Process of Company Formation and Registration Explained
Chapter 3 formation of
company
A company comes into existence
through the following process:
a. promotion;
b. incorporation;
c. capital subscription; and
d. commencement of business.
A private company needs only to go
through the first two stages.
1. Promotion
Gerstenberg has defined promotion
as “the discovery of business
opportunities and the subsequent
organization of funds, property and
managerial ability into a business
concern for the purpose of making
profits therefrom.”
The following steps are followed
during the promotion of the
company:
a.
Name of the company
The following should be observed by
the promotors when choosing a
name for the company:
•
Name not suggest criminal or
immoral intent;
•
Name not suggest any association
with the government and its
department;
•
The name should not be mislead;
•
The name should not be similar to
the name of existing company or
any other associations
b. Discovery of idea;
c. Detailed investigation;
d. Assembling; and
e. Financing of proposition.
2. Registration or Incorporation
The promoters take the following
steps for registration or
incorporation of a company:
a. Presentation of documents
•
Memorandum of association
•
Article of association
•
Statement of company’s nominal
capital
•
Declaration of compliance
•
List of directors.
III. Certificate of incorporation
After receiving the required
documents, the registrar opens a
particular file for the company and
register the name of the company
and produce the certificate of
incorporation. Original copy of the
certificate will be given to the
promoters and a copy will be left in
the file of the company.
Any rejection or decline from the
register’s side without any valid
reasons after delivering all required
documents shall give the promoters
the right to apply an order of
Mandamus to a court.
Once certificate is issued it acts as
conclusive evidence that the
company was properly formed in
accordance with all the requirements
of the law.
Circumstances when certificate of
incorporation can be withdrawn:
•
Where it discovered that the
company was formed with
blasphemous objectives
.
•
Where it discovered that the
objects of the company are
immoral.
•
Where the entity that was
registered as a company is not a
company in nature.
•
Where the company to which the
certificate has been issued turns
out to be an enemy of the state
.
Iv. Acquisition of legal personality
Where the company is registered
and the certificate of incorporation is
issued; it becomes a legal person in
the eyes of the law by the name
contained in its memorandum.
C
.
Capital subscription
In order to make necessary
arrangements for raising capital of
the company; a meeting board of
directors is convened to deal with
Following:
•
appointment of the secretary and
fixing the terms and conditions of
his appointment;
•
appointment of bankers, brokers,
solicitors and auditors;
•
adoption of preliminary contracts
entered by the promoters on
behalf of the company in the pre-
incorporation stage;
•
Adoption of the draft ‘prospectus’
or ’statement in lieu of
prospectus’;
•
Appointment of managing
director or manager and other
responsible officers of the
company;
•
Approval of the design of the
common seal of the company and
authorizing the custody thereof;
and
•
Listing of shares in the stock
exchange.
The process of capital subscription
•
the company invites the public ,
through its directors, to subscribe
for its shares;
•
Company files a copy of
prospectus with the registrar of
the company and published on
advertised date;
•
The investors may obtain a copy
of the prospectus from either from
the registered office Or its
bankers;
•
Investors forward their application
for shares with the money to the
company’s banker mentioned in
the prospectus;
•
The bankers will forward the
application to the company where
the directors consider the
allotment of the shares if the
subscribed capital is at least equal
to the minimum subscription as
disclosed in the prospectus.
•
After that, allotment letters will be
sent to the applicants who have
been allotted to share while letter
of regret will be sent to those have
been rejected and For those who
have been allotted share will
receive share certificate after
sometime;
D. commencement of Business
A private company can commence
business immediately after the grant
of certificate of incorporation, but a
public limited company will have to
undergo some more formalities
before it can start business.
The certificate for commencement of
business is issued by Registrar of
Companies, subject to the following
conditions:
1. Shares payable in cash must have
been allotted up to the amount of
minimum subscription
2. Every director of the company had
paid the company in cash application
and allotment money on his shares
in the same proportion as others.
