School of Mittal School of Business Faculty of

Name of the faculty member: Dr. Shallu Ma’am

Course Code: BSL201 Course Title: Legal Aspects of Business

Academic Task No: 03 Academic Task Title: online Assignment 03
Date of Allotment: 18-04-2022 Date of Submission: 25-04-2022
Student Roll No: RQ2113A31 Student Reg. No: 12111454
Term: 121221 Section: Q2113
Max. Marks Marks. Obtained:
Evaluation Parameters

Learning Outcomes: (Student to write briefly about learnings obtained from the academic tasks)
The following are the main outcomes of this assignment:
• Provided the concept clarity.
• Knowledge and application of the concepts.
• Provided practical exposure.

Declaration:

I declare that this Assignment is my work. I have not copied it from any other student’s work or any
other source except where due acknowledgment is made explicitly in the text, nor has any part been
written for me by any other person.

Evaluation Criterion:
Student’s Signature: HARSH KATAREY

Evaluator’s Comments (For Instructor’s use only)

General Observations Suggestions for Improvement The best part of the assignment

Evaluator’s Signature and Date:

 INTRODUCTION
A company is a legal entity formed by a group of individuals to engage in and operate
a business—commercial or industrial—enterprise. A company may be organized in various
ways for tax and financial liability purposes depending on the corporate law of its jurisdiction.

The line of business the company is in will generally determine which business structure it
chooses such as a partnership, proprietorship, or corporation. These structures also denote
the ownership structure of the company.

They can also be distinguished between private and public companies. Both have different
ownership structures, regulations, and financial reporting requirements.

Various types of companies:

• Partnerships are formal arrangements in which two or more parties cooperate to

manage and operate a business.
• Corporations are legal entities that are separate and distinct from their owners and
provide the same rights and responsibilities as a person
• Associations are vague and often misunderstood legal entities based on any group of
individuals who join together for business, social, or other purposes as a continuing
entity. (This may or may not be taxable depending on structure and purpose).
• Funds are businesses engaged in the investing of pooled capital of investors.
• Trusts are fiduciary arrangements in which a third party holds assets on behalf of
beneficiaries.

THE NAME OF MY COMPANY IS HK FORTUNE. My company’s work is to manufacture various

food items like edible oil, flour, and various packed foodstuff. It is a public sector company
mainly focusing on the welfare of the people at a reasonable price and best in quality.
PROCESS FOR INCORPORATING THE COMPANY
Under the new Companies Act 2013, the Ministry of Corporate Affairs has mandated the
procedure for the incorporation of a company in India. Public Company registration is a
complex procedure as it requires proper documentation. The working of the Public Company is
subject to more strict compliances with the provision of the Companies Act 2013.

Recognizing 7 shareholders and 3 directors For Public Limited Company

Registration, a minimum of 7 shareholders, and 3 directors are required. Shareholders can be
individuals, companies, or LLPs, but only individuals can become directors of the company. It is
not necessary that the director shall be the shareholder of the company and shareholders need
not necessarily be the directors of the company.

RUN- Fees
With the introduction of the RUN web form, a company name can be reserved quickly and
easily even before obtaining a digital signature. However, only one name choice can be
provided at a time. The fee for name reservation using RUN web-form is Rs.1000 to perform
submission – irrespective of whether the name is approved or not. Brief of Main Objects to be
entered in *RUN* in the comments section

Apply for Digital Signature Certificate and Director Identification number.

For company registration, (Also in the case of Public Company Registration) an applicant can
apply for DIN through SPICE+ Form only. The requisite details of proposed Directors not having
DIN must be filled into SPICE+ Forms. However, in the case the company is already in existence,
DIR-3 can be filled for the appointment of the director not having DIN. For the same, an
applicant who intends to be appointed as director of the company already in existence shall
make an application electronically in form DIR-3 to the Central Government for allotment of
DIN along with such fees as provided under the Companies (Registration Offices and Fees)
Rules, 2014.

Fee for Incorporation (Zero)

The MCA to simplify the company incorporation process and spur new Startups has announced
zero fees for incorporation. Hence, Entrepreneurs would be able to save a few thousand rupees
on incorporation fees.
Though zero fees have been announced for the SPICE form, Emma, and AOA – stamp duty
would still be applicable for incorporation as before depending on the state of incorporation.

APPLICATION OF INCORPORATION
An application for registration of a company shall be filed, with the Registrar within whose
jurisdiction the registered office of the company is proposed to be situated, in Form No.INC-32
(SPICe) along with the fee as provided under the Companies (Registration offices and fees)
Rules, 2014”

Form INC – 7 has been discontinued

.Other Attachment of E form:

• Memorandum Of Association
• Articles Of Association
• A declaration and affidavit must be filed by the first subscriber/s and director/proof of
Office Agreement – Rental Agreement, conveyance, lease deed, and rent receipts
• A copy of Utility bills lesser than 2 months – phone bill, electricity bill, etc.
• NOC from the sole proprietor, partners, other associates, etc.
• Approval of the owner of the trademark or the applicant of such application for
registration of Trademark;
• Proof of identity and residential address of the subscribers and directors

Declaration by a Professional
The DSC of a professional (Company Secretary, Chartered Accountant, advocate, Cost
Accountant) along with the professional’s membership and the certificate number is required
to file the SPICe Form (a declaration that all information provided is accurate and true).

