1. CORE JAVA
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Formation of Company | CONFIDENTIAL
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1
FORMATION OF A COMPANY
By-Sonali
BBA/13/913
2. COMPANY:-
• Is an Artificial Person created by Law.
• Company means an assocoation of many persons
who contribute money or money`s worth to a
common stock and employed for a common
purpose.The common stock so contributed is
denote in money and is capital of a company.The
person who contribute it or to whom it belongs
are members.The proportion of capital to which
each member is entitled is his share. Share are
always transferable although the right to transfer
is often more or less restricted.
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6. INTRODUCTION..
• It may be noted that before a company is actually
formed, certain persons, who wish to form a company,
come together with a view to carry on some business.
Such persons have to decide various questions
a) which business they should start
b) They should form a company
c) Which type of company they required
d) What should be the capital of company.
• There are various stages in formation of company.
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7. Stages in formation of a company
Promotion of a Company :The promotion of a
company refers to all those steps which are
taken from the time of having an idea of starting
a company to the time of actual starting of the
company business.
Who is a promoter?
1. People who think of forming a company and take
necessary steps in its formation are known as
“Promoters” or “Company Promoters”.
2. The person who conceives such an idea is called
“Company Promoter”.
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8. Functions of promoters:
• To discover an idea for establishing a company.
• To make detailed investigations about the
demand for the product, availability of power,
labor, raw material.
• To investigate the idea and know whether the
formation of the company is possible and
profitable.
• To find out suitable persons who are willing to
act as first directors of the company.
• To settle the name of company.
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9. • To submit all the documents required for
incorporation with the registrar.
• To make contracts with vendors,
underwriters, and managing directors of
the company.
• To make proper arrangement for the
office of the company.
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10. Duties and Obligation of Promoters
• The promoters must disclose fully all the material facts
regarding the formation of a company.
• The promoters must faithfully disclose all the facts relating
to the property which they want to sell to the company.
• The promoters must not make an unfair use their position.
• To disclose the liability and pay the secret profits if
promoters have earned.
• The prospectus of the company should contain the true
statements.
• Liability on statutory mistakes or frauds in the property.
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12. DOCUMENTS NEEDED :-
• MEMORANDUM OF ASSOCIATION
• ARTICLES OF ASSOCIATION
• LIST OF THE DIRECTORS
• CONSENT LETTER FROM DIRECTORS
• STATEMENT OF CAPITAL
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13. Registration and Incorporation of a Company:
• The second stage for establishment of a
company is to get the company
incorporated or registered. The
promoters have to prepare and file a
number of documents with the registrar.
1-The memorandum of association signed by at least seven
persons
2-The articles of association signed by at least seven persons
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14. 3-Promoters have to file a prospectus or statement in lieu of
prospectus with the registrar.
4-A list of directors and their willingness to act, duly signed
by each of them.
5-Notice of address at which the registered office of the
company will be situated.
• All the director whose names are in the
list have to submit a declaration
certificate that they have taken up
qualifying shares and have paid up the
money.
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15. Memorandum of Association
• Memorandum of association is the basic
document of a company.
• It is known as the charter of the company.
• It sets out limits outside which the company
cannot go.
• To enable the shareholders, creditors and all
those who deal with the company.
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16. CLAUSES (CONTENTS) OF MEMORANDUM OF
ASSOCIATION
1. Name Clause.
2. Registered Office clause.
3. Objective Clause.
4. Liability Clause.
5. Capital Clause.
6. Association Clause.
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17. NAME CLAUSE:-
• A company adopts any name but it should not be
identical to the name of the existing company.
• The name should not be prohibited one.
• The name of the company must end with the
word limited so all the persons dealing with the
company must know that their liability is limited
up to the extent of their of shares.
• In the case of private limited company the word
private limited to be used as the last word of the
name.
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18. SITUATION CLAUSE :-
• The company is required to state the name of the
province in which the office is situated.
