The document outlines the four stages of forming a company: promotion, incorporation, capital subscription, and commencement of business. In the promotion stage, promoters conceive an business opportunity and undertake steps to formally establish the company by preparing necessary documents and obtaining approval. They then apply for incorporation with the registrar of companies. After incorporation, the company raises capital through public offering or private placement. Finally, it applies for a certificate of commencement of business from the registrar to officially start operations.
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The Formation of A Company
The document outlines the four stages of forming a company: promotion, incorporation, capital subscription, and commencement of business. In the promotion stage, promoters conceive an business opportunity and undertake steps to formally establish the company by preparing necessary documents and obtaining approval. They then apply for incorporation with the registrar of companies. After incorporation, the company raises capital through public offering or private placement. Finally, it applies for a certificate of commencement of business from the registrar to officially start operations.
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THE FORMATION OF A COMPANY
TO FULLY UNDERSTAND THE PROCESS OF THE FORMATION
OF A COMPANY, ONE CAN DIVIDE THE FORMALITIES INTO FOUR DISTINCT STAGES WHICH ARE EXPLAINED IN DETAIL IN THE FURTHER SLIDES. THE FIRST STAGE: PROMOTION IT INVOLVES CONCEIVING A BUSINESS OPPURTUNITY AND TAKING AN INITIATIVE TO FORM A COMPANY SO THAT A PRACTICAL SHAPE CAN BE GIVEN TO EXPLOITING THE AVAILABLE BUSINESS OPPURTUNITY. A PROMOTER IS SAID TO BE THE ONE WHO UNDERTAKES TO FORM A COMPANY WITH REFERENCE TO A GIVEN PROJECT AND TO SET IT GOING AND WHO TAKES THE NECESSARY STEPS TO ACCOMPLISH THAT PURPOSE.
AFTER THOUROUGHLY EXAMINING THE FEASIBILITY, THE PROMOTERS ASSEMBLE THE RESOURCES, PREPARE THE NECESSARY DOCUMENTS, GIVE A NAME AND COMPLETE ALL THE LEGAL FORMALITIES AND FINALLY OBTAIN A NECESSARY COMPANY CERTIFICATE ENABLING THE COMPANY TO COMMENCE BUSINESS. STEPS IN PROMOTION APPROVAL OF THE COMPANYS NAME IS TAKEN FROM THE REGISTRAR OF THE COMPANIES. SIGNATORIES TO THE MEMORANDUM OF ASSOSIATION ARE FIXED. CERTAIN PROFESSIONALS ARE APPROPRIATED TO ASSIST THE PROMOTERS. DOCUMENTS NECESSARY FOR THE REGISTERATION OF THE COMPANY ARE PREPARED. THE NECESSARY DOCUMENTS ARE: 1. THE MEMORANDUM OF ASSOSIATION 2. ARTICLES OF ASSOCIATION 3. CONSENT OF PROPOSED DIRECTORS 4. AGREEMENT, IF ANY, WITH PROPOSED MANAGING OR WHOLE TIME DIRECTOR 5. STATUTORY DECLARATION.
INCORPORATION THE PROMOTERS GIVE AN APPLICATION ALONG WITH THE NECESSARY DOCUMENTS TO THE REGISTAR OF COMPANIES AND REGISTERATION FEES. THE REGISTRAR, AFTER DUE SCRUNITY, ISSUES CERTIFICATE OF INCORPORATION. THE REGISTERATION MAY BE REFUSED IF THERE IS ANY DEFECT IN THE DOCUMENTS. THE CERTIFICATE OF INCORPORATION IS A LEGAL EVIDENCE OF THE EXISTENCE OF THE COMPANY IN THE EYES OF LAW. EVEN IF THERE HAS BEEN A MAJOR DEFECT IN THE INCORPORATION,THE LEGAL EXISTENCE IS NOT AFFECTED.
CAPITAL SUBSCRIPTION A PUBLIC COMPANY RAISING FUNDS FROM THE PUBLIC NEEDS TO TAKE THE FOLLOWING STEPS FOR RAISING FUNDS: i. SEBI APPROVAL ii. FILE A COPY OF PROSPECTUS WITH THE REGISTRAR OF COMPANIES. iii. APPOINTMENT OF BROKERS, BANKERS AND UNDERWRITERS, ETC. iv. ENSURE THAT MINIMUM SUBSCRIPTION IS RECEIVED. v. APPLICATION FOR LISTING OF COMPANYS SECURITIES. vi. REFUND/ADJUST EXCESS APPLICATION MONEY RECEIVED. vii. ISSUE ALLOTMENT LETTERS TO SUCCESSFUL APPLICANTS AND viii. FILE RETURN OF ALLOTMENT WITH THE REGISTRAR OF COMPANIES.
A PUBLIC COMPANY RAISING FUNDS FROM FRIENDS OR RELATIVES BUT NOT THE PUBLIC HAS TO FILE A STATEMENT IN LIEU OF PROSPECTUS WITH THE ROC AT LEAST 3 DAYS BEFORE ALLOTMENT OF SHARES AND RETURNS OF ALLOTMENT AFTER COMPLETING THE ALLOTMENT.
COMMENCEMENT OF BUSINESS A PUBLIC COMPANY RAISING FUNDS FROM THE PUBLIC HAS TO APPLY TO THE REGISTRAR OF COMPANIES FOR THE CERTIFICATE OF COMMENCEMENT OF BUSINESS ALONG WITH THE FOLLOWING DOCUMENTS: A. A DECLARATION ABOUT MEETING MINIMAL CAPITAL SUBSCRIPTION REQUIREMENT; B. A DECLARATION ABOUT DETAILS IN RESPECT OF ALLOTMENT TO DIRECTORS. C. A DECLARATION ABOUT NO MONEY BEING PAID TO THE APPLICANTS; AND D. A STATUTORY DECLARATION A PUBLIC COMPANY RAISING PRIVATE FUNDS HAS TO SUBMIT DOCUMENTS B. AND D. LISTED ABOVE.
THE REGISTRAR, UPON SATISFACTION ISSUES CERTIFICATE OF COMMENCEMENT OF BUSINESS WHICH IS ALSO AN EVIDENCE OF THE COMPLETE FORMATION OF FORMATION REQUIREMENTS.
KEEP IN MIND THE TWO TYPES OF CONTRACTS: i. PRELIMINARY CONTRACTS: CONTRACTS SIGNED BY PROMOTERS WITH THIRD PARTIES FOR THE INCORPORATION OF COMPANY. ii. PROVISIONAL CONTRACTS: CONTRACTS SIGNED AFTER INCORPORATION BUT BEFORE COMMENCEMENT OF BUSINESS.