements (Form AOC-4)
6. Optional Compliance: -
GST Registration - if the turnover exceeds the threshold (₹20L (services), ₹40L (goods) – still valid.)
Professional Tax Registration
ISO Registration
MSME/Udyam Registration for benefits
Shops & Establishment Act Registration
Trademark application (optional but recommended)
And filing your GST returns is one of the post-registration compliances that you should not miss.
Checklist for registration
A concise checklist to help you navigate the Private Limited Registration Process:
Approval of Company Name, a unique and compliant name.
Get DSC for all designated Directors.
Draft the e-Memorandum of Association & e-Articles of Association.
Apply through SPICe+.
Submit documents & pay fees.
Get Certificate of Incorporation.
Obtain PAN & TAN.
A Company bank account, Proof of the company's registered office.
Stay up-to-date with Compliance.
Timeline for registration: -If all the documents are complete and there are no objections, the entire process may take 15-25 working days.
What can affect the cost & time-length of company registration
The cost and duration of registering a company in India depend on your business structure, state location, professional support, and post-registration requirements. Planning ahead and consulting professionals can help minimize delays and avoid unexpected expenses:
1. Type of business entity
Private Limited (Pvt Ltd) and Public Limited (Public Ltd) companies come with higher registration and compliance costs, as they require extensive documentation and adherence to stricter regulations.
Limited Liability Partnerships (LLPs) and One Person Companies (OPCs) are generally more cost-effective and involve simpler compliance procedures.
Public Limited companies often face longer approval timelines due to their complex structure and regulatory obligations.
Not all states are equal when it comes to registration costs:
Stamp duty— a significant part of the registration cost—varies from state to state.
States like Karnataka, Madhya Pradesh, Punjab and Rajasthan have higher stamp duties, increasing overall costs.
States like West Bengal, Uttar Pradesh, Sikkim and Jharkhand offer lower stamp duty rates, making them more cost-efficient for registration.
3. Professional fees:
Fees for the professional vary based on the work complexity and their experience.
4. Government processing Time & Approvals:
Delays often happen at the government end, especially with documentation and approvals:
Private Limited and LLP registrations typically take 15–25 workingdays, assuming no document issues.
Public Limited and Section 8 Companies (NGOs) may take longer due to additional scrutiny and compliance checks by the Ministry of Corporate Affairs (MCA).
5. Additional post-registration costs
Registration is just the beginning—other mandatory steps may add to your timeline and budget.
GST Registration – Required if your turnover crosses the threshold limit.
Statutory Compliances – Costs for EPF, ESI, and Professional Tax filings may apply depending on employee strength and state regulations.
Intellectual Property Protection – Fees for trademark, patent, or copyright registrations if you're protecting your brand or product.
Common mistakes to avoid during company Registration in India
To ensure a smooth registration, you should avoid these common mistakes:
Choosing a name that’s already taken: Ensure the proposed name does not conflict with existing company names or registered trademarks.
Incorrect document submission: Submit all required documents correctly to avoid rejections or delays.
Missing post-registration compliance: If you miss important filings like Form INC-20A or don’t hold board meetings on time, you could face fines or legal trouble.
click here: for any query related to ITRfiling and GST filing.
Key Government portals involved in online registration
MCA V3 Portal: The primary platform for company registration, statutory filings, and compliance management.
SPICe+ Web Form: The integrated online application form for company incorporation.
AGILE-PRO Form: A linked webform used for obtaining GSTIN, EPFO, ESIC registrations, and opening a bank account.
Digi Locker: An optional platform for digital document verification and secure storage of identity proofs, Aadhaar, and more.
Relevant case laws
Madhya Pradesh High Court Ruling on Corporate Compliance:
In a recent decision, the Madhya Pradesh High Court pointed out that some private companies are not following the rules properly. The court made it clear that all private companies must keep proper records and regularly file their returns. If they don’t, they could face penalties. This ruling reminds companies how important it is to stay compliant with the Registrar of Companies (ROC) requirements.
Supreme Court on Perpetual Succession:
The Supreme Court, in a landmark decision, declared again that the death of shareholders or directors in a Private Limited Company does not affect its existence, showcasing the resilience and operational continuity of the PLC structure.
Private Limited Companies are a top choice for startups and entrepreneurs in India because they offer limited liability, growth opportunities, and organized management.
Registering a company in India has become much easier and more transparent, thanks to online tools like the MCA V3 portal and the SPICe+ form. By following the steps shared in this guide and meeting all the legal requirements, you can confidently start your business the right way.
Note: The details in this blog are based on the latest information available as of 2025. For any updates or changes, please check the official MCA website.
I hope this post has made you more aware of the procedures and required paperwork for the incorporation of the Company in India.
At Finodha.in, We serve a number of clients who need assistance/guide for various regulatory compliances including setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. If you require any guidance for any professional service, we are here to serve you! You can also book a free consultation with us!
Join with us today! We shall be happy to assist you, and in case you require our services, please feel free to contact us at the below mentioned email details: – help@finodha.in.
FAQs: Get answers to all your queries!
Question. How long does it take to register a company in India?
Answer. 15–25 working days with correct documentation.
Question. Can I register a company in India online without visiting any office?
Answer. Yes. The entire process is 100% online via the MCA portal.
Question. Where can I register my company?
Answer. By applying to the Ministry of Corporate Affairs on their official portal.
Question. Is GST registration mandatory after company registration?
Answer. Only if turnover exceeds ₹20L (services) or ₹40L (goods), or if you sell online.
Question. What happens if MOA and AOA are incorrectly drafted?
Answer. MCA may reject the incorporation application.
Question. Which is the best bank for startups in India?
Answer. Options include ICICI Bank, HDFC Bank, Kotak Mahindra, SBI, Axis Bank, etc.
Question. How to Register a Private Limited Company in India at a lower cost?
Answer. The MCA SPICe+ Form online registration reduces cost.
Question. Can I form a private limited company on my own?
Answer. Yes, but professional guidance ensures compliance with the Companies Act, 2013.
Question. Should a PAN card be compulsory for all shareholders in the company?
Answer. Yes, a PAN card is mandatory for Indian shareholders, while foreign shareholders must provide a passport copy.
Question. How long does it take to obtain a Digital Signature Certificate?
Answer. It will usually take 1-2 working days.
Question. DSC (Digital Signature Certificate) mandatory for company registration in India?
Answer. Yes, it is mandatory for all filings under the MCA portal.
Question. Can an individual hold multiple DINs?
Answer. No, each person can have only one DIN.
Question. Is it mandatory to have DIN for LLP registration?
Answer. No, Designated Partner Identification Number (DPIN) is required in the case of LLP instead of DIN.
Question. How long does it take for name approval?
Answer. 2-3 working days, assuming the name is compliant with the rules.
Question. How to Apply for a DSC?
Answer. Submit identification proof, address proof, and passport-size photographs with the government-backed Certifying Authority (CA).
Question. Who needs a DSC?
Answer. All Directors, Shareholders, and authorized signatories are required to have a Class 3 DSC from agencies like e-Mudra, NSDL, and CDSL.
Question. What is a Digital Signature Certificate (DSC)?
Answer. A Digital Signature Certificate (DSC) is required to e-file company registration forms on the Ministry of Corporate Affairs (MCA). It makes digital transactions and document authentication secure.
Question. Can I form a company in India from the USA?
Answer. Yes, as a U.S. citizen or resident, you can form a company in India, including a Private Limited Company, by complying with Indian regulations, including having at least one resident Indian director and submitting the required documents.
Question. Who is eligible to register a Private Limited Company in India?
Answer. Any individual (Indian or foreign) aged 18 or above, of sound mind, not disqualified under law, and with at least one Indian resident director, is eligible to register a Private Limited Company in India.
Question. How can I check if my company is registered or not?
Answer. To check the company’s registration status: Step 1. Visit the MCA’s official website. Step 2. Go to the MCA Services Step 3. Click “View Company/LLP Master data” Step 4. Enter your CIN
Question. What documents are required to open a business account?
Answer. 1. Certificate of Incorporation, 2. PAN Card of the Company, 3. MOA, AOA, 4. Resolution of the Board of Directors for a director to open the account.
Question. Can I open a bank account before getting the Certificate of Incorporation?
Answer. No, you can only open a company bank account after receiving the Certificate of Incorporation (COI), PAN, and TAN, all of which are auto-issued upon approval.
Question. How to file MOA and AOA?
Answer. 1. Draft them as per the Companies Act, 2013, 2. Ensure the digital signatures of all directors and shareholders, 3. Submit via SPICe+ form electronically.
Question. What are MoA and AoA?
Answer. MoA (Memorandum of Association): It contains the company’s objectives, scope, and authorized capital. AoA (Articles of Association) governs internal management, rights of shareholders, and company operations. Both are required during incorporation and must be signed by subscribers.
Question. Do I need a professional (CA/CS/Lawyer) to register my company?
Answer. While not mandatory, it is highly recommended to consult a CA or CS to ensure: 1. Correct document preparation, 2. Avoiding rejections or errors, 3. Post-incorporation compliance.
Question. Is there any minimum capital requirement for the company?
Answer. No, there is no minimum capital requirement for company registration in India. You must simply declare an authorized share capital and pay the corresponding fee. A common initial authorized capital for many new ventures is Rs.1 lakh, though there is no mandatory minimum.
Question. What if someone has already taken my company name?
Answer. You can easily check the MCA records online, and if somebody has already taken your company name, then you just need to choose a new name and get your company’s registration done.
Question. What is the complete legal procedure to register a Private Limited Company in India, and what are the steps involved from name approval to post-registration compliance?
Answer. To register a Private Limited Company in India, obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for all directors. Reserve a unique company name using the SPICe+ Part A form on the MCA portal. After approval, file SPICe+ Part B along with e-MOA, e-AOA, AGILE-PRO, and other required documents. Once verified, the Registrar issues a Certificate of Incorporation (COI) with PAN and TAN. Post-registration, open a bank account, file INC-20A within 180 days, issue share certificates, and register under GST or other laws if applicable. Ongoing compliance with MCA and tax laws is essential.
Question. How much does it cost to register a company in India in 2025, and what factors influence the overall budget?
Answer. In 2025, registering a Private Limited Company in India usually costs between ₹7,000 to ₹30,000. The cost depends on factors like the number of directors, authorized capital, professional fees (for CA/CS), and state-wise stamp duty. Government fees for small companies are lower. If you hire a professional for the process, their service charges can increase the cost. Extra expenses may include GST registration, trademark filing, and post-registration compliances like filing Form INC-20A and opening a bank account.
Question. Why is it legally important to register a business in India, and what benefits does a registered company receive?
Answer. Registering a business in India is important because it makes your company legal and recognized by the government. This protects you from legal troubles and penalties. A registered company gets many benefits like limited liability, easier loans and investments, trust from customers, access to government schemes, brand protection, and smooth long-term business growth.
Question. What is SPICe+ and how has it simplified company registration in India?
Answer. SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is an online form used to register a company in India. It combines multiple services like name approval, company registration, PAN, TAN, GST, EPFO, and bank account opening in one form. This has made the process faster, easier, and paperless, reducing time, effort, and cost for new business owners.