• To give the exact address and name of the company
where the company is located.
• A person can know through this the jurisdiction of the
court under which the company operates.
• It also indicates the place for holding annual meeting
of the company.
• The creditors, customers, government, know the
whereabouts of the company.
• All correspondence is done at the office of the
company.
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19. OBJECTIVE CLAUSE :-
• It is the essence of memorandum. it clearly
defines the sphere of the company activities.
It indicates a series of objects for which the
company is established.
• HERE THE COMPANY SHOULD MENTION ITS
– MAIN OBJECTIVES
– SUBSIDARY OBJECTIVES
– OTHER OBJECTIVES
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20. LIABILITY CLAUSE :-
• THE EXTENT AND NATURE OF THE LIABILITY OF
SHARESHOLDERS SHOULD BE STATED LIKE
– LIMITED LIABILITY
– LIMITED BY GAURANTEE
– UNLIMITED
• The liability of the members is limited to the
extent of the value of shares purchased by them.
• In a case if a shareholder has to pay the unpaid
amount on the share investment, he can be
compelled to pay to the extent of unpaid amount
on the shares, nothing more.
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21. CAPITAL CLAUSE :-
• DIVISION OF CAPITAL INTO SHARES OF
DIFFERENT DOMINATIONS
• THE EXTENT OF EACH CAPITAL SHOULD BE
SPECIFIED
• THE AUTHORISED CAPITAL SHOULD BE
MENTIONED
• A COMPANY IS NOT AUTHORISED TO ISSUE
ABOVE AUTHORISED CAPITAL
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22. ASSOCIATION CLAUSE:-
• THIS CLAUSE CONTAINS DELCARATION OF
MEMBERS
• THE NAMES, ADDRESSESS AND OCCUPATIONS
OF THE SUBSCRIBERS SHOULD BE MENTIONED
• THE SIGNATURES ARE TO BE ATTESTED BY
PROPER WITNESS
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23. ARTICLES OF ASSOCIATION
• After memorandum of association, Articles of
Association is the most important document
to prepare and present to registrar for
incorporation or registration.
• Article of Association explains about the rules
and regulation of a company, it discusses the
internal points and boundaries that the
company can’t go beyond that.
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24. • Articles of association is a legal document
second in importance to memorandum.
• The articles of association are regulations
which governs the internal organization and
conduct of the company.
• The articles of association describe powers of
the directors, other officers and shareholders as
to voting etc.
• It also describes the mode and form in which
changes in the internal regulations of the
company may from time to time be made.
• The articles are subordinate to the
memorandum and they cannot go beyond the
scope of the companies act and memorandum
of association.
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25. Prospectus
Definition: “A prospectus means any
document described or issued as prospectus
and includes any notice or circular,
advertisement or other document inviting
deposits from the public or inviting offers from
the public for the subscription or purchase of
any shares in, or debentures of a body
corporate”.
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26. Contents of Prospectus
1. Name and registered address of the company.
2. The main objects of the company.
3. Information regarding listing of shares on a
recognized stock exchange.
4. Particulars pertaining to different classes of
shares and extent of interest of holders.
5. The number of shares (if any) fixed by the
articles as the qualification of a director and the
remuneration of directors.
6. The date of opening and closing of the issue.
7. The names and addresses of auditors and lead
managers.
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27. 8. Amount payable on application and
allotment of shares.
10.Details regarding debenture.
11.Amount of premium or discounts on
shares.
12.Details regarding property purchased or
acquired against issue of shares.
13.Preliminary expenses.
14.The promoters and their background.
15.Benefit paid to any promoters or officer
and consideration thereof.
16.Details regarding contract or appointment
of Chief Executive, Managing Agent,
Secretary and every other material
contract.
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28. 17. Name and address of legal advisors.
18. Full particulars of nature and extent of the
interest of every director or promoter.
19. Voting rights and rights in respect of capital and
dividend.
