1. FORMATIONOF A
COMPANY
PRESENTED BY:
Anand Aggarwal(1211206)
Jigar Mehta(1211245)
Kunal Goel(1211248)
Punit Sethia(1211250)
Pratik Jain(1211251)
Vivek Agarwal(1211255)
2. COMPANY:-
A company can be defined as an "artificial person",
invisible, intangible, created by or under law, with a
discrete legal entity, perpetual succession and
a common seal. It is not affected by the death,
insanity or insolvency of an individual member.
6. Promotion of a Company : The promotion of a
company refers to all those steps which are taken
from the time of having an idea of starting a
company to the time of actual starting of the
company business.
Who is a promoter?
1. People who think of forming a company
and take necessary steps in its formation
are known as “Promoters” or “Company
Promoters”.
2. The person who conceives such an idea is
called “Company Promoter”.
7. FUNCTIONS OF PROMOTERS:
To discover an idea for establishing a company.
To make detailed investigations about the demand
for the product, availability of power, labor, raw
material.
To investigate the idea and know whether the
formation of the company is possible and profitable.
To find out suitable persons who are willing to act
as first directors of the company.
To settle the name of company.
8. To select bank, legal advisor, auditor, underwriter for
the company.
To submit all the documents required for
incorporation with the registrar.
To meet all the preliminary expenses for floating of a
company.
To make contracts with vendors, underwriters, and
managing directors of the company.
To arrange for the loan etc. from various financial
resources.
To make proper arrangement for the office of the
company.
9. DUTIES AND OBLIGATION OF PROMOTERS
The promoters must disclose fully all the material facts
regarding the formation of a company.
The promoters must faithfully disclose all the facts
relating to the property which they want to sell to the
company.
The promoters must not make an unfair use their
position.
To disclose the liability and pay the secret profits if
promoters have earned.
The prospectus of the company should contain the true
statements.
Liability on statutory mistakes or frauds in the property.
10. REMUNERATION OF PROMOTERS:
He may be paid a certain lump sum.
He may be given shares of the company.
He may be given commission of the shares sold by
the company.
He may be given an option to buy the shares of the
company at par when their market price is higher.
He may sell his own property to the company at
higher price and earn profit.
11.
12. REGISTRATION AND INCORPORATION OF A
COMPANY:
The second stage for establishment of a company
is to get the company incorporated or registered.
The promoters have to prepare and file a number of
documents with the registrar.
1-The memorandum of association signed by at least
seven persons
2-The articles of association signed by at least seven
persons
13. 3-Promoters have to file a prospectus or statement in lieu
of prospectus with the registrar.
4-A list of directors and their willingness to act, duly
signed by each of them.
5-Notice of address at which the registered office of the
company will be situated.
All the director whose names are in the list have to
submit a declaration certificate that they have
taken up qualifying shares and have paid up the
money.
14. DOCUMENTS NEEDED :-
MEMORANDUM OF ASSOCIATION
ARTICLES OF ASSOCIATION
LIST OF THE DIRECTORS
CONSENT LETTER FROM DIRECTORS
STATEMENT OF CAPITAL
15. MEMORANDUM OF ASSOCIATION
Memorandum of association is the basic document
of a joint stock company.
It is known as the charter of the company.
It sets out limits outside which the company cannot
go.
To enable the shareholders, creditors and all those
who deal with the company.
16. CLAUSES (CONTENTS) OF
MEMORANDUM OF ASSOCIATION
1. Name Clause.
2. Registered Office clause.
3. Objective Clause.
4. Liability Clause.
5. Capital Clause.
6. Association Clause.
17. NAME CLAUSE:-
A company adopts any name but it should not be
identical to the name of the existing company.
The name should not be prohibited one.
The name of the company must end with the word
limited so all the persons dealing with the company
must know that their liability is limited up to the
extent of their of shares.
In the case of private limited company the word
private limited to be used as the last word of the
name.
18. SITUATION CLAUSE :-
The company is required to state the name of the
province in which the office is situated.
To give the exact address and name of the
company where the company is located.
A person can know through this the jurisdiction of
the court under which the company operates.
It also indicates the place for holding annual
meeting of the company.
The creditors, customers, government, know the
whereabouts of the company.
All correspondence is done at the office of the
company.
19. OBJECTIVE CLAUSE :-
It is the essence of memorandum. It clearly defines
the sphere of the company activities. It indicates a
series of objects for which the company is
established.
20. LIABILITY CLAUSE :-
THE EXTENT AND NATURE OF THE LIABILITY
OF SHARESHOLDERS SHOULD BE STATED
LIKE
LIMITED LIABILITY
LIMITED BY GAURANTEE
UNLIMITED
The liability of the members is limited to the extent
of the value of shares purchased by them.
In a case if a shareholder has to pay the unpaid
amount on the share investment, he can be
compelled to pay to the extent of unpaid amount on
the shares, nothing more.
21. CAPITAL CLAUSE :-
Division of capital into shares of different
dominations
The extent of each capital should be specified
The authorized capital should be mentioned
A company is not authorized to issue above
authorized capital
22. ASSOCIATION CLAUSE:-
This clause contains declaration of members
The names, addresses and occupations of the
subscribers should be mentioned
The signatures are to be attested by proper
witness.