Question. How can a foreign national register a company in India, and what are the legal requirements?
Answer. A foreign national can register a company in India by partnering with at least one Indian resident director. They must obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN). The company is registered through the SPICe+ form on the MCA portal. Compliance with FDI rules, a valid passport, and address proof are required. RBI and FEMA regulations must also be followed.
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Important Keywords: CCFS 2026 Scheme MCA circular, MCA compliance scheme 2026, ROC late fee waiver 2026, Pending ROC filing penalty relief, MCA annual filing scheme, ROC filing relaxation 2026, AOC-4 and MGT-7 late filing, MCA compliance update 2026, Company strike-off concession scheme, Dormant company filing relief, ROC scheme for inactive companies, MCA scheme for defaulting companies, Annual return filing relief India, Financial statement filing scheme, ROC penalty reduction scheme, MCA compliance regularization scheme, Private company compliance relief India, One-time compliance scheme MCA, MCA delayed filing relief.
Words: 5,638, Read time: 30 minutes. Last updated: May 2026.
Table of Contents
Overview
In India, many companies miss their ROC compliances due to lack of awareness, financial difficulties, or operational issues. As a result, they may face heavy penalties, director disqualification, and other compliance-related problems.
To help such companies, The Ministry of Corporate Affairs (MCA) introduced the Companies Compliance Facilitation Scheme, 2026 (CCFS 2026) through its circular dated 26 February 2026. The scheme came into effect on 15 April 2026 and will remain valid till 15 July 2026.
Under this scheme, companies get an opportunity to complete their pending annual filings by paying a reduced late fee. Eligible companies are required to pay only 10% of the additional fees or penalties. Once the pending filings are completed, the company’s compliance status on MCA records becomes updated and compliant.
In this article, we will explain the key features, benefits, eligibility, and importance of CCFS 2026 in simple and easy-to-understand language.
CCFS 2026 Scheme a Complete Guide: Reduced ROC Penalties, Strike-Off, Dormant Status
Check whether the company is eligible for the scheme
Verify all pending ROC filings
Identify required e-forms like MGT-7, AOC-4, ADT-1, etc.
Decide whether to continue, become dormant, or apply for strike-off
Calculate reduced fees payable under the scheme
Ensure filings are completed within 15 April 2026 to 15 July 2026
Check if any strike-off or legal action is already pending against the company
Why was CCFS 2026 introduced?
The government brought CCFS 2026 to help companies that have missed their ROC filings for a long time due to reasons like lack of awareness, financial issues, or being inactive.
Many companies forget or delay filing their annual returns and financial statements. Because of this, late fees keep adding every day without any limit, which becomes a heavy burden, especially for small businesses and startups.
So, this scheme gives companies a simple chance to “start fresh” — by paying reduced penalties and clearing all old pending filings within a limited time.
For example:
A startup incorporated in 2020 stopped business operations after one year due to funding issues. Since the promoters did not close the company formally, annual filings remained pending for several years. By 2026, the additional fees became much higher than the company’s original capital itself.
Situations like this became common among startups, MSMEs, and inactive private companies. Therefore, the MCA introduced CCFS 2026 to give companies a practical chance to regularize their status at reduced cost.
Practical benefits of CCFS 2026 for entrepreneurs & startups
The scheme is highly useful for founders and small business owners because it provides:
Huge cost savings: Companies can clear old filings at significantly reduced cost.
Clean MCA records: Updated MCA status improves credibility with:
Banks
Investors
Vendors
Government authorities
Better future fundraising: Investors generally avoid companies with compliance defaults. Regularized filings improve investor confidence.
Legal continuity: Dormant status allows founders to preserve the company structure for future plans.
Proper exit opportunity: Inactive companies can close operations legally instead of carrying indefinite compliance burden.
What is CCFS scheme 2026?
"Think of it as a limited-time opportunity for companies in India to fix their compliance and get back on track easily".
CCFS 2026 is a scheme introduced by the Ministry of Corporate Affairs to help companies clear their pending compliances within a 3-month window.
During this 3 months period, companies can:
File all pending ROC documents
Clear old defaults
Reduce penalty burden
Restore their “compliant” status
Avoid stricter future action
Instead of allowing penalties to keep increasing, this scheme gives companies a simple and affordable way to fix their old non-compliance.
It is mainly useful for:
Dormant companies
Inactive companies
Companies with long pending filings
Companies facing possible strike-off
MSMEs struggling with compliance costs
you can say, CCFS 2026 is like a “fresh start option”- a short opportunity for companies to correct past mistakes, become compliant again, and avoid stricter action in the future.
The above circular mainly explains everything in six key points. In this article, we will go through each of these six points and understand what they mean in simple way.
Understanding the six main points of the MCA circular
The circular explaining CCFS 2026 is mainly divided into six important points. Let us understand each point in simple way .
Point No. 1 -
The first point of the scheme says that every company must file its Annual Return and Financial Statements every year with the Ministry of Corporate Affairs (MCA). If there is any delay from 1 July 2018 onwards, an additional fee of ₹100 per day is charged with no upper limit, so the penalty keeps increasing until the filing is completed.
Example:
A private company failed to file AOC-4 for 2 years because the directors believed the company was inactive and filing was unnecessary. Later, they discovered that the additional fees had crossed several lakhs due to continuous daily penalties. CCFS 2026 helps reduce this burden substantially.
Point No. 2 -
This point explains that India has more than 20 lakh active companies, and the number is continuously increasing as startups, MSMEs, and OPCs are joining the formal economy. However, many companies are not able to file their annual returns and financial statements on time with the Ministry of Corporate Affairs (MCA). Due to delayed filing, the government charges extra late fees, which keep increasing over time and can become a heavy financial burden, especially for small businesses like MSMEs and private limited companies. Because of this, many stakeholders have requested the MCA to provide relief by introducing schemes that reduce or ease the burden of these additional late filing fees. CCFS 2026 is the result of those requests.
Point No. 3 -
This point explains that it is a one-time opportunity for companies to clear all their pending compliances. The Central Government has introduced the CCFS 2026 under the powers of the Companies Act, 2013.
This scheme allows companies to file their pending Annual Returns and Financial Statements, or if they are inactive, they can choose options like dormancy or closure.
Point No. 4 -
The most important part of this scheme is Point 4, which gives companies "Three Major Options Available Under CCFS 2026":
Option 1:Complete Pending Filings
Companies can file all overdue ROC forms by paying only:
Normal filing fees, plus
10% of additional late fees.
This provides major financial relief compared to normal penalties.
Example
If additional fees payable normally are ₹2 lakh, the company may need to pay only ₹20,000 additional fees under the scheme.
This can help startups and MSMEs save substantial amounts.
Option 2:Apply for Dormant status
Inactive companies that want to keep the company legally alive can apply for dormant status under Section 455 by filing Form MSC-1.
Under CCFS 2026:
Only 50% of normal fees are payable.
Dormant status is useful when promoters want to preserve:
Brand name
Future business plans
Licenses
Investments
Intellectual property
while avoiding heavy compliance requirements.
Example
A technology startup paused operations because of lack of funding but wanted to restart later after raising investment. Instead of continuing full annual compliances, the founders opted for dormant status to keep the company alive at lower compliance cost.
Option 3 – Apply for Strike-off
Companies that no longer wish to continue business may apply for closure through Form STK-2.
Under CCFS 2026:
Only 25% of normal strike-off filing fees are payable. (it means company also apply for strike-off (closure) by filing e-form STK-2 during the scheme period and paying only 25% of the filing fees.
This option is especially useful for companies that have completely stopped business and do not want future compliance liabilities.
Example:
Two friends incorporated a private company in 2021 for an e-commerce project, but the business never started. Instead of paying annual filing penalties every year, they can now close the company officially at concessional fees under CCFS 2026.
Point No. 5 -
This point is one of the most important parts of the scheme because it explains the complete working process and conditions of CCFS 2026 / complete guideline or roadmap of CCFS 2026. It mainly covers the rules of the scheme,eligibility of companies,applicable fees,benefits available to companies, and the legal relief or protection provided under the scheme. It also explains how companies can regularize their pending compliances, apply for dormant status, or opt for strike-off at reduced cost.
Point No. 6 -
This point says that once the scheme ends, the ROC can take strict action against companies that did not use this opportunity and still failed to file their pending documents on time.
Now we will see through this article why the government felt the need to introduce this scheme and what benefits companies can get from it. So let’s start with the time limit of this scheme.
Till when can we avail the benefits of this scheme?
Companies can take benefit of this scheme only during the given time period. The Companies Compliance Facilitation Scheme, 2026 (CCFS 2026) will start on 15 April 2026 and will remain open till 15 July 2026. After this deadline, the scheme will close, and no further benefits can be claimed under it. (This windows open only for 3 months)
Which companies are eligible and which are not eligible to take benefits of CCSF 2026?
Any company with old pending filings or non-compliance issues can use this scheme to become compliant again.
This eligible companies Includes:
Companies that have not filed Annual Returns or Financial Statements on time
MSMEs and private limited companies with pending compliances
Startups or OPCs that missed filings in earlier years
Dormant or inactive companies that want to become compliant again
Companies that want to clear old defaults and update their MCA records
Companies not eligible to take benefit of this scheme include:
Companies that have already been dissolved
Companies against which strike-off proceedings or notices have already been initiated
Vanishing companies
such companies cannot use the CCFS 2026 Scheme.
Which ROC forms can be filed under the scheme CCSF 2026?
Companies are required to file forms such as MGT-7, AOC-4, ADT-1, FC-3, and FC-4 under the scheme. See the below table in details:
Form Name
Purpose
MGT-7 / MGT-7A
Annual Return of the company
AOC-4
Filing of Financial Statements
AOC-4 CFS / AOC-4 NBFC (Ind AS)
Financial Statements for specific companies (like CFS/NBFC)
AOC-4 XBRL
Financial Statements in XBRL format
ADT-1
Appointment of Auditor
FC-3
Financials/Annual filings of Foreign Company
FC-4
Annual Return of Foreign Company
Form 20B
Annual Return (old Companies Act, 1956)
Form 21A
Annual Return for companies having no share capital (old Act)
Form 23AC / 23ACA
Balance Sheet & Profit and Loss (old Act)
Form 23AC-XBRL / 23ACA-XBRL
Financial statements in XBRL (old Act)
Form 66
Compliance Certificate filing (old Act)
Form 23B
Auditor appointment intimation (old Act)
Step-by-Step process to file pending ROC filings under CCFS 2026
Check which ROC filings are pending: Visit the MCA portal and check which company forms are still pending, like AOC-4, MGT-7, ADT-1, etc.
Prepare company financial documents: Prepare the company’s financial statements and get them audited if required.
Login to the MCA portal: Open the MCA-21 portal and log in using company credentials.
Upload the pending ROC forms: Fill and upload the required forms using DSC (Digital Signature Certificate).
Pay the normal government filing fee: Pay the regular filing fee applicable for each form.
Pay the reduced late fee under CCFS 2026: Under this scheme, companies get relief in additional late fees, so the penalty amount becomes much lower compared to normal filing.
Check filing status after submission: After filing, check the SRN status on the MCA portal to confirm whether the forms are approved successfully.
