business topic

2. Formation of a company is a complexFormation of a company is a complex
activity involving completion of a lot of legal formalitiesactivity involving completion of a lot of legal formalities
and procedures . To fully understand the process oneand procedures . To fully understand the process one
can divide the formalities into four distinct stages, whichcan divide the formalities into four distinct stages, which
are; (i) promotion ; (ii) incorporation ; (iii) subscription ofare; (i) promotion ; (ii) incorporation ; (iii) subscription of
capital ; & (iv) commencement of business.capital ; & (iv) commencement of business.
PROMOTION OF A COMPANYPROMOTION OF A COMPANY
Promotion is the first stage in the formation of aPromotion is the first stage in the formation of a
company . It involves conceiving a business opportunitycompany . It involves conceiving a business opportunity
& taking an initiative to form a company so that practical& taking an initiative to form a company so that practical
shape can be given to exploiting the available businessshape can be given to exploiting the available business
opportunity.opportunity.

3. FUNCTIONS OF A PROMOTERFUNCTIONS OF A PROMOTER
((i) Identification of business opportunityi) Identification of business opportunity
(ii) Feasibility studies(ii) Feasibility studies
(a)(a) Technical feasibilityTechnical feasibility
(b)(b) Financial feasibilityFinancial feasibility
(c)(c) Economic feasibilityEconomic feasibility
(iii) Name approval(iii) Name approval
(iv)(iv) Fixing up Signatories to the Memorandum ofFixing up Signatories to the Memorandum of
AssociationAssociation
(v) Appointment of professionals(v) Appointment of professionals
(vi) preparation of necessary document(vi) preparation of necessary document

4. DOCUMENT REQUIRED TO BE SUBMITTEDDOCUMENT REQUIRED TO BE SUBMITTED
11.. Memorandum of associationMemorandum of association
(i) The name clause(i) The name clause
(ii) Registered office clause(ii) Registered office clause
(iii) objects clause(iii) objects clause
(a) The main object(a) The main object
(b) other objects(b) other objects
(iv) liability clause(iv) liability clause
(v) capital clause(v) capital clause
(vi) association clause(vi) association clause
22.. Articles of associationArticles of association
33.. constant of proposed directorsconstant of proposed directors
44..AgreementAgreement
55.. Statutory declarationStatutory declaration
66.. Payment of feePayment of fee

5. POSITION OF PROMOTERPOSITION OF PROMOTER
Promoters undertakes various activities toPromoters undertakes various activities to
get a company registered and get it to theget a company registered and get it to the
position of commencement of business.position of commencement of business.
Promoters of a company enjoys a fiduciaryPromoters of a company enjoys a fiduciary
position with the company, which they mustposition with the company, which they must
not misuse.not misuse.
Promoters are not legally entitled to claimPromoters are not legally entitled to claim
the expense incurred in the promotion of thethe expense incurred in the promotion of the
comopany.comopany.

6. Perform for Statutory Declaration
“FORM NO. 1”
The companies Act .1956
Declaration of compliance with requirements of the companies Act, 1956 on
Application for Registration of a company.
PURSUANT TO SECTION 33 (2)
NAME OF THE COMPANY : M/S
PRESENTED BY : SUSHIL KR.
CHARTERED ACCOUNTANT.
…(NAME OF CA)….partner of…(NAME OF CA FIRM& ITS ADDRESS) ...,do
solemnly and sincerely declare that I am a CA in whole time practice in
India ,who is engaged in the formation of the company “M/S, ------------
PRIVATE LIMITED”
And that all the requirements of the companies Act, 1956 and the rules there
under in respect of matter precedent to the registration of the said
company& incidental thereto have been complied with& I make this
solemn declaration conscientiously believing the same to be true.
PLACE : NEW DELHI (NAME OF CA )
DATED : CHARTERED ACCOUNTANTS

7. INCORPORATION
1. The memorandum of association duly stamped,
signed & witnessed. In case of a public company, at last
seven members must signed it. For a private company
however the signature of two members are sufficient.
The signatories must also give information about their
address, occupation and the number of share
subscribed by them.
2.The articles of Association duly stamped and
witnessed as in case of the Memorandum. However, as
stated earlier, a public company may adopt table A,
which is a model set of Articles, given in the companies
Act. In that case a statement in lieu of the prospectus is
submitted, instead of Article of Association.

