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