How much fee reduction is available?
The scheme offers different concessions depending on the option chosen.
Activity
Benefit
Pending annual filings
Only 10% additional fees
Dormant status application
50% of normal fee
Strike-off application
25% of normal fee
The options available for dormant status or strike-off
Under the CCFS 2026 Scheme, companies that are not active have two simple options:
They can choose dormant status, which means the company stays registered but does not do business and has very few compliance requirements.
Or they can choose strike-off (closure), which means the company is officially closed and removed from the records.
*Simply says companies can either keep the company inactive with minimal rules or close it completely at a lower cost.
The legal relief/immunity available for delayed filings in certain cases
This provision is based on sections 92, 137, and 454(3) of the Companies Act, 2013, which deal with company filing requirements and penalty action for non-compliance.
Section 92 (Annual Return): Every company must file its annual return with the Registrar. If not filed on time, it is treated as a default.
Section 137 (Financial Statements): Every company must file its financial statements every year. Delay or non-filing is also considered a default.
Section 454(3) (Adjudication of Penalties): This section gives power to authorities to impose penalties and conduct proceedings for such defaults.
Simple meaning under CCFS 2026:
If a company files its pending documents before a notice is issued or within 30 days of receiving the notice, then penalty proceedings under sections 92 and 137 will be closed, and no penalty will be imposed.
But if the company files after 30 days of the notice or after a penalty order has already been passed, then the already decided penalties under section 454 will remain applicable. The scheme will not cancel those penalties.
These sections define the legal duty to file (92 & 137) and the power to punish non-compliance (454), while CCFS 2026 only gives relief if companies act within the permitted time.
What happens after this scheme ends?
After the CCFS 2026 Scheme ends, the temporary relief window will be closed completely, and companies will go back to the normal compliance system under the Companies Act, 2013.
What this means in practical terms:
No more reduced fees or discounted penalty benefit will be available.
Any company with pending filings will again be treated as a defaulting company.
The Registrar of Companies (ROC) may start strict enforcement actions, such as penalty orders or strike-off proceedings.
Companies will have to pay full statutory additional fees and penalties, as per normal rules, without any relaxation.
Once the scheme closes, companies lose the “one-time relief opportunity.” After that, delays will become costly again, and compliance enforcement will be stricter.
Key difference between earlier MCA schemes vs CCFS 2026 (Pending Compliance Relief)
Earlier MCA schemes:
CFSS 2020 (Companies Fresh Start Scheme, 2020) – allowed companies to file overdue forms with reduced additional fees
LLP Settlement Scheme, 2020 – gave relief to LLPs for pending compliances
Defaulting, inactive, dormant, and defunct companies
Options Available
Only one option: file pending documents
Three options: (1) regularise (2) dormant status (3) strike-off
Fee Benefit
Waiver/reduction of additional fees in limited cases
Reduced burden: 10% late fee + concessional fees for dormancy/strike-off
Legal Relief
Limited immunity in specific cases
Structured immunity based on timing (before notice / within 30 days)
Compliance Approach
Reactive (fix past defaults)
Preventive + corrective (fix, pause, or exit)
Impact on MCA Records
Only updates compliance status
Ensures cleaner registry + removal of inactive entities
Business Outcome
Company becomes compliant again
Company can continue, stay inactive legally, or close properly
Flexibility
Very limited
High flexibility with multiple exit/compliance options
Earlier MCA schemes mainly helped companies only to clear pending filings, while CCFS 2026 is more advanced—it not only allows compliance correction but also gives companies a complete choice to continue, pause, or close their business in a structured way with reduced cost.
Conclusion
From the above information about the CCFS 2026 Scheme, I have tried to explain all the important points in a simple and easy way so that anyone can understand it clearly.
If I have missed any point mentioned in the official circular, you can share your questions or suggestions at: help@finodha.in
You can also drop your queries on this email, and any suggestions to improve this information are always welcome.
I hope this helps you understand the CCFS 2026 Scheme in a clear and practical understanding of the CCFS 2026 Scheme.
As we know, this scheme is available only till 15 July 2026, companies having pending ROC compliances should check their status early and take proper professional advice wherever needed so they can use the benefit within time.
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FAQs: Get answers to all your queries!
Question. Who can apply?
Answer. Any eligible company having pending ROC filings or compliance defaults can apply under CCFS 2026.
Question. What is the last date?
Answer. The last date of this scheme is 15 July 2026.
Question. Can inactive companies apply?
Answer. Yes. Inactive companies can also apply.
Question. . What is the duration of the Companies Compliance Facilitation Scheme 2026?
Answer. The CCFS 2026 is available only for a limited period of 3 months. It started on 15 April 2026 and will remain valid till 15 July 2026.
Question. Can I close my inactive company using the CCFS-2026 scheme?
Answer. Yes. Under the CCFS 2026 Scheme, inactive companies can apply for strike-off (closure) by filing e-form STK-2 during the scheme period at reduced filing fees.
Question. Does the scheme waive penalties that have already been adjudicated?
Answer. No, it does not waive penalties that have already been adjudicated or imposed by the authorities.
Question. Can companies that have already applied for strike-off claim a refund under this scheme?
Answer. No. Companies that have already applied for strike-off cannot claim any refund underthis (CCFS 2026 Scheme).
Question. Is there a separate application form to register under CCFS-2026 like CFSS-2020?
Answer. No. There is no separate registration form, declaration form, or immunity form required under CCFS-2026, unlike CFSS-2020.
Question. What is the purpose of introducing the CCFS 2026?
Answer. The main purpose of introducing the CCFS 2026 is to give companies a one-time opportunity to complete their pending ROC compliances at reduced cost and become compliant again.
Question. What is the duration of the CCFS 2026?
Answer. This scheme is available only for 3 months. It started on 15 April 2026 and will remain open till 15 July 2026. After 15 July 2026, the benefits of reduced fees and relief available under the scheme will no longer be applicable.
Question. What are the eligibility criteria for the companies to take advantage of this CCFS 2026?
Answer. The scheme is mainly available for: - Companies having pending ROC filings - Startups, MSMEs, OPCs and private companies with delayed compliances - Dormant or inactive companies wanting to regularise their status - Companies intending to become dormant or apply for strike-off
Question. Are Limited Liability Partnerships (LLPs) eligible to take advantage of this scheme?
Answer. No. CCFS 2026 is mainly applicable to companies registered under the Companies Act, 2013. Limited Liability Partnerships (LLPs) are governed under the LLP Act, 2008, so they are generally not covered under this scheme.
Question. Which all forms can be filed with discounted late fee under CCFS 2026?
Answer. Here are the important forms covered under the scheme include: MGT-7 / MGT-7A – Annual Return AOC-4 and its variants – Financial Statements ADT-1 – Appointment of Auditor FC-3 and FC-4 – Foreign company filings Old Companies Act forms like 20B, 21A, 23AC, 23ACA, 66, 23B etc.
Question. How cost effective is filing of forms under this CCFS 2026?
Answer. Let's understand this cost effective with this given example: Suppose a company has pending ROC filings and the normal additional late fee comes to ₹1,00,000. Under normal rules → the company would have to pay the full ₹1,00,000 as additional fees. But under CCFS 2026 → the company may need to pay only ₹10,000 as additional fees (10% amount), along with the normal filing fee. So, the scheme gives major financial relief and helps companies become compliant at a much lower cost.
Question. Is there any legal immunity granted to participating companies?
Answer. Yes. Under CCFS 2026, companies filing their pending annual returns and financial statements within the prescribed time may get relief from penalty proceedings related to those filing defaults.
This means that if the company completes the pending compliances under the scheme, the ROC may not continue penalty action for such delayed filings, subject to the conditions mentioned in the scheme.
However, this immunity is limited only to filing-related defaults covered under the scheme and does not automatically remove all other legal violations or penalties already finalized.
Question. Does the scheme prescribe any conditions for receiving immunity under CCFS 2026?
Answer. Yes. The company must complete the eligible pending filings within the prescribed scheme period and comply with the conditions mentioned in the scheme. Generally, the benefit of immunity is available only when the company files the pending documents before any final penalty order is passed or within the permitted time after receiving notice from the ROC.
Question. Is the company required to undertake any extra filing for availing the above-mentioned immunity?
Answer. Let's understand with this example: Suppose a company files all its pending AOC-4 and MGT-7 forms under CCFS 2026 within the prescribed timeline. In this case, the company does not need to submit any separate “immunity form” to the ROC. The benefit of the scheme will be available automatically if all conditions are properly complied with.
Question. If a company was not a small company in FY 2022-23 but becomes a small company under the new definition applicable from December 2025, then while filing old pending forms under CCFS 2026, should it file as a small company or a normal company?
Answer. Let's understand this situation with the given example :
Suppose a company’s turnover in FY 2022-23 was above the old small company limit, so at that time it was treated as a normal company. Later, after the definition changed in December 2025, the same company now falls within the small company category. Even then, while filing forms for FY 2022-23 under CCFS 2026, the company should generally follow the compliance requirements applicable to a normal company for that particular year.
Question. If companies want to file earlier years’ forms under CCFS 2026, will the filing be done on MCA V3 portal or V2 portal?
Answer. Since these annual filing forms have already migrated to the MCA V3 portal, companies will generally be required to file even the old pending forms through the MCA V3 portal under CCFS 2026.
This means the MCA is not expected to reopen the old V2 portal separately for such filings. Companies will have to use the currently active V3 portal system for filing earlier years’ forms also.
Question. During the period of CCFS 2026, if a company files forms for FY 2025-26, will it get discounted filing fees under the scheme?
Answer. No. CCFS 2026 mainly provides relief for delayed or pending filings of earlier financial years. Normal filings for FY 2025-26 made within the regular due dates will not get the discounted fee benefit under the scheme. *This scheme is meant for old pending compliances, not for regular current-year filings.
Question. If annual filing of a company is pending for FY 2024-25, can the company take benefit of CCFS 2026?
Answer. Yes. If the annual filing for FY 2024-25 is pending and the due date has already expired, then the company can file the pending forms under CCFS 2026 and take benefit of the reduced additional fees available under the scheme.
Question. If the company did not conduct AGM on time but later conducts it and files the financial statements under CCFS 2026, will the delay in AGM be forgiven?
Answer. No. CCFS 2026 gives relief for delayed ROC filings, but it does not automatically remove the non-compliance related to delay in conducting the AGM. So, even if the company later conducts the AGM and files the pending forms, the AGM delay may still remain a separate default under the Companies Act.
Question. Does this scheme apply to form CSR-2 as well?
Answer. No. CCFS 2026 mainly covers annual filing forms such as MGT-7, AOC-4, ADT-1 and similar forms. Form CSR-2 is generally not covered under this scheme.
Question. Does CCFS 2026 applies to cost audit related forms like CRA-2, CRA-4 etc.?
Answer. No. CCFS 2026 mainly applies to pending annual filing forms such as MGT-7, AOC-4, ADT-1 and similar annual compliance forms. Cost audit related forms like CRA-2, CRA-4 etc. are generally not covered under this scheme.
Question. If a company wants to refile any annual filing form with some corrections or changes, can it take benefit of CCFS 2026?