On getting trading certificate, the
process of formation of public
company is complete and it is now
that such company can start its
business.
Any questions or Comments!!
A company is formed via promotion and incorporation, involving steps like choosing a name, discovering ideas, detailed investigations, and assembling financing. The next step is registration, where promoters present documents like Memorandum of Association and Articles of Association. After registration, a Certificate of Incorporation is issued, serving as conclusive evidence of proper formation. However, the certificate can be withdrawn in certain circumstances.
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Presentation Transcript
Chapter 3 formation of company A company comes into existence through the following process: a. promotion; b. incorporation; c. capital subscription; and d. commencement of business. A private company needs only to go through the first two stages.
1. Promotion Gerstenberg has defined promotion as the discovery of business opportunities and the subsequent organization of funds, property and managerial ability into a business concern for the purpose of making profits therefrom. The following steps are followed during the promotion of the company: a. Name of the company The following should be observed by the promotors when choosing a name for the company: Name not suggest criminal or immoral intent;
Name not suggest any association with the government and its department; The name should not be mislead; The name should not be similar to the name of existing company or any other associations b. Discovery of idea; c. Detailed investigation; d. Assembling; and e. Financing of proposition.
2. Registration or Incorporation The promoters take the following steps for registration or incorporation of a company: a. Presentation of documents Memorandum of association Article of association Statement of company s nominal capital Declaration of compliance List of directors.
III. Certificate of incorporation After receiving the required documents, the registrar opens a particular file for the company and register the name of the company and produce the certificate of incorporation. Original copy of the certificate will be given to the promoters and a copy will be left in the file of the company. Any rejection or decline from the register s side without any valid reasons after delivering all required documents shall give the promoters the right to apply an order of Mandamus to a court.
Once certificate is issued it acts as conclusive evidence that the company was properly formed in accordance with all the requirements of the law. Circumstances when certificate of incorporation can be withdrawn: Where it discovered that the company was formed with blasphemous objectives. Where it discovered that the objects of the company are immoral. Where the entity that was registered as a company is not a company in nature.
Where the company to which the certificate has been issued turns out to be an enemy of the state. Iv. Acquisition of legal personality Where the company is registered and the certificate of incorporation is issued; it becomes a legal person in the eyes of the law by the name contained in its memorandum.
C. Capital subscription In order to make necessary arrangements for raising capital of the company; a meeting board of directors is convened to deal with Following: appointment of the secretary and fixing the terms and conditions of his appointment; appointment of bankers, brokers, solicitors and auditors; adoption of preliminary contracts entered by the promoters on behalf of the company in the pre- incorporation stage;
Adoption of the draft prospectus or statement in lieu of prospectus ; Appointment of managing director or manager and other responsible officers of the company; Approval of the design of the common seal of the company and authorizing the custody thereof; and Listing of shares in the stock exchange.
The process of capital subscription the company invites the public , through its directors, to subscribe for its shares; Company files a copy of prospectus with the registrar of the company and published on advertised date; The investors may obtain a copy of the prospectus from either from the registered office Or its bankers; Investors forward their application for shares with the money to the company s banker mentioned in the prospectus;
The bankers will forward the application to the company where the directors consider the allotment of the shares if the subscribed capital is at least equal to the minimum subscription as disclosed in the prospectus. After that, allotment letters will be sent to the applicants who have been allotted to share while letter of regret will be sent to those have been rejected and For those who have been allotted share will receive share certificate after sometime;
D. commencement of Business A private company can commence business immediately after the grant of certificate of incorporation, but a public limited company will have to undergo some more formalities before it can start business. The certificate for commencement of business is issued by Registrar of Companies, subject to the following conditions: 1. Shares payable in cash must have been allotted up to the amount of minimum subscription
2. Every director of the company had paid the company in cash application and allotment money on his shares in the same proportion as others. On getting trading certificate, the process of formation of public company is complete and it is now that such company can start its business. Any questions or Comments!!