23. SIGNING OF MEMORANDUM:
The memorandum must be:
Be signed by each member
Who shall add his name and surname in full, any
former name or surname in full
His occupation; and
Father’s name; or
In the case of a married woman or widow, her
husband’s name, in full
His nationality of origin; and
His usual residential address in full
24. DOCTRINE OF ULTRA-VIRES
The term ‘ultra’ means beyond and the term
‘vires’ means powers
An act ultra-vires the directors: It is an act
which is beyond the powers of the directors.
An act ultra-vires the memorandum of
association: It is an act which is beyond the powers
given by the memorandum of association.
An act ultra-vires the articles of
association: It is an act which is beyond the
powers given by the articles of association.
25. ARTICLES OF ASSOCIATION
After memorandum of association, Articles of
Association is the most important document to
prepare and present to registrar for incorporation or
registration.
Article of Association explains about the rules and
regulation of a company, it discusses the internal
points and boundaries that the company can’t go
beyond that.
26. Articles of association is a legal document second in
importance to memorandum.
The articles of association are regulations which
governs the internal organization and conduct of the
company.
The articles of association describe powers of the
directors, other officers and shareholders as to voting
etc.
It also describes the mode and form in which
changes in the internal regulations of the company
may from time to time be made.
The articles are subordinate to the memorandum and
they cannot go beyond the scope of the companies
act and memorandum of association.
27. COMPARISON BETWEEN MEMORANDUM
AND ARTICLES OF ASSOCIATION
Memorandum of Association
It contains conditions upon
which the company is
granted registration.
It contains objects and
powers of the company
It can not be easily altered.
The company has to follow
strict procedure for the
alteration.
It regulates the relationship
of the company with the
outsiders, as the objects
and powers of the
company are made known
to the outsiders
Article of Association
These are internal
regulations of the company
It provides the regulation
by which those objects and
powers are to be carried
into effect.
It can be easily altered as
compared to memorandum
of association.
It regulates the internal
management of the
company, as the rules and
regulations contained in it
describe the internal
procedure to be followed
by the company
28.
29. PROSPECTUS
Definition: “A prospectus means any document
described or issued as prospectus and includes any
notice or circular, advertisement or other document
inviting deposits from the public or inviting offers
from the public for the subscription or purchase of
any shares in, or debentures of a body corporate”.
30. CONTENTS OF PROSPECTUS
1. Name and registered address of the company.
2. The main objects of the company.
3. Information regarding listing of shares on a
recognized stock exchange.
4. Particulars pertaining to different classes of
shares and extent of interest of holders.
5. The number of shares (if any) fixed by the
articles as the qualification of a director and the
remuneration of directors.
6. The date of opening and closing of the issue.
7. The names and addresses of auditors and lead
managers.
31. 8. Amount payable on application and allotment of
shares.
10. Details regarding debenture.
11. Amount of premium or discounts on shares.
12. Details regarding property purchased or acquired
against issue of shares.
13. Preliminary expenses.
14. The promoters and their background.
15. Benefit paid to any promoters or officer and
consideration thereof.
16. Details regarding contract or appointment of
Chief Executive, Managing Agent, Secretary and
every other material contract.
32. 17. Name and address of legal advisors.
18. Full particulars of nature and extent of the
interest of every director or promoter.
19. Voting rights and rights in respect of capital and
dividend.
20. The authorized, issued, subscribed and paid up
capital of the company.
21. The size of present issue. Out of this, the shares
reserved for preferential allotment to promoters
and other should also be stated.
22. Restrictions imposed upon the members of the
company.
23. Quorum of general meeting.
24. The location of the plant.
25. Information about projects, plant and its
machinery raw material.
33. STATEMENT OF AUTHORISED CAPITAL
:-
The company should prepare and submit a
statement of proposed capital which is authorized
to collect from the public
It contain the number of shares and debentures and
the amount of each category.
34. STATUTORY DECLARATION :-
A copy of statutory declaration should be enclosed
stating to that all the formalities have duly compiled
with as per the provisions of companies act.
It should be signed by an advocate of high court or
the supreme court or a charted accountant or a
director or a secretary or manager .
35. RECEIPT OF REGISTRATION FEE :-
It is necessary to attach the receipt of the
registration which is paid to registrar office of which
it is calculated basis on the authorized capital of
the company
36. ISSUE OF CERTIFICATE
After the receipt of the all the documents , the
registrar will scrutinize the documents .
After everything is satisfied , the registrar will issue
the certificate of incorporation
With this certificate, the company gets its
recognition as a body of corporate.
38. A PRIVATE COMPANY CAN START ITS
OPERATIONS IMMEDIATELY AFTER
OBTAINING THE CERTIFICATE OF
INCORPORATION
39.
40. 4.COMENCEMENT OF BUSINESS
A certificate of incorporation is one which certifies
that the company is incorporated. It is issued by the
registrar of companies. It contains :-
1. Name of company.
2. Date of its issue.
3. Signature of registrar with seal.