Answer. No. CCFS 2026 is mainly meant for filing pending forms that were not filed earlier. It is not meant for refiling or revising forms that have already been filed with the ROC. So, if a company wants to make corrections in a form that is already filed, the benefit of reduced fees under this scheme may not be available for such refiling.
Question. What is meant by “final notice for being struck off” in this scheme?
Answer. It means the ROC has already taken the last step to close the company and remove its name from MCA records because of long pending compliances or inactive business. After this final notice is issued, the company usually cannot take benefit of CCFS 2026.
Example: Suppose a company did not file ROC forms for many years. First, the ROC may send reminders or notices. But if the company still does not respond, then the ROC issues a final strike-off notice saying that the company’s name will now be removed from MCA records.
This final notice is called the “final notice for being struck off.” Once this stage comes, the company may not be allowed to use the scheme.
Question. Is the Scheme also available in cases where the financial statements of the company for the past years have not been audited?
Answer. Yes. A company can still use the CCFS 2026 Scheme even if its financial statements for earlier years were never audited. But before filing the pending ROC forms, the company must first prepare those financial statements and get them audited by the statutory auditor.
Question. What happens if a company does not avail the Scheme?
Answer. If the company does not take benefit of this scheme within the prescribed timeline, then after the scheme ends, normal ROC penalties and strict legal actions may continue. This means the company may face: -Heavy additional late fees -Penalty action by the ROC -Risk of company strike-off -Director disqualification issues -Problems in future compliances and business operations.
Question. Can a company use the Scheme to regularize multiple pending filings?
Answer. Yes. A company can use CCFS 2026 to complete multiple pending ROC filings together under the scheme.
Question. If a company wants to close itself (strike-off), is it enough to file only Form STK-2 under CCFS 2026?
Answer. No. In most cases, the company should first complete its old pending ROC filings and only after that can it apply for strike-off through Form STK-2.
Let’s understand with a simple example: Suppose a company stopped doing business in 2023 but did not file its annual returns for FY 2021-22 and FY 2022-23. In such cases, the company should first file these pending ROC forms under CCFS 2026 by paying reduced fees. After completing the pending filings, the company can apply for closure (strike-off) through Form STK-2.
So, CCFS 2026 helps companies first clear their old pending compliances and then close the company properly at a lower cost.
Question. What is CCFS 2026?
Answer. CCFS 2026 is a compliance relief scheme introduced by the MCA that allows companies to complete pending ROC filings at reduced fees and also provides options for dormant status or strike-off.
Question. What is the last date to avail the scheme?
Answer. The scheme is available from 15 April 2026 to 15 July 2026.
Question. Can inactive companies apply under this scheme?
Answer. Yes, inactive and dormant companies can also take benefit of the scheme.
Question. Is full penalty waived under CCFS 2026?
Answer. No. Companies are generally required to pay only 10% of additional filing fees, but already adjudicated penalties may still remain applicable.
Question. Can companies apply for strike-off under this scheme?
Answer. Yes. Eligible companies can file Form STK-2 at concessional fees during the scheme period.
Question. Does the scheme remove director disqualification automatically?
Answer. The scheme mainly provides filing relief. Director disqualification issues depend on separate legal provisions and may require additional legal evaluation.
Question. Can companies file only one pending form under the scheme?
Answer. Yes. Companies may file even a single pending annual filing form if required.
Question. Is a separate registration required to use CCFS 2026?
Answer. No separate registration is required. Eligible companies can directly file applicable forms during the scheme period.
Question. What happens if companies do not use this scheme?
Answer. After the scheme ends, normal penalties and strict ROC actions may continue without any relaxation.
Question. Can dormant companies restart business later?
Answer. Yes. Dormant companies can later apply for active status and resume operations after completing required procedures.
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Important Keywords: Types of directors in a company, Director under Companies Act, 2013, Section 166, Independent Director, Executive Director vs Non-Executive Director, Managing Director, Nominee Director, Shadow Director, De facto Director, Resident Director requirement, Woman Director Companies Act, Appointment of director, Removal of director, Penalty under Companies Act, Board of Directors responsibilities.
Words: 4,252, Read time: 22 minutes.
Table of Contents
Overview
"I just want to make you smile while adding real value to your day! I’m sure you’ll find something useful in my blog to take away and put into action.”
Today, we are going to explore the different types of directors in a company. Directors are the people who make important decisions and guide the company in the right direction. We will also talk about who can become a director, what responsibilities they have, what is the criteria of appointment and tenure of the director and what legal duties or liabilities they need to follow. Understanding this is important for anyone who wants to know how a company is managed.
There are several types of directors, each with a specific role. In this discussion, we will look at: Alternate Director, De Facto Director, Executive Director, Non-Executive Director, Independent Director, Lead Director, Managing Director, Nominee Director, and Shadow Director. Each of these directors has a different way of contributing to the company, and knowing their roles helps us understand how decisions are made and who is responsible for what.
We will explain each type of director in simple terms. By the end, you will understand their roles, responsibilities, how they are chosen, and why they are important for running the company smoothly and legally.
Definition of Director as per company Act,2013
As per Section 2(34) of Companies Act, 2013. Director means a director appointed to the Board of a Company.
II. Responsibility
The board of directors of a company is primarily responsible for: Determining the company’s strategic objectives and policies;monitoring progress towards achieving the objectives and policies; appointing senior management; accounting for the company’s activities to relevant parties, e.g. shareholders.
The board of directors of a company has several important responsibilities:
Setting goals and policies:
The board decides what the company wants to achieve (its goals) and sets the rules or policies for how the company should operate.
Monitoring progress:
The board keeps an eye on how well the company is doing in reaching its goals. They check if the company is following its policies and making progress.
Appointing senior management:
The board hires top managers, like the CEO or other senior executives, who handle the day-to-day running of the company.
Reporting to shareholders and stakeholders:
The board is responsible for keeping the company accountable. They share information about the company’s activities, performance, and financial health with shareholders and other interested parties.
In this way: This way, you can visualize the board as a group that guides, supervises, and keeps the company accountable, just like a school management committee guides a school.
III. Minimum Directors Required in Company
1. One Person Company:- One Director.
ii. Private Limited Company:- Two Directors.
iii. Public Limited Company:- Three Directors.
Different types of companies have different rules about the minimum number of directors they must have. Normally, a company can have up to 15 directors, but it can appoint more if shareholders approve through a special resolution. Additionally, at least one director must be a resident of India, having stayed in the country for more than 182 days in the previous calendar year.
Who is the Director?
Every company needs some people to run it properly. These people are called directors. According to the Companies Act, 2013, directors are the members of the Board of Directors. When all directors sit together and take decisions, this group is known as the Board.
A director plays many roles in a company. Sometimes, a director works like an agent, taking decisions for the company. Sometimes, the director acts like a trustee, taking care of the company’s money and property. In many cases, the director also acts like a manager or partner, helping the company grow and succeed.
The law also decides how many directors a company should have. A public company must have at least three (3) directors, a private company must have atleast two(2) directors, and a One Person Company must have one (1) director. A company can appoint up to 15 directors. If it wants more than 15, it must take special permission from shareholders.
The term “director” means a person who is responsible for taking important decisions for a company and all the member of that. A director looks after the main activities of the business and also look after all the things apart from the business (.i.e. employee of the company, infrastructure of the company, etc.) such as planning, controlling, and guiding how the company works. They make sure the company is running in the right direction and following all the rules.
Because of this important role, directors are often considered the top executives of a company. In large companies, there is usually more than one director. These directors work together as a team to manage the company, and this team is called the Board of Directors.
In this way, without directors, a company cannot run properly or grow in the market. Directors play a key role in guiding and supporting the business to achieve success.
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Eligibility criteria for director
To become a director in a company, a person must follow some basic rules under the Companies Act, 2013.
Must be at least 18 years old
Must have a Director Identification Number (DIN) from MCA
Must give written consent to act as director
Must provide a declaration saying they are not disqualified
Should not be disqualified under the Companies Act.
Documents Required
Driving license, voter ID, passport
A copy of an Aadhar card and PAN card
Utility bills that are no more than two months old and copies of bank passbooks or bank statements can both serve as proof of permanent residence.
If the present address differs from the permanent address, you must provide proof of it.
Directors can be appointed in these ways: • Most directors are elected by the shareholders at the company’s Annual General Meeting (AGM). • In some cases, the board of directors itself may appoint new directors to fill a vacancy or add necessary expertise. • Many companies set term limits for directors, typically requiring re-election every few years.
Different types of directors
There are the following types of directors in the company, such as:
A. Statutory Directors:
Managing Director
Managing Directors have a lot of power in running the company. They handle finance, operations, and planning. They make sure the company runs well and meets its goals.
Residential Director
Every company must have at least one director who lives in India for 182 days or more in the previous year. This is important so that the company always has someone in India responsible for legal and official matters.
Women Director
All Listed Companies and public companies having paid-up capital of Rs. 100 crore or more OR with a turnover of Rs 300 cr or more are mandatorily required to appoint a woman director in their company.
Independent Director
These non-executive directors improve corporate credibility and governance standards. They maintain an unbiased viewpoint, free from company relationships that could influence judgment.
Independent Director Duties:
Keep skills and knowledge about the company updated
Attend and contribute in board and general meetings
Understand the company and its operations
Report unethical behavior, fraud, or code violations
Maintain confidentiality of company information
Do not obstruct company functioning
Limited liability; responsible only if aware, consented, or acted negligently
Provide expertise on key issues (accounting, cybersecurity, etc.)
Whole time Director or Executive Director
An Executive Director is a director who works full-time in the company and is directly involved in managing its day-to-day works. They make important decisions, supervise employees, and ensure that all parts of the business are running smoothly. Executive Directors may also called the Managing Director, Whole-Time Director, or Chief Executive Officer (CEO).
According to the Companies Act, 2013, a Whole-Time Director is someone who looks after the company’s main activities and takes decision for its benefit.The Companies Rules, 2014 clarify that an Executive Director and a Whole-Time Director are essentially the same. Both are fully dedicated to the company, handling regular management tasks and ensuring the company operates effectively.
Key clarification:
Section 2(94) of the Company Act, 2013: Defines a "whole-time director" as a director in the whole-time employment of the company.
Rule 2(1)(k) of the Rules, 2014: This rule Clearly states that "Executive Director" means a "Whole-Time Director".
Executive Director (ED) Duties:
Execute board strategy
Manage daily operations
Lead teams & HR
Control finances
Communicate with board & investors
Whole-Time Director (WTD) Duties:
Work full-time
Handle internal affairs
Get salary for active role
Manage specific departments
Focus on core company functions
B. Functional / Practical types
Non- Executive Director
Non-Executive Directors (NEDs) are those directors who do not participate in the day-to-day management of the company but play an advisory and oversight role, supervising from the boardroom. Non-executive directors help increase the company’s trust and maintain proper management. They give honest opinions because they are not involved in the company’s daily work or personal relationships.
(In this context the role is usually contrasted with a non-executive director who usually holds no executive, managerial role with the corporation, but purely an advisory role.)
