PROMOTIO

PROMOTIO
N
N
OF A
OF A
COMPANY
COMPANY

PRESENTED BY
MS TARANJIT KAUR
LECTURER(DIRD)
LECTURER(DIRD
 MEANING AND DEFINITION OF JOINT STOCK
COMPANY
• Joint stock company is an association of persons
formed for carrying out business activities and
has legal status independent of its members.
• Joint stock company is established and governed by
The Companies Act, 2013.
• Definition by Prof Honey. “Joint Stock Company is a
voluntary association of individual for profit, having a
capital divided into transferable shares, the ownership
of which is the condition of membership”.
• Section 3 of the Companies Act, 2013 defines as “A
company formed and registered under the act or
under any previous company laws”.
EXAMPLES OF COMPANIES
 FEATURES/CHARACTERISTICS OF JOINT
STOCK COMPANY

1. ARTIFICIAL LEGAL PERSON

• A company is a legal entity that has been created by the statues
of law. Like a natural person, it can do certain things, like own
property in its name, enter into a contract, borrow and lend money,
sue or be sued, etc.
• It has also been granted certain rights by the law which it enjoys
through its board of directors.
• However, not all laws/rights/duties apply to a company.
• It exists only in the law and not in any physical form. So we call it an
artificial legal person.

2. INCORPORATED ASSOCIATION – The company must be

incorporated or registered tender the companies Act 1956. Without
registration no company can come into existence.
 FEATURES/CHARACTERISTICS OF
JOINT STOCK COMPANY
3. Separate Legal Existence – It is created by
law and it is a distinct legal entity independent
of its members. It can own property, enter into
contracts, can file suits in its own name.
4. Perpetual Existence – Death, insolvency and
insanity or change of members as no effect on
the life of a company. It can come to an end
only through the prescribed legal procedure.
 FEATURES/CHARACTERISTICS OF
JOINT STOCK COMPANY

5. Limited Liability – The liability of every

member is limited to the nominal value of the
shares bought by him or to the amt.
guaranteed by him. Transferability of shares –
Shares of public Co. are easily transferable.
But there are certain restrictions on transfer of
share of private Co.
6. Separation of ownership and control
– Management of company is in the hands of
elected representatives of shareholders known
individually as director and collectively as
board of directors.
 FEATURES/CHARACTERISTICS OF
JOINT STOCK COMPANY
7. Common Seal
• A company is an artificial person.
• So its day-to-day functions are conducted by the
board of directors. So when a company enters any
contract or signs an agreement, the approval is
indicated via a common seal.
• A common seal is engraved seal with the
company’s name on it.
• So no document is legally binding on the company
until and unless it has a common seal along with
the signatures of the directors.
 FEATURES/CHARACTERISTICS OF
JOINT STOCK COMPANY
8. Transferability of Shares
• In a joint stock company, the ownership is
divided into transferable units known as
shares.
• In case of a public company the shares
can be transferred freely, there are almost
no restrictions. And in a public company,
there are some restrictions, but the
transfer cannot be prohibited.
ADVANTAGES OF JOINT STOCK
COMPANY
1. Limited Liability – Limited liability of shareholder
reduces the degree of risk borne by him.
2. Transfer of Interest – Easy transferability of
shares increases the attractiveness of shares for
investment.
3. Perpetual Existence – Existence of a company is
not affected by the death, insanity,
• Insolvency of member or change of membership.
Company can be liquidated only as per the
provisions of companies Act.
ADVANTAGES OF JOINT STOCK
COMPANY
4. Scope for expansion – A company can
collect huge amount of capital from
unlimited no. of members who are ready to
invest because of limited liability, easy
transferability and chances of high return.
5. Professional management – A company
can afford to employ highly qualified
experts in different areas of business
management.
 LIMITATIONS
1. Legal formalities – The procedure of formation of
Co. is very long, time consuming, expensive and
requires lot of legal formalities to be fulfilled.
2. Lack of secrecy – It is very difficult to maintain
secrecy in case of public company, as company is
required to publish and file its annual accounts
and reports.
3. Lack of Motivation – Divorce between ownership
and control and absence of a direct link between
efforts and reward lead to lack of personal interest
and incentive.
 LIMITATIONS
4. Delay in decision making – Red papism and
bureaucracy do not permit quick decisions and
prompt actions. There is little scope for
personal initiative.
5. Oligarchic management – Co. is said to be
democratically managed but actually managed
by few people i.e. board of directors.
Sometimes they take decisions keeping in mind
their personal interests and benefit, ignoring the
interests of shareholders and Co.
 TYPES OF COMPANIES
• Private company
• Public company
• One person company
 (1) PRIVATE COMPANY
• According to the Companies Amendment Act,
(2000), a private company is one which
• Has a minimum of two and maximum of 50
members excluding the employees.
• Restricts the right of members to transfer
their shares.
• Does not offer its shares to general public.
• Does not invite general public to invest
deposits in the company.
• Has minimum paid up capit.al of~ one lakh.
 PUBLIC COMPANY
• A public company is the one which
• Has a minimum of seven members and maximum
no limit.
• Permits easy transfer of its shares.
• Invites general public to subscribes to its public
deposits.
• Invites general public to subscribes to its shares
and debentures.
• Has minimum paid up capital of five lakh.
• Any private company which is subsidiary of a
public company.
Private Co. Public Co.