8. 3. Written consent of the proposed directors to act as director and3. Written consent of the proposed directors to act as director and
an undertaking to purchase qualification shares.an undertaking to purchase qualification shares.
4. The agreement, if any, with the proposed Managing Director,4. The agreement, if any, with the proposed Managing Director,
Manager or whole –time director.Manager or whole –time director.
5. A copy of the Registrar’s letter approving the name of the5. A copy of the Registrar’s letter approving the name of the
company.company.
6. A statutory declaration affirming that all legal requirements for6. A statutory declaration affirming that all legal requirements for
registration have been compiled with. This must be signed by anregistration have been compiled with. This must be signed by an
advocate of a high court or supreme court or a signatory to theadvocate of a high court or supreme court or a signatory to the
Memorandum of Association or a Chartered Accountant orMemorandum of Association or a Chartered Accountant or
company secretary in whole time practice in India.company secretary in whole time practice in India.
7. Documentary evidence of payment of registration fees.7. Documentary evidence of payment of registration fees.

9. SPECIMEN OF CERTIFICATE OFSPECIMEN OF CERTIFICATE OF
INCORPORATIONINCORPORATION
I hereby certify that …………………(name of the company) is thisI hereby certify that …………………(name of the company) is this
day incorporated under the companies Act 1956, and that theday incorporated under the companies Act 1956, and that the
company is limited.company is limited.
Given under my hand at Delhi, this seventh day of November,Given under my hand at Delhi, this seventh day of November,
two thousand and five.two thousand and five.
Fees: Deed Stamp Rs. ……………………….Fees: Deed Stamp Rs. ……………………….
Stamp Duty on Capital Rs.Stamp Duty on Capital Rs.
………………………..………………………..
Sd/-Sd/-
Registrar of companiesRegistrar of companies
DelhiDelhi
Corporate Identity NumberCorporate Identity Number
of company : 1352 of 2005of company : 1352 of 2005
SEAL

10. EFFECT OF THE CERTIFICATE OF
INCROPORATION
A company is legally born on the date printed on the certificate
of Incorporation . It becomes a legal entity with perpetual
succession on such date. Some interesting examples showing
the impact of the conclusiveness of the certificate of
Incorporation are as under:
(a) Documents for registration were filed on 16th
January.
Certificate of Incorporation was issued on 8th
January But the
date mentioned on the certificate was 6th
January . It was
decided that the company was in existence and the contracts
signed on 6th
January were considered valid.

11. (b) A person forged the signatures of other on the(b) A person forged the signatures of other on the
Memorandum. The Incorporation was still consideredMemorandum. The Incorporation was still considered
valid.valid.
CAPITAL SUBSCRIPTIONCAPITAL SUBSCRIPTION
(i) SEBI Approval(i) SEBI Approval
(ii) Filling of prospectus(ii) Filling of prospectus
(iii) Appointment of Bankers, Brokers , Underwriters(iii) Appointment of Bankers, Brokers , Underwriters
(iv) Minimum subscription(iv) Minimum subscription
(v) Application to stock Exchange(v) Application to stock Exchange
(vi) Allotment of shares(vi) Allotment of shares

12. COMMENCEMENT OF BUSINESSCOMMENCEMENT OF BUSINESS
For commencement of business these followingFor commencement of business these following
documents are requireddocuments are required
1. A declaration that share payable in cash have been1. A declaration that share payable in cash have been
subscribed for and allotted up to the minimumsubscribed for and allotted up to the minimum
subscription mentioned in the prospectus;subscription mentioned in the prospectus;
2. A declaration that every director has paid in cash,2. A declaration that every director has paid in cash,
the application and allotment money on his shares inthe application and allotment money on his shares in
the same proportion as others;the same proportion as others;
3. A declaration that no money is payable or liable to3. A declaration that no money is payable or liable to
become payable to the applicants because of thebecome payable to the applicants because of the
company to either apply for or obtain permission tocompany to either apply for or obtain permission to
deal in its security on stock exchange;deal in its security on stock exchange;
4. A statutory declaration that the above requirements4. A statutory declaration that the above requirements
have been compiled with.have been compiled with.

13. CERTIFICATE OF COMMENCEMENTCERTIFICATE OF COMMENCEMENT
OF BUSINESSOF BUSINESS
(specimen)(specimen)
I hereby certify that ………… ltd. Of……………whichI hereby certify that ………… ltd. Of……………which
was incorporated under The companies Act, 1956, onwas incorporated under The companies Act, 1956, on
the …………day of ……….200…….and which has thisthe …………day of ……….200…….and which has this
day filed a statutory declaration in the prescribed formday filed a statutory declaration in the prescribed form
that the conditions of commence business .that the conditions of commence business .
Given under my hand at…………this day of……….Given under my hand at…………this day of……….
Two thousand………Two thousand………
Registrar Joint Stock CompaniesRegistrar Joint Stock Companies
……………….(state)……………….(state)
SEAL