Registration by the registrar

Where the Registrar examining FORM No. INC-32 (SPICe), finds that it is necessary to call for
further information or, finds such application or document to be defective or, incomplete in any
respect, he shall give intimation to the applicant to remove the defects and re-submit the e-
form within fifteen days from the date of such intimation given by the Registrar. After the
resubmission of the document, if the registrar still finds that the document is defective or
incomplete in any respect, he shall give one more opportunity of fifteen days to remove such
defects or deficiencies. Provided that the total period for re-submission of documents shall not
exceed thirty days.
Certificate of Incorporation
Once satisfied that the documents are as required, the registrar registers the company

Issues the certificate of Incorporation

The registrar shall allot to the company a unique corporate identity number. The company
maintains all the filed documents at the registered office that the date borne by the certificate
of incorporation is the date of the birth of the company, i.e. the date on which the company
comes into existence.

Once the documents are prepared, they need to be submitted to the ROC for verification and
after verification, the ROC registers the company and issues the incorporation certificate along
with the CIN of the Company.

The business cannot be started immediately after receiving the COI. The business has to apply
for a certificate of commencement within 180 days of the COI stating that all the subscribers
have paid the subscription money through Form INC-20A.

OBJECTIVES OF THE COMPANY

To be a globally preferred business associate — an entrepreneurial organization having
responsible concern for employees, society, ecology, and stakeholder value.

• Entrepreneurial - We shall think innovatively in all aspects of our business, spanning the
gamut of technological and commercial practices
• Preferred Business Associate - We shall strive to generate optimum value for all our
associates through constant innovation and adoption of universal best practices
• Responsible Concern – We shall harmonize all our actions and reactions, with the global
environment and actively work to reduce the load on the environment

To acquire, develop, assimilate and manage knowledge; to profitably apply this across our
businesses for the benefit of stakeholders.

• Acquire, develop, assimilate and manage knowledge - We shall actively seek to become
experts in our chosen domains
• Apply knowledge across our businesses – We shall apply our domain expertise across
businesses, to deliver optimum value to our stakeholders
 • Profitably – We shall be guided by the “Profit Motive”. Generating respectable, tangible
as well as intangible, profits will ensure the allocation of resources for developing,
assimilating, and managing expertise

Memorandum of Association
A memorandum of association contains a name clause, registered office clause, object (or
objective clause), objects clause, liability clause, capital clause, and association clause. An MOA
is a type of legal paper that is prepared when forming and registering a limited liability
company (LLC).
The MOA's purpose is to explain the LLC's relationship with its shareholders. The articles of
Association and MOA make up the company's constitution. An MOA isn't required in the United
States, but limited liability companies that are based in European countries, which include the
U.K., the Netherlands, France, and some Commonwealth Nations do require MOAs.

Name Clause
This clause states the company's proposed name.

• It must end in the word "limited" if it's a public company or "private limited" if it's a
private company.
• It can't be identical to any existing company's name.
• It can't allude to the new company doing the business of an existing company.
• It should not be misleading in any way.

HERE THE NAME OF THE COMPANY IS HK FORTUNE LIMITED

Registered Office Clause

The registered office clause lists the name of the state where the company's registered office is
physically located.

• The registered office's physical location determines which jurisdiction the Registrar of
Companies and which court the company would fall under.
• It also confirms the company's nationality.
• The registered office's full address must be provided to the Registrar of Companies to
simplify further communications.
Objects or Objective Clause
The objects clause, also called the objective clause, is considered the most important in the
MOA.

• It defines and limits the scope of the company's operations.

• It details the company's scope of activity for the members and explains how the
members' capital will be used.
• It protects shareholders’ funds and ensures the funds will be used for the specific
business purposes for which they were raised and that they won't be risked in other
endeavors.

Object Clause
The object clause explained why the company is establishing. Companies aren't legally allowed
to do any kind of business other than the kind of business that is specifically stated in this
clause. An object clause should contain:

• A list of the main objects the company will be pursuing after it's Incorporated
• Incidental objects that are necessary to achieve the main object
• Any other objects that aren't included in the main objects or incidental object
• Nothing illegal
• Nothing that's against the public interest
• Nothing that's against the country's general rule of law

Liability Clause
The liability clause explains what liability each of the company's members faces. If the company
is limited by shares, the liability that each member faces can be no more than the face value of
the shares that he or she holds. If it's a company that's limited by a guarantee, this clause must
define how much liability each company member holds. If it's an unlimited company, this
particular clause would not be included in the MOA.