Duties of a Non-Executive Director (NED):
Monitor and review company performance
Provide independent oversight and advice
Ensure the company follows laws and regulations
Protect shareholders’ interests
Help in strategy and risk management
Attend board meetings and committees
Professional Director
A professional director is someone with expertise and skills in a specific field who helps the board make better decisions and Professional Director is not defined under the Act but recognized in corporate practice.
C. Special Situation director
Nominee Director
A nominee director is a person appointed to the company’s board by someone else, such as a bank, investor, or the government. Their role is to represent and protect the interests of the person who appointed them. They help ensure the company follows rules and agreements, even though they do not own the company themselves.
Duties of Nominee Director:
Acting honestly and in the company’s interest
Avoiding conflicts between company and appointing party
Not misusing their position
Not interfering unnecessarily with management
Maintaining confidentiality
Alternate Director
An alternate director it simply means someone appointed to take the place of a director who is away from India for more than three months. They only stay as director until the original director comes back.
Duties of Alternate Director:
Call and attend board meetings (in person or online)
Speak up and share ideas at meetings
Raise concerns and discuss company strategies
Suggest and vote on decisions (resolutions)
Get copies of meeting minutes
Submit company accounts, tax returns, and confirmation statements
Report any changes to Companies House
Ad-hoc Director
If a director leaves the company because of death, resignation, or any unexpected reason, the board can appoint an ad-hoc director. This ad-hoc director will work only for the rest of the original director’s term. The term “Ad-hoc Director” is not expressly defined in Companies Act, 2013. It is commonly used in practice.
D. Legal / Implied categories
De-facto Director
A de facto director is someone who acts like a director even though they were never officially appointed. The company treats them as a director, and they behave and make decisions like one.
To prove someone is a de facto director, it must be shown that they performed duties that only a director could do. It is not enough to show that they were involved in managing the company or did tasks that a regular manager could do. Courts identify a de facto director based on conduct, not formal appointment.
Duties of a de facto director:
Act honestly and for the company’s benefit
Take care in decisions
Follow laws and rules
Keep company information private
Responsible for any breaches
Example of a De-facto Director: Suppose Mr. A was never officially appointed as a director of a company. However, he attends board meetings, signs important company documents, makes business decisions, and employees treat him like a director. Even without formal appointment, the law may treat Mr. A as a de facto director because he is acting like one.
Shadow Director
A shadow director is not officially appointed, but the directors usually act on his directions. Because of this control, the law can treat him as responsible for company actions.
Duties of a shadow director:
Follow company rules and the law
Act for shareholders’ best interests
Protect creditors if company is insolvent
Take on duties like a normal director
Example of a shadow director:
Suppose Mr. B is not a director and never attends board meetings. But the company’s directors regularly follow his instructions and make decisions according to his directions. In this case, Mr. B may be treated as a shadow director because he controls the directors from behind the scenes.
Roles and Responsibility of Director
Directors are responsible for running the company lawfully and fairly, guiding its long-term direction, supervising management, protecting company assets, and acting in the best interest of the company and its stakeholders.
Directors act as guardians of the company. They make sure the company behaves responsibly, follows the law, and is open and honest in its decisions and reports.
Directors work together to plan and approve the company’s long-term goals. They make important decisions about growing the business, buying or selling companies, products to offer, and markets to enter or leave.
Directors are responsible for keeping an eye on the company’s finances. They approve financial reports, set budgets, and make sure all financial information is correct.
Directors help spot and manage risks that could harm the company or its reputation. They make plans to prevent problems and protect the company.
Directors have a legal duty to act in the best interest of the company and its owners, making decisions that benefit them and the company.
Sometimes, directors represent the company to the public, like talking to shareholders, government authorities, or the media.
Duties of Directors(As per section 166 of the companies Act)
Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
A director of a company shall not assign his office and any assignment so made shall be void.
If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Disqualification of Director (Section - 164)
Section 164 simply means:
A person cannot become or continue as a company director if they are legally disqualified—for example, if they are insolvent, have serious criminal conviction, or if the company they are involved in has not filed returns or defaulted on payments for a long time.
Removal of a Director
A director can be removed from a company in two main ways. Under Section 169 of the Companies Act, 2013, shareholders can remove a director by passing an ordinary resolution in a general meeting.
Additionally, under Section 242 of the Companies Act, 2013, the National Company Law Tribunal(NCLT) has the power to remove a director in cases of oppression or mismanagement, if it is necessary to protect the company’s interests.
Punishment.— As per section 172 of the companies Act, 2013. If a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees (₹50,000) but which may extend to five lakh rupees (₹5,00,000).
Recent Supreme Court Judgment on Director Liability (13 February 2025).
Kamal Kishore Shrigopal Taparia v. India Ener‑Gen Pvt. Ltd. & Anr.
In simple way: In this case, an independent non-executive director was accused after company cheques bounced. He had no role in financial decisions, did not sign the cheques, and had already resigned before the cheques were dishonoured.
The Supreme Court decided that just being a director is not enough to hold someone liable. A director can be punished only if they were involved, knew about, or approved the act. Since this director was not involved, the case against him was dismissed.
Conclusion
In this article, we learned that a company has different kinds of directors, and each one has a specific job in running the business. Knowing who can be a director, what they do, and the rules they must follow helps us understand how decisions are made, who is in charge of what, and how the company stays organized and follows the law. Learning about directors makes it easier to see how a company is managed properly. Follow Finodha.in, for more such informative blogs and guides on company incorporation, GST filing, and ITR filing.
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FAQs: Get answers to all your queries!
Question. Is a CEO higher than a director?
Answer. No, a CEO is no higher than a director.
Question. Who is higher Director or CEO?
Answer. A director is higher than a CEO.
Question. Who is more powerful CEO or Board of directors?
Answer. The Board of directors is more powerful than a CEO.
Question. Who is higher than a director?
Answer. No one is higher than a director in a company.
Answer. MD is more powerful than CEO in terms of work. MD has statutory powers under Companies Act, CEO is a managerial role Power always depend on Articles of Association.
Answer. As per Section 166 of the Companies Act, 2013, a director must act honestly, carefully, and ethically, avoid conflicts of interest, follow the law, protect the company, and make decisions in its best interest.
Question. What are the most important director’s duties?
Answer. A director must lead the company responsibly, legally, and wisely. A director is like the guardian of the company. Just like in a family we have a head of the family who takes care of all the members, looks after their needs, and ensures their well-being, similarly, in a company, the director takes care of the company and its employees. They look after the employees’ benefits, make decisions in the company’s best interest, and help the company grow.
Question. Is a director an owner?
Answer. No, a director is not necessarily an owner.
Answer. The 5 main functions of a director are to plan, make decisions, supervise, follow the law, and protect the company’s interests.
Question. What are the director’s duties under section 166?
Answer. Ans. Duties of directors under Section 166 of the Companies Act:- 1. Act in the best interest of the company – Directors should make decisions that benefit the company as a whole. 2. Exercise duties with due care, skill, and diligence – Directors should be careful, competent, and responsible while making decisions. 3. Avoid conflicts of interest – Directors should not use their position for personal gain. 4. Do not misuse powers for personal gain – Directors should not take advantage of company resources or opportunities for themselves. 5. Act honestly and ethically – Directors should make decisions with integrity and fairness, keeping the company’s interests in mind. 6. Ensure compliance with the law – Directors should follow the Companies Act, rules, and other applicable laws.
Question. Who is world’s no.1 director?
Answer. There is no single “No. 1” director in India, because it depends on factors like the company, performance, and achievements. Top directors are leaders who guide companies, make smart decisions, and ensure growth. Some well-known names are:- Sudarshan Venu – Chairman; Managing Director of TVS Motor Company (Indian auto company). Usha Sangwan – Managing Director of LIC (Life Insurance Corporation of India), also an independent director at Tata Motors. Sanjiv N. Sahai – Independent Director at Bajaj Finserv. Rahul Bhatia – Managing Director of InterGlobe Enterprises (IndiGo airline). Rajesh Jejurikar – Executive Director and Board member of Mahindra; Mahindra (Auto; farm sectors). Vikram Singh Mehta – Chairman of IndiGo’s Board of Directors (airline board leadership).
Question. Which director has the most Oscars in film?
Answer. The director with the most Academy Awards (Oscars) for Best Director is John Ford. John Ford won 4 Oscars for Best Director. Famous films include: The Grapes of Wrath (1940), How Green Was My Valley (1941), The Quiet Man (1952), and Stagecoach (1939). He holds the record for the Best Director Oscars in history.
Question. Is ED or MD higher?
Answer. MD is higher than an ED in authority and responsibility.
Question. What is the most important role of the directors?
Answer. Directors are responsible for the company’s overall direction, performance, and legal compliance.
Question. What are the director’s primary responsibilities?
Answer. The director's primary responsibilities are: 1. To take best care of the company To manage and lookover the company's affairs. 2. To take right decision for the company. 3. To handle all the legal and statutory compliance of the company. 4. To perform with full care, skill and integrity. A director must lead the company with honesty, care, and accountability.
Question. What is the difference between an Executive and a Non-Executive Director?
Answer. An executive director works full-time in the company and runs its daily operations, like a manager. A non-executive director does not work day-to-day but watches over, advises, and makes sure the company is run properly.
Question. Is it mandatory for every company to have a female director?
Answer. As per Section 149(1), listed companies and certain public companies meeting prescribed criteria must have at least one woman Director, as per the given procedure of the Act.
Question. What is the purpose of appointing a Resident Director?
Answer. The purpose of appointing a Resident Director is to ensure that at least one director is physically present in India for regulatory and operational oversight.
Question. Can a Professional Director take part in daily management decisions?
Answer. No, Professional Directors primarily provide expertise and guidance in their field but do not engage in daily management activities.
Question. Can a minor become director?
Answer. No, a minor cannot become a director of a company under the Companies Act, 2013 because a director must be a competent person capable of entering into contracts, and a minor is not legally competent to contract.
Question. What is DIN?
Answer. DIN stands for Director Identification Number. It is a unique identification number given by the Ministry of Corporate Affairs to a person who wants to become a director in a company.
Question. Can director be removed without consent?
Answer. Yes, a director can be removed without his consent under Section 169 of the Companies Act, 2013.
Question. Maximum number of directorships?
Answer. A person can be a director in up to 20 companies in total under the Companies Act, 2013. Out of these 20, they can serve in maximum 10 public companies (this includes private companies that are subsidiaries of public companies).
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Important Keywords: Share Certificate, Section 46 Companies Act, 2013, Section 56 Companies Act, 2013, Section 10A Companies Act, 2013, Timeline for Issue of Share Certificate, Two Months Share Certificate Rule, Subscription Money, Issue of Share Certificate Without Payment, Penalty for Non-Issuance of Share Certificate, Section 56(6) Penalty, Form SH-1, Format of Share Certificate, Proof of Share Ownership, APTIA Group India Private Limited Case, Tejas Cargo India Limited Case.
Words: 3,385, Read time: 18 minutes.
Last Updated: May 2026 (As per latest MCA amendments)
Table of Contents
Overview
As we know that share certificate is a paper based legal document. which shows who owns shares in a company. It serves as official proof of a shareholder’s investment and contains important details such as the shareholder’s name, permanent address, number of shares owned, and the date the shares were issued or allotted.
Certificates always make it easier for companies to stay legal and organized.