It has minimum 2 and maximum 50 It has minimum 7 and maximum

members. unlimited.
It cannot invite general public to buy its It invites general public to buy its shares
shares and debentures. and debentures.
There are certain restrictions on transfer
Its shares are freely transferable.
of its shares.
It can commence business after
It can commence business after
obtaining certificate of commencement of
incorporation.
business.

It has to write Private Ltd. After its name It has to write only limited after its name
Ex- Tata Sons, Citi Bank, Hyundai Motor Ex- Reliance Industries Ltd., Wipro Ltd. ,
India. Raymond’s Ltd.

In its minimum capital required is one In its minimum capital required is five
lakh. lakhs.
 ONE PERSON COMPANY

• The Companies Act, 2013 completely revolutionized corporate

laws in India by introducing several new concepts that did not
exist previously.
• One such game-changer was the introduction of One Person
Company concept.
• This led to the recognition of a completely new way of starting
businesses that accorded flexibility which a company form of
entity can offer, while also providing the protection of limited
liability that sole proprietorship or partnerships lacked.
• Several other countries had already recognized the ability of
individuals forming a company before the enactment of the
new Companies Act in 2013.
• These included the likes of China, Singapore, UK, Australia,
and the USA.
 Definition of One Person
Company
• Section 2(62) of Companies Act defines a one-person
company as a company that has only one person as to its
member. Furthermore, members of a company are
nothing but subscribers to its memorandum of
association, or its shareholders. So, an OPC is effectively
a company that has only one shareholder as its member.
• Such companies are generally created when there is only one
founder/promoter for the business. Entrepreneurs whose
businesses lie in early stages prefer to create OPCs instead of
sole proprietorship business because of the several
advantages that OPCs offer.
 Features of a One Person
Company
• Private company: Section 3(1)(c) of the Companies Act says
that a single person can form a company for any lawful
purpose. It further describes OPCs as private companies.
• Single-member: OPCs can have only one member or
shareholder, unlike other private companies.
• Nominee: A unique feature of OPCs that separates it from
other kinds of companies is that the sole member of the
company has to mention a nominee while registering the
company.
• No perpetual succession: Since there is only one member in
an OPC, his death will result in the nominee choosing or
rejecting to become its sole member. This does not happen in
other companies as they follow the concept of perpetual
succession.
 ONE PERSON COMPANY
• Minimum one director: OPCs need to have minimum
one person (the member) as director. They can have a
maximum of 15 directors.
• No minimum paid-up share capital: Companies Act,
2013 has not prescribed any amount as minimum paid-
up capital for OPCs.
• Special privileges: OPCs enjoy several privileges and
exemptions under the Companies Act that other kinds of
companies do not possess.
 PRIVILEGES OF ONE PERSON
COMPANIES
• OPC enjoy the following privileges and
exemptions under the Companies Act:
• They do not have to hold annual general
meetings.
• Their financial statements need not
include cash flow statements.
• A company secretary is not required to
sign annual returns; directors can also do
so.
 PRIVILEGES OF ONE PERSON
COMPANIES
• Provisions relating to independent
directors do not apply to them.
• Their articles can provide for additional
grounds for vacation of a director’s office.
• Several provisions relating to meetings
and quorum do not apply to them.
• They can pay more remuneration to
directors than compared to other
 FACTORS FOR SELECTION OF FORM OF
BUSINESS ORGANISATION
1. Cost and ease in setting up the organization: Sole
proprietorship is least expensive and can be formed
without any legal formalities to be fulfilled. Company is
also expensive with lot of legal formalities.
2. Capital consideration: Business requiring less
amount of finance prefer sole proprietorship &
partnership form, where as business activities
requiring huge financial resonances prefer company
form.
3. Nature of business: If the work requires personal
attention such as tailoring unit, cutting saloon, it is
generally setup as a sole proprietorship. Unit engaged
in large scale manufacturing are more likely to be
organized in company form.
FACTORS FOR SELECTION OF FORM
OF BUSINESS ORGANISATION
4. Degree of control desired: A person who
desires full and exclusive control over
business prefers proprietorship rather than
partnership or company because control has
to be shared in these cases.
5. Liability or Degree of Risk: Projects which
are not very risky can be organized in the
form of sole proprietorship partnership
whereas the risky ventures should be done in
company form of organization because the
liability of shareholders is limited.
 Stage I
Stage I
Promotion
Promotion
(a) Discovery of Idea
(a) Discovery of Idea Stage II
(b) Investigation Stage II
(b) Investigation Registration or Incorporation
(c) Assembling Registration or Incorporation
(c) Assembling (a) Preparation of MOA and AOA
(d) Financial arrangement (a) Preparation of MOA and AOA
(d) Financial arrangement (b) Filing of necessary documents for
(b) Filing of necessary documents for
registration
registration
(c) Issue of Certificate of Incorporation
(c) Issue of Certificate of Incorporation

