1. FORMATION AND
INCORPORATION OF COMPANY
PRESENTED BY : SHRAVANI SHAILENDRA SAWANT
CLASS : SY.BCOM
DIVISION : B
ROLL NO : 210
ACADEMIC YEAR : 2022 - 2023 SEM : III
SUBJECT : ELEMENTS OF COMPANY
CONTACT NO : 9881697779
2. STAGES IN THE FORMATION AND
INCORPORATION
For forming a company and to carry on a particular business it is necessary that the
number of persons should come together with such intention. These persons are called ‘
promoters’. For this purpose promoters have to do a lot of preliminary work.
Formation of a company takes place by way of following 4 steps :-
• Promotion
• Incorporation or registration
• Capital subscription
• Commencement of business
Private company is concerned only first two steps i.e promotion & incorporation. The
moment certificate of registration is received, it can start its commercial activities.
However, a public company having share capital will have to go through all the four steps.
3. PROMOTION
This first step has to be taken by every company , the promoters are the persons
who will bring their business idea into reality. They have to do all necessary
preliminary such as preparation of documents, submitting them to the registrar ,
payment of necessary stamp duty, filling fees & getting the company
incorporated. Completing all this stages may be called as Promoters.
According To Gerstenberg ,
“Promotion is a discovery of business opportunity & organization of funds,
property and managerial abilities into business concern for the purpose of
making profits therefrom”
4. According To Lord Justice Bowen, Promotion is describes as
“A number of business operations familiar to the commercial world, by which a company
is brought into existence.”
Promotion may involve following steps:-
a) Finding an idea : first of all promoters have to discover some idea to start some
business activity by forming a group.
b) Investigation as to practicability of the idea : promoters have to confirm
that the idea of the business can be brought into practice.
c) Preparation : necessary resources, materials, other factors required for production etc
are required to be assembled to bring the idea into practice.
d) Approval for ‘name’ of the company : promoters have to select some ‘name’ for
company which is suitable and convenient for business activity. The proposed name of
the company must be reserved from Registrar of Companies of the state.
e) Directors taking over the change : process of promotion begins when ‘idea’ of
business company floated & continue up to time. thus, status of promoters is
terminated when Board of Directors has been continued & start governing the
company.
5. INCORPORATION / REGISTRATION OF A
COMPANY
In this step of incorporation actual steps are required to be taken to bring the
company in existence. Incorporation is the method in which ‘artificial person’ or
‘incorporate person’ is created.
Under the Companies Act 2013, ‘registration is the method of having the
company incorporated.
Mode of forming incorporated company [ section 3]
A company may be formed for any lawful purpose by any 7 or more person in
case of public company or any 2 in case of private company or any one person in
case of one person company that is to say private company, by subscribing their
names to a memorandum of association & otherwise complying with the other
requirements of this act in respect of registration , from an incorporated
company.
6. PROCEDURE FOR FORMATION OF A COMPANY
A company is formed by way of registration of same under the provisions of
Companies Act and for the purpose of registration, certain legal formalities &
procedure are required to be followed.
Some documents are required to be prepared .
Thus, formation of company involves following steps :
1) To decide the type of company
2) Approval of name
3) Preparation of memorandum and articles of association
4) Vetting of memorandum of and articles
5) preparation of other documents
6) Submission of documents
7) Certificate of incorporation
7. TO DECIDE THE TYPE OF COMPANY
• First of all one has to decide the type of company desired to be
incorporated – public or private.
APPROVAL OF NAME
• Name of a company is a very important asset and gives it a proper
identity. It is important even from the legal point of view.
• Therefore, one has to apply for availability of name.
8. PREPARATION OF MEMORANDUM AND
ARTICLES OF ASSOCIATION
• Both these documents are required to be prepared with great care and
caution
• This work is done under the supervision of experienced or experts.
• Both this documents must be printed, paragraphed, and consecutively
numbered. This documents must also be duly stamped.
• Both documents are required to be signed by the subscribers thereto the
date od stamping or at some later date.
• For public company at least seven signatories are necessary
9. VETTING OF MEMORANDUM AND ARTICLES
• Before submitting these documents to the ROC, the promoter may
approach the registrar with respect to vet.
• To vet means examine documents and suggest corrections of
improvement.
• After getting suggestions both documents may be printed and properly
signed by the subscribers in presence of witness.
10. PREPARATION OF OTHER DOCUMENTS
Other documents are also required to be prepared for the purpose of
incorporation of company
a) Power of attorney
b) A declaration by professional
c) Declaration from subscribers and first directors
d) The particular of subscribers
e) The particulars of the interest of the first directors
f) Consent of the first directors
g) Particulars of directors
h) Notice of registered address
11. SUBMISSION OF DOCUMENTS
• Once the mentioned documents are ready, they are formally required to
be submitted with the Registrar of Companies of the State in which the
company is proposed to be incorporated, along with prescribed
registration and filing fees.
12. Certificate of incorporation
• Once all the documents are submitted fir registration, the Registrar has to
scrutinize them and see that they are as per the requirements of the Act &
then on being satisfied that all the legal requirements have been duly
complied with the Registrar will enter the name of the company in the
Registrar of Companies.
• A certificate of incorporation is then issued by the Registrar which certifies
under his hand that the company is incorporated under this Act . such
certificate is called as the ‘Certificate of Incorporation’.