Formation of a company

➢ Any 7 or more persons in case of a

public company and 1 or more in case of
a private company may form an
incorporated company.
➢ They shall subscribe their names to the
Memorandum of Association and also
comply with other formalities in respect
of registration.
• A company so formed may be:-
• 1. Company limited by shares
• 2. A company limited by guarantee
• 3. An unlimited company.
 Documents to be filed with the
registrar:-
1. The memorandum of association duly signed by the
subscribers. Sec. 33(1)(a)
2. The articles of association, if any, signed by the subscribers
to the memorandum of association
Sec. 33(1)(b)
3. The agreement Sec. 33(1)(c).
4. A list of directors who have agreed to become the First
Directors of the Company & taken up qualification shares.
Sec. 266.
5. An undertaking by the directors to take up and pay for their
qualification shares.
6. A declaration in e-form . No. 1. Sec.33(2)
 Certificate of incorporation
• Certificate of incorporation:- a certificate of
incorporation given by the registrar of a
company is conclusive evidence that all the
requirements of the companies act have
been complied with.
• This is known as Rule in Peel’s case.
• Jubliee cotton mills V/S Lewis
 Effects of Registration
• 1. the company becomes a distinct legal
entity
• Salmon v/s Salmon & co. Ltd
• 2. the company acquires perpetual
succession
• 3. the companies property is not the property
of the share holders.
 Memorandum of Association
Sec.2(56)
➢The first step in the in the formation of a company
is to prepare Memorandum of Association .

➢Memorandum of Association is a fundamental

document.

➢It is the charter of the company & defines its

“raison d’etre” (reason for existence).

➢It contains the fundamental conditions upon

which alone the company is allowed to be
incorporated.
 **Purpose of Memorandum of
Association
1. The prospective shareholders should know the
field in which their money is going to be used
by the company & what risk they are
undertaking in making investment.

2. The outsiders dealing with the company shall

known with certainty as to what the objects of
the company are and as to whether the
contractual relation into which they
contemplate to enter into with the company is
within the objects of the company.
Printing & Signing of Memorandum of
Association
Memorandum of Association shall be:
1. Printed,
2. Divided into paragraphs numbered
consecutively, &
3. Signed by 7 (2 in case of a private company)
subscribers.
 Contents of Memorandum of
Association Sec. 4
➢ The Memorandum of Association of every
company shall contain the following clauses:
➢1. Name clause
➢2. Registered office clause
➢3. Objects clause
➢4. Limited Liability clause
➢5. Share capital clause
➢6. Association clause
 Articles of Association Sec.5
➢ Articles are the rules, regulations and bye-laws
for the ‘internal management’ of the affairs of a
company.
➢ They are framed with the object of carrying out
the aims and objectives as set out in the
Memorandum of association.
➢ They must not violate the Memorandum & the
Act
 Contents of Articles

1. Share capital & variation of these rights

2. Lien on shares
3. Calls on shares
4. Transfer of shares
5. Transmission of shares
6. Forfeiture of shares
7. Alteration of Capital
8. Capitalisation of profits
 Contents of Articles

9. Buy-back of shares
10. General meetings
11. Proceedings at General meetings.
12. Adjournment of meetings
13. Voting rights
14. proxy
15. Board of Directors ( their appointment,
remuneration, qualifications, powers)
16. Proceedings of the BOD.
 Contents of Articles

17. CEO, Manager, Company Secretary or Chief

Financial Officer.
18. The Seal.
19. Dividends & Reserves.
20. Accounts .
21. Winding up.
22. Indemnity.
 Companies which must have their
own Articles Sec.5
a) Unlimited companies
b) Companies limited by guarantee
c) Private companies limited by shares.