Types of Company
Types of Company

FLOW CHART
Private
Private
company
Public
Public
Company
company Company

Stage III
Stage III
Raising of Capital
Raising of Capital Stage IV
(a) Issue of prospectus Stage IV
(a) Issue of prospectus Commencement of Business
(b) Filing of Prospectus Commencement of Business
(b) Filing of Prospectus (a) Submission of following document
(c) Allotment of Shares (a) Submission of following document
(c) Allotment of Shares to Registrar of Company
(d) Issue of Share Certificates to Registrar of Company
(d) Issue of Share Certificates (b) Issue of Certificate of Commencement
(b) Issue of Certificate of Commencement
of Business
of Business
Start
Start
Operation
Operation
 PROMOTION STAGE
It means discovery of business opportunities
and the subsequent organisation of funds,
property, management ability to run a
business concern for the purpose of making
profit therefrom.

Steps involved in the promotion of the company

Discovery of Idea
Investigation
Assembling
Financial arrangement
 PROMOTER
PROMOTER
A promoter is a person or a group of persons who think of
forming a company and take necessary steps for the same

 PROFESSIONAL PROMOTERS
As a part of their occupation.

 OCCASIONAL PROMOTERS
They encash the
opportunities

 INSTITUTIONAL PROMOTERS
Set up by the Government
 INCORPORATION OF A
COMPANY
A company comes into existence only when
it is incorporated or registered with the
Registrar of Companies. The promoter has to
take the following steps for this purpose:
 Approval of name
 Filing of Documents, and
 Payment of Filing and registrations
fees.
 FILLING
FILLING OF
OF
APPROVAL
APPROVAL OF
DOCUMENTS
DOCUMENTS OF NAME
NAME
 Memorandum of Association
 Articles of Association
 A Co.
list ofname does
persons who havenot match
agreed withDirectors
to become the with
their addresses etc.
name
 Written of any
consent other
of the company.
proposed Directors to act in that
capacity, duly signed by each Director.
 “Name Availability Form” and submit it
 The notice about the exact address of the Registered Office of
the company. It may, however, be filed within 30 days of
to the Registrar
incorporation of Companies
or registration.
 A copy of the name approval letter received from the Registrar
 ‘Limited’ or ‘Private limited’ at the end
of Companies.
 A statutory declaration that all the legal requirements of the
Companies Act in regard to incorporation have been complied
with.
 CERTIFICATE
CERTIFICATE OF
OF
INCORPORATION
INCORPORATION
 Payment of stamp Duty ,registration
fee and filling fee are to be deposited
with the Registrar
 Issue of Certificate of Incorporation -
Certificate of Incorporation gives
legal status to the company. It is also
known as birth certificate of the
company.
CAPITAL SUBSCRIPTION
 Private limited company - funds are

