presentation on company formation

1. FORMATION OF A
COMPANY

2. STAGES IN THE FORMATION OF A
COMPANY
 PROMOTION
 INCORPORATION OF A COMPANY
 CAPITAL SUBSCRITON
 COMMENCEMENT OF BUSINESS

3. PROMOTION OF A COMPANY
 First stage in the formation of a company
 Promotion means the initial work involved in
bringing a business concern into existence and
making arrangements for its proper running

4. PROMOTER
 Promoter is a person who undertakes to
form a new company and carries out all the
preliminary work in connection with its
establishment as a going concern.

5. TYPES OF PROMOTER
 Professional Promoters
 Occasional Promoters
 Entrepreneur Promoters
 Financier Promoters

6. PROFESSIONAL PROMOTERS
 Promotion is their main profession or
occupation
 They are experts who specialise in company
promotion. They float the company and hand it
over to the shareholders or their representatives.

7. OCCASIONAL PROMOTERS
 These promoter take interest in floating some
companies
 They take up the promotion of some company and
once it is over they go to their original profession
 Eg. Engineers, lawyers etc… may float some
companies

8. ENTREPRENEUR PROMOTERS
 They are both promoters and entrepreneurs.
 They conceive idea of a new business unit,
do the groundwork to establish it and
subsequently become a part of the
management.

9. FINANCIER PROMOTER
 Some financial institutions like investment
banks or industrial banks, may take up the
promotion of a company with a view to
finding opportunities for investment.

10. FUNCTION OF A PROMOTER
 Identification of Business Opportunities
 Feasibility Studies
 Name Approval
 Fixing up signatories to the Memorandom of Association
 Appointment of Professionals
 Preparation of Necessary Documents

11. INCORPORATION
 Second stage in the company formation
 A company is said to be incorporated when
it is registered with the Registrar of Joint
Stock Companies.

12. The following documents are required to
be submitted to the Registrar of Companies:
 Memorand of Association
 Articles of Association

13.  Agreement with the proposed directors
 A copy of the Registrar’s letter approving the name of the
company
 A notice about the exact address of the registered office
 Documentary evidence of payment of registration fees
 A statutory declaration that all the necessary requirements of
the law for registration have bee complied with

14. MEMORANDOM OF ASSOCIATION
 It is the Charter or Magna Carta of the
company.
 Most important document of the company
with which a company is registered

15.  It defines the company’s objects, capital and
power
 It governs the outside relationship of the
company

16. CONTENTS OF MEMORANDOM
OF ASSOCIATION
 Name Clause
 Registered Office Clause
 Objects Clause
 Liability Clause
 Capital Clause
 Association Clause

17. ARTICLES OF ASSOCIATION
 It is to be filed with the registrar to get the
company registered.
 It contains the rules and regulations for
internal management and administration of
the company

18. MEMORANDOM OF
ASSOCIATION
ARTICLES OF
ASSOCIATION
 Constitution or charter
 Fundamental document
 Relationship between
company and outsiders
 Compulsory
 Contains the objects of
the company
 Bye-laws of the company
 Subsidiary document
 Company and its
members
 Not compulsory
 Mentions the ways by
which the objects can be

19. CAPITAL SUBSCRIPTION
 Third stage in the company formation
 Here, the public company can raise the
required funds from the public by means of
issue of shares and debentures

20. The following steps are required for raising funds from the public:
 SEBI Approval
 Filing of Prospectus
 Appiontment of bankers, brokers and underwriters
 Minimum subscription
 Application to stock exchange
 Allotment of shares

21. PROSPECTUS
The Companies Act defines prospectus as “any
prospectus, notice, circular, advertisement or
other document inviting deposits from the public
or inviting offers from the public for subscription
or purchase of any shares or debentures of a body
corporate”

22. COMMENCEMENT OF BUSINESS
 Last stage in the formation of a company
 At this stage, the ROC issue a Certificate of
Commencement of Business to a public company
 After getting this certificate, the company can
start its business