Secretarial practice - Stages of incorporation (Part 1) - Promotion stage, Incorporation, Capital Subscription

3. Pre – Incorporation
contracts
 Acquire some property or right for the company before incorporation
 Preliminary or pre incorporation contracts
 Neither sue or nor be sued (need 2 for a contract since company is
non – entity, Cant make contract in eyes of law)
 Until refreshing the old contracts before incorporation, PROMOTOR is
liable for his action
 A contract is not deemed to be necessary for the incorporation and
working of the company
 Ratification (official way to confirm something) after incorporation “Pre
incorporation contracts are not acceptable or else need principal at the
time of contract for Doctrine of ratification ( without consent or
permission)
 Promoters entered into a contract , before its incorporation, for the
purpose of the company, warranted by terms of its incorporation
specifically enforced by or against company. If accepted by company it
should be informed to the other party of the contract

4. Provisional contract
 (contracts made after incorporation but
before obtaining certificate to commence
business, on issue of certificate contract
becomes binding)

5. Pre incorporation contract and
provisional contract
 Private company and public company
not having share capital– Becomes
legally bound – moment enter into fresh
contract or ratifies a contract – after
incorporation – can commence business
immediately
✔Preliminary or pre incorporation contract
✔Contracts made after incorporation which
are legally binding on the company

6.  Public company having a share capital –
legally bound – after gets certificate to
commence of business – on that date
✔Preliminary contract or pre incorporation
contract
✔Provisional contract
✔Contracts made after obtain certificate to
commence business

7. Incorporation and registration
 Second stage
 Effected by registration – with registrar of company
 After promotion and before registration, promoter should take preparatory steps:
❑ Ascertain – from ROC – Whether the name for the new company – is available
or not
❑ To get LOI (A letter of intent is a document outlining the understanding between
two or more parties which they intend to formalize in a legally binding agreement,
LATER CONVERTED INTO Industrial license)
❑ To fix up underwriters ( a financial expert who takes a look at your finances and
assesses how much risk a lender will take on if they decide to give you a loan.) ,
brokers (facilitates transactions between traders, sellers, or buyers. ) , bankers
(One who conducts the business of banking; ), solicitors (provides specialist legal
advice on different areas of law and is responsible for representing and defending
a client's legal interest. a lawyer who advises clients on matters of law, draws up
legal documents, prepares cases for barristers, etc, and who may represent
clients in certain courts), auditors (inspect organisations' financial accounts to
ensure they're correct and comply with the law.) and signatories (someone who is
entitled to sign, execute and approve business contracts on behalf of a
company.) to the memorandum ( a primary document for the incorporation of a
company. It should be prepared before applying for company registration and
signed by the founder members of the company, while the MOA describes the
powers and objects of the company, the AOA defines its rules.
❑ To get MOA and AOA printed (memorandum ( a primary document for the
incorporation of a company. It should be prepared before applying for company
registration and signed by the founder members of the company, while the MOA
describes the powers and objects of the company, the AOA defines its rules. )

8. Documents needed during
application for registration
✔ MOA ( duly stamped – signed and witnessed)
✔ AOA (Stamped, duly signed by signatories and witnessed
❖ Public company with limited liability - article filing is
optional/ but adopt table A (Registered without articles
which mean automatic adoption of Table A. Table A is a
specimen set of articles for a company limited by shares
applicable to companies registered before 1.10)
❖ The agreement (For appointment as manager, director)
❖ A written consent of the directors (to act in that capacity)
❖ Notice of address of the registered office of the company
❖ A statutory declaring stating all legal requirements

9.  Along with the above documents necessary
filing fees and registration fees at
prescribed rates of fikling feeas and
registration fees (Scheduled at the end of
the companies act prescribed rates)
 The registrar will scrutinize these
documents – if it is in order - will register
the company – will issue a CERTIFICATE
OF INCORPORATION
 Becomes body corporate – common seal –
allocate CIN

10. conclusiveness of certificate of
incorporation
 sec 35, certificate once issued is conclusive of fact that, company duly registered
 regularity of incorporation is not questionable the certificate of incorporation
 Even though the conditions of registration prescribed by the act might not have been
duly complied with prior to the registration
❑ The signatories to the memorandum be all infants
❑ Signatories of memorandum come out to be forged
❑ The memorandum be found to be materially altered after signatures
❑ There were not 7 subscribers to the memorandum
Once the certificate is issued , the court cant go behind it
And existence of the company cannot be questioned.
Its because, if anyone are allowed to show that the company is not properly
registered after years, it will be disastrous
❖ If a company having illegal objects has been registered, the illegal objects do not
become legal by issue of certificate.
But the certificate would be all the same conclusive.
The legal personality of the company cannot be extinguished by cancellation of the
certificate of incorporation.
The Remedy would be “to wind up” of the
company

11. Capital Subscription
 Private company and public company
(Not having share capital) can commence
business right after incorporation.
 Its applicable only for the public having have
share capital.
 Task – Obtaining the necessary capital for
the company
 Issue of capital to public is regulated by
SEBI


12. SEBI
SEBI (Has power to make rules and
regulations to protect the interest of
investors in securities and regulate the
securities market)
Issued “Guidelines fro disclosure and
investor protection