raised from the members, banks and

other sources.

 Public limited company - the share

capital has to be raised from the public.

 STEPS
STEPS REQUIRED
REQUIRED FOR
FOR
RAISING
RAISING FUNDS
FUNDS FROM
FROM
PUBLIC
PUBLIC
 SEBI Approval for Raising
Capital
 Filing of Prospectus
 Appointment of Bankers,
Brokers & Underwriters
 Minimum Subscription
 Application to Stock
Exchange
 Allotment of Shares
COMMENCEMENT
COMMENCEMENT OF
OF
BUSINESS
BUSINESS
‘Certificate of Commencement of Business’, must be obtained from the
Registrar of Companies.
For this purpose it has to file a statement with the following declarations to
the Registrar of Companies :

 That a prospectus has been filed with the Registrar of

Companies.
 That the shares have been allotted upto the amount of the
minimum subscription.
 That the Directors have taken up or purchased the minimum
number of shares required to qualify themselves to be Director.
 That no money is liable to become refundable to the applicants
by reason of failure to obtain permission for shares to be traded
in a recognised stock exchange.
 A statutory declaration by a Director or the Secretary of the
company stating that the requirements relating to the
commencement of business have been duly complied with.
 MEMORANDUM OF
ASSOCIATION
MOA lays down the powers and objects
of the company as well as the scope of
the company beyond which it cannot
go.
 Name Clause
 Registered Office Clause
 Objects Clause
 Liability clause
 Capital Clause
 Subscription or Association Clause
 ARTICLES OF ASSOCIATION
It contain the rules and regulations relating to the
management of its internal affairs.

1. Preliminary contracts 2. Use and custody of

3. Allotment, calls and lien on common seal
shares 4. Transfer and
5. Forfeiture and re-issue of shares transmission of shares
7. Issue of share certificates and 6. Alteration of share
share warrants capital
9. Procedure of holding and 8. Conversion of shares
conducting company meetings into stock
11. Qualification, appointment,
10. Voting rights and
proxies of members
remuneration and power of
Directors 12. Borrowing powers and
methods of raising loans
13. Payment of dividends and
creation of reserves 14. Accounts and audit
15. Winding up.
DIFFERENCE
DIFFERENCE BETWEEN
BETWEEN MOA
MOA &
&
AOA
AOA
 PROSPECTUS
 This document is prepared by the public
limited companies.
 The purpose of its preparation is to invite the
public to subscribe its shares and debentures.
 Any prospectus, notice, circular,
advertisement or other documents inviting
offers from the public for the subscription or
purchase of any shares in or debentures of a
body corporate.
PURPOSE
PURPOSE OF
OF
PROSPECTUS
PROSPECTUS
 To inform the public about the
company
 To induce people to invest in the
shares or debentures of the company
 To provide an authentic information
about the company and the terms
and conditions of issue of shares and
debentures.
 CONTENTS
CONTENTS OF
OF
PROSPECTUS
PROSPECTUS
 General information regarding the name, office of the company,
stock exchange where shares are to be listed, date of opening
and closing of the issue, credit rating information, name of
underwriters, brokers and bankers.
 Capital structure of the company.
 Terms of payment and application procedure.
 Company management and details of the project and project
report.
 Other listed companies under the same management.
 Outstanding litigations and defaults.
 Management perception of risk factors.
 PARTNERSHIP

A Partnership is a voluntary
association of person who
come together for achieving
common objective.
• In order to enter into
partnership, a clear
agreement with respect to
the terms, condition and all
aspect concerning the
partners is essential so that
there is no misunderstanding
later among the partners.
• An Agreement can be oral or
written.
• It is not essential to have
written agreement.
• The written document is
known as PARTNERSHIP
DEED.
 PARTNERSHIP DEED

