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Formation of a company

According to Company Act, 1994- to form a company whether it is Public or Private, a
systematic criteria must be followed:
1. Promotional Stage: n this stage, at least ! promoters for Private Company and "
promoters for the Public Company need to complete these primary tas#s:
a$ %ecision ma#ing: &irstly, promoters need to identify their business sector, study its
feasibility, prepare an efficient pro'ect according to their sector and prepare financial
plan for the pro'ect$ (econdly, they need to ma#e decision about the amount of share
capital, price of each share, amount of minimum capital, directors, )ualification
shares of directors etc$
b$ *ame clearance: Promoters then set up an appropriate name for their company$ *o
e+isting name can be used$ ,hey submit their desired name or names to the -ffice of
the .egistrar of /oint (toc# Companies and &irms with registration fee$ .egistrar then
approves the name and provides them 0name clearance certificate1 and as#s them to
provide more documents for the ne+t process$
2. Document Preparation Stage: n this stage, the promoters submit the most two important
documents of the company$ ,hey are:
a$ 2emorandum of Association: 2ain document of the company$ n this document-
Company name, address, ob'ectives, consents, share capital, liabilities etc$ are described
in details$
b$ Articles of Association: .ules and regulations for the internal management of the
company are described in details in this document$ Promoters can use 3schedule-14
according to the Company Act, 1994 instead of Articles of Association$ f they do so, no
separate document needs to be formed and submitted$
3. Certificate of Incorporation Collection Stage: n this stage, promoters fill up important
forms and submit them to the .egistrar office with necessary documents and stamp duty and
fee$ Promoters must submit-
a$ 5 copies of the 2emorandum of Association$
b$ 5 copies of the Articles of Association$ A statutory declaration of statement if
3schedule-14 is used instead of Articles of Association
c$ A list of persons who have consented to be directors of the company, their address
and professions
d$ A written consent duly signed to act as directors
e$ An underta#ing in writing signed by each director to ta#e and pay for their
)ualification shares, if any$
f$ A statutory declaration by an attorney or a chartered accountant or by a director or
by any senior officer engaged in formation of company that all re)uirements of the
Act and .ules there under in respect of the registration have been compiled with$
,he .egistrar verifies all the submitted documents and when he is satisfied, he provides
0Certificate of ncorporation1 to the promoters$ A Private Company can start its business after
getting 0Certificate of ncorporation1 but a Public Company must collect 0Certificate of
Commencement1$
4. Commencement Stage: ,his step is only for the Public companies$ 6ere the promoters
start to arrange the share capital$ ,hey usually do this-
a$ 7y creating prospectus and share them to the public to sell shares of the company$
b$ 7y selling shares to the #nown people 8friends or relatives9 without sharing
prospectus to the public and thus collect share capital$
c$ Collecting money from the )ualification shares which the directors hold$
,hen according to section 1:;819, Company Act 1994, a director is re)uired to submit the
following documents:
a$ A statutory declaration that the minimum capital has been collected$
b$ A statutory declaration that the directors have bought their )ualification shares$
c$ A copy of prospectus$
After successful submission, the promoters of Public Company get 0Certificate of
Commencement1 and start their business$