Capital Clause
The capital clause lists information about the total capital held by the proposed company. This
amount is called the company's authorized capital. Companies aren't permitted to collect more
money than the amount listed under authorized capital. The way the capital is divided into
equity share capital and preference share capital also needs to be listed in the capital clause.
The number of shares the company puts in equity share capital and preference share capital,
alongside their value, needs to be included in the MOA.
Association Clause
The association clause explains that any individual signing the bottom of the MOA wants to be
part of the association that's being formed by the memorandum. The MOA has to be signed by
at least seven people or more if it's a public company. It has to be signed by at least two or
more people if it's a private company. The signatures also have to be affirmed by witnesses.
There can be one witness for all of the signatures, but none of the subscribers can witness the
signatures of the others. All subscribers and witnesses must provide their addresses and
occupations in writing.

Division of capital into various heads

A share represents a unit of equity ownership in a company. Shareholders are entitled to any
profits that the company may earn in the form of dividends. They are also the bearers of any
losses that the company may face. In simple words, if you are a shareholder of a company, you
hold a percentage of ownership of the issuing company in proportion to the shares you have
bought.

Shares can be further categorized into two types. These are:

• Equity shares
• Preference shares

They vary based on their profitability, voting rights, and treatment in the event of liquidation.

THE VALUATION OF THE COMPANY WILL BE AROUND 10 CRORES

Classification Of Equity Shares based on Share Capital

Here is a look at the classification of equity shares based on share capital:

• Authorized Share Capital: Every company, in its Memorandum of Associations, requires

to prescribe the maximum amount of capital that can be raised by issuing equity shares.
The limit, however, can be increased by paying additional fees and after the completion
of certain legal procedures.

IN THIS COMPANY THE AUTHORISED SHARE WILL BE OF 10 CRORES

• Issued Share Capital: This implies the specified portion of the company’s capital, which
has been offered to investors through the issuance of equity shares. For example, if the
nominal value of one stock is Rs 200 and the company issues 20,000 equity shares, the
issued share capital will be Rs 40 lakh.
 HERE THE COMPANY WILL ISSUE A SHARE OF Rs 500 AND WILL ISSUE A TOTAL OF
1,00,000 SHARES, THE ISSUED SHARE CAPITAL WILL BE 5 CRORES

• Subscribed Share Capital: The portion of the issued capital, which has been subscribed
by investors is known as subscribed share capital.

THE INVESTORS WILL SUBSCRIBE 50% PORTION OF THE ISSUED CAPITAL

• Paid-Up Capital: The amount of money paid by investors for holding the company’s
stocks is known as paid-up capital. As investors pay the entire amount at once,
subscribed and paid-up capital refer to the same amount.

INVESTOR HAS TO PAY A AMOUNT OF Rs 500 TO HAVE A SHARE OF THE COMPANY

Classification Of Equity Shares

Here is a look at the equity share classification based on the definition:

• Bonus Shares: Bonus share definition implies those additional stocks which are issued to
existing shareholders free-of-cost, or as a bonus.

A BONUS SHARE OF THE COMPANY WILL BE GIVEN IN A RATIO OF 2:3

• Rights Shares: Right shares meaning is that a company can provide new shares to its
existing shareholders - at a particular price and within a specific period - before being
offered for trading in stock markets.

IF THE COMPANY WILL NOT THE A GOOD RESPONSE, THEN THE RIGHT SHARES WILL
ANNOUNCED FOR THE INVESTORS AT THE RATE OF Rs 450

• Sweat Equity Shares: If as an employee of the company, you have made a significant
contribution, the company can reward you by issuing sweat equity shares.

• Voting And Non-Voting Shares: Although the majority of shares carry voting rights, the
company can make an exception and issue differential or zero voting rights to
shareholders.

• Dividend Shares: A company can choose to pay dividends in the form of issuing new
shares, on a pro-rata basis.

A DIVIDEND SHALL BE PROVIDED IF THE COMPANY MEETS ITS REGULAR OBJECTIVES

CONCLUSION
The HK FORTUNE LIMITED is a public company having the main motive to achieve its
vision and complete its mission. My company’s work is to manufacture various food
items like edible oil, flour, and various packed foodstuff. It is a public sector company
mainly focusing on the welfare of the people at a reasonable price and best in quality.
This company will have 50% of its equity to the directors and the remaining will be to
the shareholders of the company. Keeping in view the recent demands of the products
and doing all the measures to prevent our environment the work and manufacturing
will be done. This company will provide a large number of employment opportunities
too.

This file consists that how a company is formed. What are the main steps needed to be
followed to form a public company? What are the main visions and missions of the
company and how do gather the funding for the effective working of the company?