The written agreements which specifies the terms and

conditions that governs the partnership is called as
partnership deed.
THE PARTNERSHIP DEED GENERALLY INCLUDE THE
FOLLOWING ASPECTS
Name of firms
Nature of business and location of business
Duration of business
Investment made by each partners
Distribution of profit and losses
Duties and obligations of the partners
Salaries and withdrawal of partners
Terms governing admission ,retirement and expulsion of the partners
Interest on capital and interest on drawings
Procedure of dissolution of the firms
Preparation of accounts and their auditing
Method of solving disputes
 PARTNERSHIP DEED
• PARTNERSHIP FIRM IS FORMED BY AN
AGREEMENT.
• AGREEMENT CAN BE ORAL OR IN WRITTEN
FORM.
• WHEN AGREEMENT IS IN WRITTEN FORM
THEN IT IS KNOWN AS PARTNERSHIP DEED.
 REGISTERATION OF FIRM

• As per the Partnership Act 1932, it is not

compulsory to register a partnership firm.

• The firm does not have a separate legal identity

and registration will not alter this fact.

• However, registration is the definite proof of the

existence of the firm and its legality.
 CONSEQUENCES OF NON
REGISTERATION OF FIRM
• The firm cannot file legal proceedings against
any third party for any situation. For example,
if the client has not paid his dues to the firm,
the firm cannot sue him if it is unregistered.
• An unregistered firm cannot fail a case against
a partner for any reason (like
mismanagement, theft etc)
• A partner of an unregistered firm cannot file a
suit against one of the other partners either.
TYPES OF PARTNERS
 ACTIVE PARTNER

WHO PARTICIPATE IN MANAGEMENT ,

SHARE PROFIT&LOSSES, HAVING
UNLIMITED LIABILITY TOWARDS
CREDITORS OF FIRM.
 SLEEPING/DORMANT PARTNER

CONTRIBUTES CAPITAL
SHARE PROFIT & LOSSES
HAS UNLIMITED LIABILITY
DOES NOT PARTICIPATE IN MANAGEMENT.
 SECRET PARTNER

CONTRIBUTES CAPITAL
PARTICIAPTE IN MANAGEMENT
SHARE PROFIT AND LOSSES
UNLIMITED LIABILITY
HIS IDENTITY IS UNKNOWN TO GENERAL
PUBLIC.
 NOMINAL PARTNER

DOES NOT CONTRIBUTE CAPITAL

HE ALLOWS THE USE OF HIS/HER NAME
BY A FIRM.
DOES NOT TAKE PART IN MANAGEMENT
GENERALLY DOES NOT SHARE PROFIT
AND LOSSES
UNLIMITED LIABILITY TOWARDS
CREDITORS OF FIRM.
 PARTNER BY ESTOPPEL

BY BEHAVIOUR, INITIATIVES AND

IMPRESSION OF PERSON THAT SHOW HE IS
A PARTNER OF A FIRM.
IS A PERSON WHO ACCEPTS BY HIS WORDS OR
CONDUCT THAT HE IS A PARTNER IN THE FIRM.
DOES NOT CONTRIBUTE CAPITAL
DOES NOT TAKE PART IN MANAGEMENT
DOES NOT SHARE PROFIT AND LOSSES
UNLIMITED LIABILITY TOWARDS CREDITORS
 PARTNERS BY HOLDING OUT

He is the one who is falsely declared partner of

the firm whereas actually he is not. And even
after becoming aware of it, he-does not deny it.
HE ALLOWS THE USE OF HIS NAME BY A
FIRM
DOES NOT CONTRIBUTE CAPITAL
DOES NOT PARTICIPATE IN MANAGEMENT
His liability is unlimited towards the party who
has deal with firm on the basis of this
declaration.
 MINOR AS PARTNER

A minor is a person who has not attained the age

of 18 years. Since a minor is not capable of
enlarging into a valid agreement.
He cannot become partner of firm. However, a
minor can be admitted to the benefits of an
existing partnership firm with the mutual consent
of all other partners.
He cannot be asked to bear the losses.
His liability will be limited to the exilent of the
capital contributed by him.
 He will not be eligible to take an active part in
the management of the firm.
MINOR AS PARTNER
 TYPES OF PARTNERSHIP

A. Classification on the Basics of Duration

Partnership at will- This type of partnership exists
at the will of partners.
Ex: Rhea, Suhana, and Reema , fashion designers
worked as partners for 15 years. Now Reema has
plans to shift her base to Singapore so Suhana and
Rhea decide to end the partnership and work as
individual designers.