This article explains share certificates in a simple way. You’ll learn what a share certificate is,How a private company issues one, and the benefits it provides. It also covers why companies need to handle them carefully, especially in today’s digital and regulated business world.
What is share certificate?
As explained above under the definition of a share certificate in the Companies Act, 2013, It is a paper-based document which is issued by the company. It is either stamped with the company’s seal or signed by two directors, or by one director and the company secretary.
The certificate clearly shows who owns the shares and how many shares they own in the company. It contains basic details such as the shareholder’s name, address, number of shares, and the date when the shares were given or allotted. Because of this, the certificate works as official proof that the person named in it is the real owner of those shares.
It is the duty of the company that prepare and give the share certificate to the shareholder within two months from the date the shares are allotted (Incorporation).
Section 46(1) of the companies Act 2013, talks about that when the company issue a share certificate in the name of shareholder under the seal of the company and signed under the seal by the 2 director of the company or a director or a company secretory who is appointed by the company to handle all the takin care of this document of the company. In that case, It may consider as prima facie evidence of the title of the person to such shares. w.e.f. 29th May 2015, this seal is optional for those company who has not a seal as per their article.
Further, in case the shares are in dematerialized form, the record of the depository shall be treated as the prima facie evidence of the interest of the beneficial owner.
Principle of estoppel
Here is one of the principles of estoppel which is known as the name of estoppel that means this principle use ever in the case of share certificate. when the company issue a share certificate in that case the company binding in two ways first as estoppel as to title and second as estoppel as to payment. The principle of estoppel means that a person is prevented (Stopped) from denying or going backon a statements, if another person has relied on it and acted upon it.
Format of share certificate
As per Rule 5(2) of the Companies (Share Capital and Debentures) Rules, 2014, every company must issue this certificate in a fixed format called Form SH-1. This means it should be in Form SH-1 or very close to it.
This certificate shows important details about the shares and the shareholder. According to Form SH-1, This document usually includes:
Name of the holders (including the joint holders).
Number of share held in words and in number.
Distinctive numbers from to.
Signatory of directors and secretary/any other authorized person.
Back side:
Name of the Transferor.
Name of the Transferee.
Number of shares.
Date of share transfer.
Signature of the authorized signatory
When company issue a share certificate to the shareholder?
As per the Companies Act, 2013, Section 46 deals with the issue of share certificates and states that it is a prima facie evidence of title to the shares mentioned therein. Section 56 of the companies Act, 2013 explains the time limit for giving this certificate— the company must issue the share certificate within 60 days after shares are allotted, and within 30 days when shares are transferred or passed on (transmission).
Here are the following way to issue share certificate:
1. Requirement and Time frame: As per Section 46 of the Companies Act, 2013 and SEBI regulations, a company is required to issue share certificates to its shareholders within two months from the date of incorporation.
2. Share allotment: After allotment of shares, company must issue share certificate to its shareholder within 2 months at the date of allotment.
3. In case of transfer: When the company receives the transfer documents, it must issue the share certificate within one month of receiving them.
Below are some basic and mandatory requirements for the issuance of it:
When a company is incorporated, shares must be allotted or subscribed.
The Board of Directors must pass a resolution to issue it.
Share certificates must include all required details. (Like - Name of Company, CIN of Company and Registered Office Address of the Company, etc.)
Certificates should be signed by two directors or one director. (If possible, one signer should not be the Managing or Whole-Time Director).
The Company Secretary (if any) or any person authorized by the Board can also sign the certificate.
The Company Secretary is generally considered authorized to sign share certificates.
Note:
Share certificate must be issued from the registered office of the company.
After issuing a share certificate, the company must pay stamp duty on it as per the Stamp Act of the respective State. The stamp duty must be paid within 30 days from the date of issuance of the share certificate. If the stamp duty is not paid, the company may face heavy penalties.
As per Section 56 of the Companies Act, 2013, a company must issue share certificates to shareholders when shares are issued, transferred, or passed on to another person, unless restricted by law or a court order. The time limits are as follows:-
(a) For the first shareholders named in the Memorandum of Association, the share certificates must be issued within two months from the date of incorporation of the company.
(b) For shares allotted after incorporation, the company must issue the share certificates within two months from the date of allotment.
(c) In case of transfer or transmission of securities, the share certificate must be issued within one month from the date the company receives the transfer document or intimation of transmission.
(d) For debentures, the company must issue the debenture certificates within six months from the date of allotment.
Important Note: If the securities are dealt with in a depository, the company must intimate the depository immediately upon allotment.
Penalty of non issuance of share certificate
As per section 56(6) of the companies Act, 2013, Where any default is made in complying with the provisions of sub-sections (1) to (5), the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees (₹ 50000). There is no maximum cap beyond this penalty under the updated law.
However, as per section 446B of the companies Act, 2013 talks about that in favor of small companies and startups are eligible to reduce this penalty. In such cases, the penalty shall be reduced to Rs. 25,000for the company and Rs. 25,000 for each officer in default.
Issuance of share certificate without receiving of subscription money
Section 10A basically deals with the commencement of business. Section 10A(1) states that a company cannot commence its business or exercise its borrowing powers unless the share capital has been deposited into the company’s bank account.
Further, Section 10A(1)(a) provides that the directors must, within 180 days from the date of incorporation, submit a declaration to the Registrar confirming that all subscribers to the Memorandum have paid the value of the shares agreed to be taken by them.
Section 10A(1) as per Act: A company incorporated after the commencement of the Companies (Amendment) Ordinance, and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a): A declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
This rule ensures that this certificates are issued on time and avoids any confusion about who owns the shares.
From a simple reading of the law, it is clear that a company must issue this certificate to MOA subscribers within two months of incorporation, even if the subscription money has not yet been received.
This raises a common question—is the company still required to issue share certificates if the subscriber has not paid the subscription money?
The answer, based on recent cases, is Yes — APTIA Group India Private Limited is a recent case involving delay in issuing share certificates under Section 56(4)(a) of the Companies Act, 2013. In this case, the company filed a Suo-moto adjudication application with the Registrar of Companies (ROC) for not issuing certificate within the required two-month period.
Basic Information about the Case
In this case:
There were two Directors, namely Mr. K. Rangan and Ms. Shubha Singh.
The companies involved were foreign private limited companies operating in the business outsourcing sector.
The date of incorporation was 7 July 2023. On this date, two companies were incorporated: Aptia Group Limited and Aptia Group Investment Limited.
Both companies were registered with the Registrar of Companies (RoC), Delhi.
The authorized capital and paid-up capital of both companies were substantial.
Delay Details:
Subscriber
Required by
Delay in issuing share certificate
Aptia Group Limited
07 September 2023
21 days
Aptia Group Investment Limited
07 September 2023
105 days
Issue in the Case:
The companies failed to issue share certificates within the prescribed time because the subscription money was not credited to the companies’ bank accounts within the statutory two-month period.
Due to this reason, the companies did not comply with the legal requirement of issuing share certificates within two months from the date of incorporation, as required under the Companies Act, 2013.
Regulatory Action:
Because of the delay in issuing share certificates, the Ministry of Corporate Affairs (MCA) issued a Show Cause Notice (SCN)on 6 September 2024 to the companies and their officers.
The notice asked them to explain why action should not be taken for the delay in issuing share certificates.
Reply by the Company:
In response to the Show Cause Notice, the companies filed E-Form GNL-1. (This form is used when the RoC asks a company to submit explanations and supporting documents.)
Through E-Form GNL-1, the companies replied to the adjudication proceedings for violation of Section 56(4)(a) of the Companies Act, 2013.
The companies submitted their reply on 23 September 2024, explaining that the delay occurred due to late receipt of subscription money in the companies’ bank accounts.
Action Taken by the RoC:
After examining the reply, the RoC passed an adjudication order on 30 December 2024.
The RoC held that:
The share certificates were issued late, and
Delay in receiving subscription money is not a valid reason to delay the issuance of share certificates.
The RoC clarified that:
The law provides 180 days from incorporation for subscribers to deposit subscription money (Section 10A), and
The law also clearly fixes a separate timeline of two months from incorporation for issuing share certificates (Section 56(4)(a)).
The RoC stated that a company cannot refuse or delay issuing share certificates on the ground that subscription money was not received on time. Instead, the company should follow up with subscribers by sending reminders, emails, or notices, rather than delaying statutory compliance.
Accordingly, The Registrar of Companies (RoC) fined the companies and their directors because they issued share certificates late, which violated Section 56(4)(a) of the Companies Act, 2013. The RoC noted that the delay was due to waiting for subscription money, but still held the company and its officers responsible and imposed penalties in an order dated 30 December 2024.
Similarly, In Tejas Cargo India Limited, the company issued share certificates late by 74 days due to a delay in receiving share subscription money. In this scenario, they asked for leniency, but the ROC Delhi imposed a penalty of ₹50,000 each on the company and its officers under Section 56(6).
"A company cannot delay issuing this certificates, even if the subscriber hasn’t paid yet. If it does, penalties will be imposed under Section 56 of the Companies Act, 2013."
From both cases, it is clear that a company cannot refuse or delay issuing this certificate because the law clearly says that a company must issue this certificate within two months from the date of incorporation or allotment, no matter what. Even if the subscriber has not yet paid the subscription money, the company still has to issue this certificate within the two-month time limit. The company cannot use non-payment of subscription money as an excuse for delay. If the shareholder ultimately fails to pay within the allowed period, then the Board of Directors and the Registrar of Companies (ROC) have the power to take action, which may include heavy penalties on the company and its officers.
Current situation in India!
Today, the world’s financial markets are changing very fast, and holding shares in paper form is becoming outdated. Many countries have stopped giving physical share certificates and now provide shares only in electronic form because it is faster, safer, and easier to follow the law.
In India, the government has introduced dematerialization, which means converting paper share certificates into electronic form. Electronic shares are much safer—they cannot be lost, damaged, torn, or misplaced. Since there are no paper certificates, there is also no need to issue duplicates. Buying and selling shares is easier, and shareholding is quickly updated in the shareholder’s account. This system also reduces mistakes and fraud, and it saves a lot of paperwork. Dematerialization is done through a depository system under the Depositories Act, 1996.
SEBIhas asked all shareholders holding physical shares to complete their KYC (Know Your Customer) and submit the necessary documents by 1 April 2023. After this date, physical share certificates cannot be sold, transferred, or encased unless they are converted into electronic form. So, physical share certificates have no value unless they are dematerialized.
In this article, we learned about this certificates. This is an important documents that show who owns the shares in a company. Companies must give this certificate on time to follow the law and avoid fines. According to the Indian Companies Act, 2013, it is mandatory for all companies to issue share certificates after their incorporation.
Even if a shareholder has not paid the subscription money yet, the company must still issue it within two months of incorporation of the company.
If the shareholder doesn’t pay, the company can remind them or even cancel their shares, but it cannot delay giving the this certificate, no matter what.
At Finodha.in, We serve a number of clients who need assistance/guide for various regulatory compliances including setting up business in India, company formation in India, income tax return filling, bookkeeping, accounting, GST and auditing. If you require any guidance for any professional service, we are here to serve you! You can also book a free consultation with us!