20. The authorized, issued, subscribed and paid up
capital of the company.
21. The size of present issue. Out of this, the shares
reserved for preferential allotment to
promoters and other should also be stated.
22. Restrictions imposed upon the members of the
company.
23. Quorum of general meeting.
24. The location of the plant.
25. Information about projects, plant and its
machinery raw material.
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29. LIST OF DIRECTORS :-
• THE LIST OF DIRECTORS WHO HAVE AGREED TO
ACT AS A DIRECTORS SHOULD FILED WITH
REGISTRAR
• THEY SHOULD SUBMIT THEIR
- NAMES
- AGE
- OCCUPATION
- FULL ADDRESSES
• IN CASE WHEN THE LIST IS NOT READY
MEMORANDUM WILL BE DEEMED TO BE THE
DIRECTORS
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30. CONSENT LETTER OF DIRECTORS :-
• EVERY PERSON WHO IS READY TO ACT AS
DIRECTOR MUST GIVE A WRITTEN
UNDERTAKING STATING THAT HE IS WILLINGLY
AGREED TO ACT AS A DIRECTORS OF THE
COMPANY
• ALONG WITH THE LETTER THE MUST
SUBSCRIBE THE QUALIFICATION OF SHARES AS
MENTIONED IN ARTICLES OF ASSOCIATION
AND HAVE PAID YHE AMOUNT ACCORDINGLY
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31. NAME APPROVAL CERTIFICATE :-
• A COPY OF LETTER FROM THE REGISTRAR
ANNOUNCING THAT THE NAME OF
COMPANY WAS APPROVED WITHOUT
ANY OBJECTION
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32. STATEMENT OF AUTHORISED CAPITAL
:-
• THE COMPANY SHOULD PREPARE AND
SUBMIT A STATEMENT OF PROPOSED CAPITAL
WHICH IS AUTHORISED TO COLLECT FROM
THE PUBLIC
• IT CONTAIN THE NUMBER OF SHARES AND
DEBENTURESAND THE AMOUNT OF EACH
CATEGORY
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33. STATUTORY DECLARATION :-
• A COPY OF STATUTORY DECLARATION SHOULD
BE ENCLOSED STATING TO THAT ALL THE
FORMALITIES HAVE DULY COMPILED WITH AS
PER THE PROVISIONS OF COMPANIES ACT.
• IT SHOULD BE SIGNED BY AN ADVOCATE OF
HIGH COURT OR THE SUPREME COURT OR A
CHARTED ACCOUNTANT OR A DIRECTOR OR A
SECRETARY OR MANAGER .
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34. RECEIPT OF REGISTRATION FEE :-
• IT IS NECESSARY TO ATTACH THE RECIPT OF
THE REGISTRATION WHICH IS PAID TO
REGISTRAR OFFICE OF WHICH IT IS
CALCULATED BASIS ON THE AUTHORISED
CAPITAL OF THE COMPANY
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35. ISSUE OF CERTIFICATE OF
INCORPORATION
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36. ISSUE OF CERTIFICATE
• AFTER THE RECEIPT OF THE ALL THE
DOCUMENTS , THE REGISTRAR WILL
SCRUTANISE THE DOCUMENTS .
• AFTER EVERYTHING IS SATISFIED , THE
REGISTRAR WIL ISSUE THE CERTIFICATE OF
INCORPORATION
• WITH THIS CERTIFICATE, THE COMPANY GETS
ITS RECOGNITION AS A BODY OF CORPORATE.
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37. A PRIVATE COMPANY CAN START ITS
OPERATIONS IMMEDIATELY AFTER
OBTAINING THE CERTIFICATE OF
INCORPORATION
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39. 4.Comencement Of Business
• A certificate of incorporation is one which
certifies that the company is incorporated. It is
issued by the registrar of companies. It
contains :-
1.Name of company.
2.Date of its issue.
3.Signature of registrar with seal.
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