A company is said to be incorporated when it is registered with the Registrar of the joint stock companies.

1. Incorporation
Legal Environment of Business

2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Definition
• A company is said to be
incorporated when it is
registered with the
Registrar of the joint
stock companies.

4. Stages of incorporation
1. Promotion.
2. Registration / Incorporation.
3. Floatation / Raising of capital.
4. Commencement of Business.

5. Promotion
• The promoters have to first of
all decide upon the proposed
form of the company. (Public or
private).
• Then they have to decide upon
the name of the company and
check availability. The registrar
of companies may raise
objection to certain names it
they are not desirable in the
opinion of the central
government. Ex: If it is identical
or closely resembles the name
of an existing company.

6. Registration
• After the name is made available,
application for registration shall be
presented to the Registrar. It shall
be accompanied by following
documents.
– Memorandum and Articles of
association of company.
– Agreement.
– A statement of its nominal capital.
– A notice of the address of the
registered office of the company.
– A declaration of an advocate of the
Supreme or high court entitled to
appear before High court or a
Chartered Accountant practicing in
India who is engaged in the
formation of a company.

7. Certificate of registration
• If the Registrar is satisfied
that all the requirements
under the act for purpose
of registration of a
company have been
complied with, he shall
register the company and
issue a certificate of
incorporation under his
hand and seal.

8. Certificate of registration
• According to section 35, the
certification of incorporation
given by the Registrar shall
be conclusive evidence that
– All the requirements of the
Act have been complied with,
in respect of registration.
– Company is duly registered.
– Company came into existence
on the date of the certificate.

10. Floatation
• A private limited
company is prohibited
from inviting public to
subscribe to its share
capital.
• A public limited company
can subscribe to its
capital by issuing a
prospectus.

11. Commencement of business
• Every private limited
company can commence
business immediately on
receipt of certificate of
incorporation.
• A public limited company by
shares is debarred from
commencing business on
borrowing money without the
certification of
commencement of business.

12. Advantages of incorporation
• Limited liability – The
liability of all the members
of a limited company is
limited to the nominal
amount of their share
therein.
• Transferability of shares –
Shares in a company can
be transferred to another
without the consent of the
other members.

13. Advantages of incorporation
• Separate legal entity – A
company has separate legal
entity from its members and
its existence is not affected by
insolvency or death of a
member.
• Control – The control of a
company can be secured by
the acquisition of the
majority of shares which carry
the voting power.

14. Advantages of incorporation
• Perpetual succession and
common seal – Life of a
company is not measured
by the life of any of its
members. Company has an
official seal.
• Separate property – A
company can own, enjoy
and dispose of its
property.

15. Disadvantages of incorporation
• Incorporation requires expenses.
• Incorporation gives enormous
power to the state and law courts
to interfere in the affairs of the
company.
• Management of the corporation
is entrusted to a few selected
persons.
• A company though a legal person
is not a citizen. So it can’t claim
protection of such fundamental
rights.
• The company has a separate legal
entity. Therefore there is a veil
between the company and its
members.