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FAQs: Get answers to all your queries!
Question. What do you mean by share certificate?
Answer. It means that is an official document issued by a company as proof that a person owns a certain number of shares of particular company. In this document it contains details of the shareholder and the shares held and serves as legal evidence of the ownership of the company.
Question. Who gives the share certificate?
Answer. A share certificate is given by the company itself to its shareholders.
Question. Who issue the share certificate?
Answer. This certificate is issued by the company under the authority of its Board of Directors.
Question. Why is a share certificate important?
Answer. It is important as it serves as legal proof of ownership of a specific number of shares in a company.
Answer. No, This certificate does not expire. It is a lifelong document, valid as long as you hold the shares, and serves as proof of your ownership.
Question. What are the benefits of share certificates?
Answer. Here are the benefits:- It is a document that proves your ownership of shares. - It gives you the right to receive dividends on the shares you hold. - It grants you voting rights in company meetings on important matters. - It allows you to sell or transfer your shares to others. - It provides proof of your shareholding, which can be claimed in case the company is winding up or during liquidation.
Question. How to get an original share certificate?
Answer. To get an original certificate, first you must to buy shares for any company, and then pay the amount, and then shares allotted by the company to its shareholder name. Then after the company issues the certificate under the authority of its board of directors, which denotes as a legal proof of your ownership.
Question. Can I download a share certificate online?
Answer. Yes, you can download it online but only Demat shares from your depository account.
Question. What is the cost of a share certificate?
Answer. The Companies Act, 2013 does not fix any cost for this certificate. At the time of issuance, the company provides it free of cost, and you only need to pay the applicable stamp duty based on the share value. In case of loss or transfer, the company may charge a nominal fee (e.g., ₹50) plus the stamp duty as per state rules.
Question. How do I find my all shares on my name?
Answer. To find your own named shares, then you can go to the CDSL and NSDL website for electronic holdings. but in the case of physical shares you need to contact your RTAs or companies directly.
Question. What is the disadvantage of share certificate?
Answer. There are the some disadvantages of the physical share certificate is that if in case you have lost, stolen, or damaged and transferring in that case you need to face some lengthy process of paperwork.
Question. What are the risk of share certificate?
Answer. One of the major drawbacks of physical share certificate is the risk of loss, theft, damage, and misuse, which can result in ownership disputes, financial loss, and expensive reissuance procedures.
Question. Is a share certificate good idea?
Answer. Yes, It is a good and valid idea to prove the amount you have invested in the company.
Question. What is share certificate in company law 2013?
Answer. As per the Companies Act, 2013, this certificate serves as proof that a shareholder holds a certain number of shares in a company.
Question. What to do if share certificate is lost?
Answer. If you lose this certificate, first inform the company immediately and submit the required documents, such as a notarized affidavit declaring the loss. Some companies may also require a public notice or an indemnity bond. After verification and payment of a nominal fee plus stamp duty, the company issues a legally valid duplicate certificate.
Question. How to issue a share certificate in a private company?
Answer. A private company issues it after allotting shares and receiving payment.
Question. Is a share certificate proof of ownership?
Answer. Yes, It is a proof of ownership. As per section 46 of the companies act, 2013. It shows that the person named in the certificate is the registered holder of the shares mentioned in it.
Question. What is the timeline for issuing a share certificate?
Answer. Under Section 56 of the Companies Act, 2013, a company must issue share certificates within 2 months of incorporation or allotment, and within 1 month in case of transfer or transmission of shares.
Question. Can a company issue share certificates without receiving subscription money?
Answer. Yes, a company is still required to issue share certificates within the statutory time limit even if the subscription money has not been received, as Section 56 of the Companies Act, 2013 operates independently of Section 10A.
Question. What is Form SH-1?
Answer. Form SH-1 is the standard format of a share certificate used by companies to issue shares as proof of ownership, containing key details like shareholder's name and number of shares, and signed by authorized directors or the company secretary.
Question. What happens if share certificates are not issued on time?
Answer. If share certificates are not issued within the prescribed time, then as per Section 56(6) of the Companies Act, 2013, the company and its officers in default are liable to a penalty for such non-compliance.
Question. Can physical share certificates still be transferred?
Answer. Yes, physical share certificates can still be transferred, but only after converting them into demat form, as paper-based transfers are largely restricted under current SEBI regulations.
Question. What should be done if a share certificate is lost?
Answer. If a share certificate is lost, the shareholder must inform the company and apply for a duplicate by submitting an affidavit and indemnity bond; after verification, the company issues a duplicate certificate.
Question. Is stamp duty payable?
Answer. Yes, stamp duty is payable on the issuance of a share certificate, as per the applicable State Stamp Act.
Question. Can share certificates be issued electronically?
Answer. Yes, share certificates can be issued electronically, but only in the case of dematerialised (Demat) shares.
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Important Keywords: Stamp duty on share certificates, Franking of share certificates, stamping in India, SHCIL e-stamp portal, Indian Stamp Act, 1899, Uniform stamp duty rate India, Stamp duty on issue of shares, Stamp duty on transfer of shares, Stamp duty on demat shares, Stamp duty on physical shares, Online stamp duty payment for shares, Franking vs stamping difference, Digital franking meaning, Machine franking of documents, Manual franking process, Stamp duty rates on shares India, Penalty for late payment of stamp duty, Stamp duty due date for share certificates, E-stamp certificate meaning.
Words: 4,015, Read time: 22 minutes.
Table of Contents
Overview
When we hear the terms stamping and franking, many of us being confused. What do these actually mean? Why are these required on important documents? And are these really necessary?
In simple terms, stamping and franking are two ways of paying stamp duty (which means, both are methods of paying stamp duty, i.e. a mandatory government tax), which is a government tax on certain legal documents. Both serve the same purpose—to prove that stamp duty has been paid—but they differ in how the payment is made, how easy to use it, and their convenience.
Paying stamp duty is important because a document without proper stamping or franking may not be legally valid and can be challenged in court.
This is especially critical when issuing share certificates. A certificate without proper stamping is like a contract without a seal—open for disputes and penalties later.
This article explains, in easy way, what stamping and franking are, why they matter, how they work, and how to choose the right method for your documents. It also highlights the importance of stamp duty in areas like share certificate issuance, where non-compliance can lead to penalties and legal challenges.
Whether you’re a startup founder, business owner, or legal professional, this guide will help you stay compliant—without confusion or wasting time or effort.
"Uniform stamp duty across the country"
Let’s see the meaning of “uniform.” Earlier, state governments had the power to charge stamp duty on share certificates and share transfers. This meant the rate of stamp duty was different in each state, which was often confusing.
But now, from 1st July 2020, the government has introduced a uniform stamp duty rate for all states. This means no matter where you are in India, the rate is the same for issuing or transferring shares.
For example: In Delhi, the stamp duty on share certificates (physical or demat) used to be 0.1%. Now, it has been reduced to 0.005% and is the same across all states.
What is Stamp Duty?
Stamp duty is a government tax you pay on certain documents to make them legally valid. This includes things like property sales, leases, loan agreements, partnership deeds, and other contracts.
Paying stamp duty proves the document is official and makes it acceptable in court. If a document is not properly stamped, it may be invalid and could lead to penalties. This is how we know the stamp duty applicable on documents. Paying stamp duty gives legal value to the documents. After stamp duty is paid, the documents become legally valid and can be presented in court. The court accepts these documents as valid.
What is Franking?
Franking is a mark which is showing that you have paid the stamp duty on this document. It is the process of stamping or marking a share certificate to show that stamp duty has been paid. This marking is done by an authorized government machine (This machine available at authorized Bank and post office). This stamp makes the document legally valid and acceptable for banks, courts, and government offices. It is an old and commonly used method, although digital methods are slowly replacing it.
Franking is usually needed for these documents:
Property papers like sale deeds, gift deeds, and rent or lease agreements
Home loan documents, because banks check whether stamp duty is paid before approving the loan
Demat account documents, especially the Power of Attorney (PoA) that allows brokers to manage shares
Business agreements like MoUs and shareholder agreements, to make them legally valid.
What is share certificate?
A share certificate is an official document, printed and signed, that proves you legally own the shares listed on it. All companies—whether small or big—must give shareholders a share certificate. It serves as proof of ownership in the company. When you buy shares, the company issues this certificate with its official seal. The document shows important details such as the company’s name and address, the shareholder’s name, the number of shares owned, and the price paid.
Companies must issue share certificates within 60 days of the shares allotment. There’s no specific place required to issue them, as long as the Board of Directors approves the issuance.
According to Section 3 of the Indian Stamp Act,every share certificate must be stamped, and the company pays stamp duty as per the rates in each state or Union Territory. Stamp duty applies even for dematerialized (digital) shares and is calculated on the issue price, not the nominal value of the shares.
Why Stamp Duty Matters for Share Certificates?
A share certificate without proper stamping is like a contract without a seal—legally weak and open to disputes.
When companies issue shares, they usually focus on valuation, funding, or investors. But stamp duty on share certificates is an important legal requirement that is often ignored. Missing this step can lead to penalties, legal issues, and future complications.
Stamp duty applies to both physical and demat shares in India and must be paid as per applicable laws. Understanding who collects it, how it is calculated, how to pay it, and how to keep records is essential.
Timeline to pay stamp Duty
According to the Indian Stamp Act, you must pay the stamp duty within 30 days from the date of the event (like signing a document or agreement).
Mode/Method of payment & stamping
E-Stamping / E-Stamp certificate: In many states, you can pay stamp duty for Demat shares online through portals like SHCIL e-stamp or NSDL. Physical stamps / stick-on stamps / franking machines: Some states still require physical share certificates to be stamped using paper stamps (stick-on stamps) or franking machines through the stamp office. Affixing / Cancelling / Certification: After the stamp or franking is applied to the document, it should be visible on the certificate, and the stamp is marked to prevent reuse. Submission / Record keeping: Companies should keep the stamped certificate and proof of duty payment (challan/receipt) in their records for legal and audit requirements.
Online Stamp Duty payment module for issuance of shares
Go to www.shcilestamp.com, register your company, and activate your account via email.
Log in and fill in the Share Details Form with all required information. For Demat shares, include Depository Name, DP Name, Client ID, and DP ID.
Upload all mandatory documents and click Submit. You’ll get a Reference Number.
A government supervisor will check your entry and mark it as Authenticated.
The Collector of Stamps (COS) will then generate a challan or reject the request. You’ll get an email notification.
Pay the stamp duty online or at the SHCIL branch, then print the acknowledgement.
Once payment is verified, the e-Stamp Certificate is issued. You can download and print it from your account.
The following table shows the stamp duty rates on issuing or transferring shares under the old rules and the new rules, according to Schedule I of the Stamp Duty Act, 1899.
Particulars
Before 1st July 2020
After 1st July 2020
Issue of share certificate
Rates differed in each state
0.005% for all states
Transfer of physical shares
0.25%
0.015%
Transfer of Demat shares
No stamp duty required (NIL)
0.015%
It’s important to know that any shares issued or transferred by the company before 1st July 2020 will follow the old stamp duty rates.
Note: Some states (like Delhi) have issued their own circulars applying a higher rate (e.g., 0.1%) to share issuances in both physical and demat form, which overrides the central uniform rate for companies registered in that state.