Particular Partnership-This type of partnership is

formed for a specified June period to accomplish a
particular project (consolation of building)
 TYPES OF PARTNERSHIP

B. Classification on the basis of Liability

General partnership-This liability of partners is
unlimited and joint.
Registration of firm is optional.
The continuity of business is affected by the
death, lunacy, insolvency or retirement of the
partners.
Limited Partnership-
The liability of at least one partner is unlimited
whereas the other partners may have limited.
Registration of firm is compulsory.
Continuity is not affected by the death, lunacy or
insolvency of any partner with limited liability.
 TYPES OF PARTNERS AT A
GLANCE

Partners Capital management Profit Unlimite

contributed sharing d liability

Active Yes Yes Yes Yes

partner

Sleeping Yes No Yes Yes

partner

Secret Yes Yes Yes Yes

partner

Minor as No No Yes No
partner
 TYPES OF PARTNERS AT A
GLANCE

Partners Capital Managem Profit Unlimited

contribution ent sharing liability

Nominal No No Usually not Yes

partner

Partner by No No No Yes
Estoppel

Partner by No No No Yes
holding out
COOPERATIVE
SOCIETIES
A FORM OF BUSINESS
ORGANISATION

Lecture by: Taranjit Kaur ( PGT

COMMERCE)
Cooperative Societies
The term ‘cooperative’ means working
together and with others for a
common purpose. Cooperative society
is a voluntary association of persons, who
join together with the motives of welfare
of the members.
 It aims to protest and promote economic

and social interests.

 It is an association of persons, not

of capital.
Definition of
Cooperatives
In the words of The Indian Cooperative
Societies Act 1912, “Cooperative
organisation is a society which has
its objectives for the promotion of
economic interests of its members in
accordance with cooperative
principles.”
 IT is based on “one man one vote”.
Irrespective of capital of members.
 Minimum 10 members are required to
form cooperative society.
Some examples of cooperative
society in India
 AMUL
 ADARSH COOPERATIVE BANKS.
 KARNATAKA MILK EFDERATION.
 SHRI MAHILA GRIHA UDYOG LIJJAT
PAPAD.
 BHESHAN SAHKARI MANDALI LTD.
 IFFCO ( INDIAN FARMERS FERTILISER
COOPERATIVE)
IMAGES OF SOME
COOPERATIVE SOCIETIES
Consumer’s
Cooperatives
Created by
Consumers who
want to get rid
of traders and
brokers by
purchasing
goods in bulk
from the
producers or
wholesalers.
Producer’s Cooperatives

Created by small
producers who
face difficulties
in attaining
material and
selling of goods
by assisting
members in
purchasing and
selling.
Marketing Cooperatives

Formed by Small
Producers and
Artisans who face
difficulties in selling
their products at
handsome profit
single handedly by
collecting and selling
goods at reasonable
price.
Farmer’s Cooperatives

Formed by Small
Farmers who are
incapable of
doing farming
economically
through co-
operative
farming and
providing
agricultural
equipment and
seeds.
Credit Cooperatives

Created by
General
Persons who
have limited
financial
resources by
accepting
deposits and
providing loans
to members at
reasonable
rate of
interest.
Housing Cooperatives

Created by General
Persons who want
to have residential
house by i)
Purchasing and
Developing land ii)
Constructing and
Allotting houses or
iii) Allotting plots in
case no houses
can be given.
Merits of Cooperatives
Merits of Cooperatives
Limitations of
Cooperatives
Limitations of
Cooperatives
 ANY
ANY
QUESTION
QUESTION ??