What is share franking?
Share Franking means putting a stamp on a share certificate to show that the company has paid the government stamp duty. This is done with a special machine which is provided by the government to the office of Sub Registrar’s or Stamp Collector’s office. The machine can stamp up to Rs. 999, and the company just needs to send a request letter to get the share certificates stamped.
What are the types of franking?
Here are the three types of Franking:
1. Manual Franking
Manual franking is done by hand using an official rubber stamp or seal to show that stamp duty has been paid. It requires physical handling of documents and is usually used when there are only a few documents to stamp. This method is suitable for small volumes of paperwork.
2. Machine Franking
Machine franking uses a special authorized machine to print a clear and uniform stamp directly on documents. This method is faster than manual stamping and is ideal for handling large numbers of documents. It ensures consistency, looks more professional, and reduces the risk of errors or misuse. Because the machine is secure and government-approved, it provides better control and reliability compared to hand stamping.
3. Digital Franking
Digital franking is an online way to pay stamp duty. You pay digitally and instantly get a secure e-stamp with a unique number (UIN). There is no need to visit any office or handle physical papers, making it fast, safe, and convenient.
How Franking/Stamp Duty/e-stamping documents look like
A franked document carries a red impression with:
The stamp duty amount Date of payment Unique reference number Bank/agency details
Franking Mark!Image of Physical and Electronic stamp paper!Image of stamp paper!
This imprint is affixed either before or after document execution. It depends on the state’s specific regulations and procedural rules.
Difference Between Franking and Stamping
Here are some key differences between franking and stamping:
Features
Franking
Stamping
Method of Application
It is done by the authorized Government franking machine.
It is done using adhesive stamps(sticker, label, Impression), e-stamping, or stamp paper.
Authorized by
For franking, the government approves banks, Post office and franking agents.
For stamping, two departments are responsible for collecting stamp duty: the revenue departments of various states and SHCIL.
Availability
Available only at authorized banks, Post office and agents.
Stamping can be done online via e-stamping or physically at approved vendors.
Convenience
For franking, it is required to visit an authorized franking center.
For stamping, if using adhesive stamps (sticker, label, Impression), you need to collect them in person. For e-stamping, there is no need to collect physically, as it can be paid online.
Penalty on Late Payment of Stamp Duty on Share Certificates?
Stamp duty on share certificates must be paid within 30 days from the date the certificate is issued. If it is not paid on time, the authorities can charge a penalty of up to 10 times the stamp duty amount. Paying stamp duty on time helps avoid heavy fines and legal problems.
Let’s understand this with examples of documents where accurate stamp duty was not paid: 1. A mortgage deed should be stamped for ₹20,000, but only ₹15,000 was paid.
Shortfall stamp duty: ₹5,000
When detected:
Penalty (up to 10 times): ₹50,000
Total payable: ₹55,000
2. An unstamped agreement is submitted as evidence in court. The judge impounds the document and sends it to the Collector of Stamps.
Stamp duty required: ₹2,000
Penalty imposed (say 5 times, depending on discretion): ₹10,000
Total payable: ₹12,000
3. A share transfer deed requires stamp duty of ₹1,000, but the company forgot to frank or e-stamp it within time.
Required stamp duty: ₹1,000
Delay in stamping
Stamp Authority may levy:
Penalty (10 times): ₹10,000
Total payable: ₹11,000
Note:
The maximum penalty can be 10 times the stamp duty, but the exact penalty is decided by the Stamp Authority based on delay and circumstances.
Without paying the duty and penalty, the document cannot be legally enforced.
Conclusion
In this article, we explored everything about stamp duty, franking and share certificates in a simple way. First, we learned what stamp duty is and why companies need to pay it. Then we looked at franking and stamping and how they are different. We also understood what a share certificate is, when stamp duty should be paid, and what happens if it’s not paid on time. Plus, we learned about the minimum and maximum stamp duty amounts.
By the end, it’s clear that stamping or franking share certificates is a must. If a company ignores it, it can bear big penalties. That’s why companies should issue properly stamped certificates as soon as shares are bought. And if the process seems tricky, it’s always a good idea to get professional help to avoid mistakes and fines.
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FAQs: Get answers to all your queries!
Question. Can we franking our documents online?
Answer. In most cases, franking cannot be done fully online because it requires a physical franking machine. Which machine available at the authorized bank, which prints the stamp directly on the document.
Question. What does franking mean in shares?
Answer. Franking is a stamp on a share certificate showing that the government’s stamp duty has been paid. It means a receipt on your shares that proves the required government tax is already paid.
Answer. It simply means, When you get a dividend, you don’t have to pay tax on the part already paid by the company. A franking credit reduces your personal tax liability. Example: Company earns ₹100 profit and pays ₹30 It gives ₹70 as a dividend to you. That ₹30 is your franking credit, which the shareholder can use to reduce their tax liability.
Question. What is Australian shares with franking credits?
Answer. In Australia, franking credits are the tax credits attached to dividends, showing the company has already paid tax on its profits. (In simple way: It means the tax credit shows the company has already paid tax on its profits. Simply put, the shareholder can use it to reduce their own tax on the dividend.)
Question. Which is the best shares with franking credits?
Answer. Here are some of the best shares with franking credits: Telstra (TLS) Common wealth Bank (CBA) -BHP Group (BHP) -Rio Tinto (RIO) -Wesfarmers (WES) These are well-known Australian, reliable companies that pay dividends with franking credits.
Question. Is there any Indian company that falls into the category of franking credits?
Answer. No, Indian companies do not have “franking credits” like in Australia. Franking credits (or imputation credits) are part of the Australian tax system, where the company tax already paid can be passed to shareholders to reduce their personal tax. In India, dividends are taxed differently: Earlier, companies used to pay Dividend Distribution Tax (DDT), which was the company’s tax on dividends. Now (since April 1, 2020), dividends are taxable in the hands of shareholders, and there is no franking credit system in India. So, no Indian company provides franking credits like Australian shares.
Question. What is franking in shares?
Answer. Franking in shares means putting a special official stamp on a share certificate to show that the company has paid the government’s stamp duty. Without franking, the share certificate is not fully legal and may not be accepted in official matters.
Question. Why is it necessary to stamp and frank shares certificates?
Answer. A share certificate needs to be franked and stamped because it proves that the required government stamp duty has been paid, making the certificate legally valid. Without franking and stamping, the certificate may not be officially recognized, and the shareholder’s ownership could be disputed. It also prevents fraud by ensuring only authorized banks or authorities can issue valid certificates.
Question. What happens if shares certificates are not stamped and franked on time?
Answer. If share certificates are not stamped or franked on time, it can cause legal problems, fines, and disputes over ownership.
Question. Can share certificates be stamped electronically?
Answer. Yes, share certificates can be stamped electronically using e-stamping. This is a digital way to pay stamp duty, and it works just like traditional stamping but is faster, safer, and more convenient.
Question. Are there any exemptions from stamp duty for shares certificates?
Answer. Yes, Some share certificates, like Demat shares, may not need stamp duty, depending on the rules in your state.
Question. What is the due date for stamping and franking of shares certificates?
Answer. The due date for stamping and franking a share certificate is within 30 days from the date the shares are issued to the shareholder.
Question. How to pay stamp duty?
Answer. You can pay stamp duty either physically via franking or online via e-stamping.
Question. What is the Stamp duty rates on shares certificates?
Answer. After the 2020 amendment, the stamp duty on share certificates depends on the type of shares and the transaction. When a company issues a new share certificate, it has to pay 0.005% of the issue price as stamp duty. This rate is the same across all states. shares are transferred in physical form, the stamp duty is 0.015% of the share value. Even for Demat shares,the stamp duty is 0.015% of the value. Earlier, Demat shares were sometimes exempt, but now they are also included under the uniform stamp duty rules.
Question. What is the process to issue share certificates with stamp duty?
Answer. Draft share certificate → pay government duty → choose stamping method (online or franking) → get the certificate stamped → issue to shareholder.
Question. What happens if I don't pay stamp duty on share certificates?
Answer. If you don’t pay stamp duty on a share certificate on time, you may have to pay up to 10 times the stamp duty as a fine. You could also face legal problems and disputes over ownership.
Question. Is stamp duty applicable on digital shares or only on physical ones?
Answer. Stamp duty must be paid on all shares, whether physical or digital (Demat).
Question. Can stamp duty be paid online for physical shares certificates?
Answer. Yes, in many states, stamp duty for physical share certificates can be paid online using e-stamping. After payment, the e-stamp certificate is attached to the physical share certificate to make it valid.
Question. Who is responsible for stamp duty payment the company or shareholders?
Answer. The company is responsible for paying the stamp duty whenever it issues share certificates, and the shareholders simply receive the stamped certificates.
Question. Which states have made e stamping mandatory?
Answer. Many major states and Union Territories in India—like Delhi, Karnataka, Gujarat, Maharashtra, Uttarakhand, Himachal Pradesh, and Assam—now mostly use e-stamping for high-value transactions. But the rules can differ depending on the state and type of document, so it’s best to check the local revenue department’s website.
Question. Can I use an e stamp certificate for any type of document?
Answer. Yes, e stamping can be used for almost all types of documents requiring stamp duty payment, including: - Sale Deeds - Lease/Rent Agreements - Affidavits - Power of Attorney - Mortgage Deeds - Partnership Deeds
Question. Can an e-stamp certificate be considered the official legal document?
Answer. An e-stamp certificate only proves that the stamp duty has been paid. You need to print the e-stamp certificate and attach it to the actual legal document (for example, a rental agreement or sale deed). Both the document and the e-stamp certificate must be kept together.
Question. Can stamp duty be refunded if the transaction is cancelled after payment?
Answer. If stamp duty is paid but the transaction is cancelled (for example, a property deal falls through), you can usually get a refund. The rules differ by state, a small part may be deducted, and it usually must be claimed within six months.
Question. When we need to frank documents?
Answer. When a legal document involves a financial transaction, it usually needs to be franked to be legally enforceable or accepted by a court.
Question. Why documents are franked? (not just for court use)
Answer. Franking is required to prove stamp duty payment, avoid penalties, and make a document legally valid.
Question. What are franking charges and who sets them?
Answer. Franking charges are fees levied by authorized franking agents or banks for paying stamp duty on documents like share certificates. The exact charges vary by state and are specified by the respective state’s stamp authority. For example, Karnataka may charge around 0.1% of the transaction value, while Maharashtra can charge up to 3%.
Question. How is franking different from e-stamping or digital stamping?
Answer. Franking is a manual, offline process that requires physical presence. E-stamping is a digital method where stamp duty is paid online, and a tamper-proof certificate is issued. E-stamping providers offer real-time document stamping, audit trails, and bulk processing, making it an enterprise-ready solution.
Question. Who pays stamp duty on share issue?
Answer. The company issuing the shares is generally responsible for paying the stamp duty on share certificates.
Question. Is stamp duty refundable?
Answer. Generally, stamp duty is non-refundable, except in certain cases allowed under the applicable Stamp Act rules.
Question. Is stamping required before or after execution?
Answer. Yes, stamping is required before or at the time of execution of the document.
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