FORMATION OF A COMPANY

BY SAHIL KATOCH

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COMPANY :


Section 25(1) (a) and (b) of the Indian companies act, 1956 deals with the Formation of the Company Company is artificial person created by law. Company means an association of person for some common purpose.

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IMPORTANT DOCUMENTS BEFORE APPROACHING THE REGISTRAR : 


An industrialist license if the proposed business is covered by industries act 1951 An important license is required if machinery is imported Approval of govt. in case of foreign collaboration Approval of govt. under monopolies and restrictive trade practice act 1961, if necessary

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DOCUMENTS NEEDED
     

MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION LIST OF THE DIRECTORS CONSENT LETTER FROM DIRECTORS STATEMENT OF CAPITAL STATUTORY DECLARATION

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MEMORANDUM OF ASSOCIATION

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MEMORANDUM OF ASSOCIATION
Memorandum of association comes under section 2(28) of Indian company act 1956 It is an important document which defines  Objectives,  Powers,  Scopes and  Relations with outsiders Some of the important clauses of memorandum of association are as follows

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NAME CLAUSE:- Section 13(1)(a)
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Company should not use any objectionable or identical according to emblems and names act 1950. The words “ Private Limited ” in case of private and “ Limited ” in case of public company at the end. Companies which are formed for the arts, culture, religion commerce etc , the word “ limited ” or private limited is not compulsory with the permission of the central government.

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SITUATION CLAUSE :- Section 13(1)(b)
 

Every company will have registrar office. It is compulsory to mention the place and state of registrar office. If place is not confirmed , then it should communicate the registrar within 30 days of its incorporation.

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OBJECTIVE CLAUSE :- Section 13(1)(c)&(d)

Here the company should mention its – Main objectives, – Subsidiary objectives and – Other objectives.

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LIABILITY CLAUSE :- Section 3(2)

The extent and nature of the liability of shareholders should be stated like
– – –

limited liability limited by guarantee unlimited

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CAPITAL CLAUSE :- Section 13(4)(a)
  

Division of capital into shares of different dominations. The extent of each capital should be specified. The authorized capital should be mentioned. A company is not authorized to issue above authorized capital.

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ASSOCIATION CLAUSE:- Section 13(4)(c)
 

This clause contains declaration of members. The names, addresses and occupations of the subscribers should be mentioned. The signatures are to be attested by proper witness.

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ALTERATION OF A MEMORENDUM

 

With regard to change the name, - government permission and - special resolution. In case of change in registrar office - permission of the company law board is required. In case of change in objective clause - special resolution with company law board permission. A copy should pass to registrar with in 30 days.

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In case of capital increase ordinary resolution and In case of decrease in capital, special resolution along with court permission is required.

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ARTICLE OF ASSOCIATION

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ARTICLES OF ASSOCIATION : 

Section 2(2) of the Indian company act 1956 explains about the articles of association. Certain rules and regulations that are necessary for the management of the company are listed in the articles of association. Every company has to prepare its own articles.

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CONTENTS OF AOA :  


 

Different kinds of shares to issue. Mode of allotment of shares and calls on shares. Procedure of issuing share certificates. Procedure for transfer of shares and re-issue of shares. Payment of commission on underwriting and brokerage on shares and debentures. Declaration of dividend and issue of bonus. Method to appropriation of profits.

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Continue…
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Division, consolidation and re-organistion of share capital. Rules for adoption of primary contracts. Use of common seal. Rules for conducting meetings. Procedure for passing resolutions. Method of accounting adopted by the company. Method of maintaining bank accounts. Winding procedure of the company etc.

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ALTRATION OF AOA : 

Permission of court is not necessary. Special resolution and approval of government is required. But in some cases they should follow companies act as well as memorandum.

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PROMOTER

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WHO IS A PROMOTER ?

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The word promoter is not been defined anywhere in the Companies Act., Only section 62 refers to the liabilities of a promoter. Promoter is one who have an intention to form a company and who take the necessary steps, to carry that intention into operation? The promoter is a person who brings a company into existence.

  

The promoter of a company decides the scope of its business activities. They negotiate, if necessary, for the purchase of an existing business. They also make arrangements for advertising and circulating the prospectus, and placing the capital.

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DUTIES AND LIABILILITIES OF THE PROMOTER

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Section 56 lays down matters to be stated and reports to be set out in the prospectus. He may be held liable for the non-compliance of the provisions of the section. Beside civil liability, the promoters are criminally liable under section 63 for the issue of prospectus containing untrue statements. Section 63 imposes severe penalty on promoters who make untrue and deceptive statements in a prospectus with a view to obtain capital.

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A promoter may be liable to public examination like any other director or officer of the company if the tribunal so directs on a liquidator’s report alleging fraud in the promotion or formation of the company. (Section 478). A company may proceed against a promoter for deceit or breach of the duty under section 543, where the promoter has misapplied or retained any property of the company or is guilty of breach of trust in relation to the company.

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PRE-INCARPORATION CONTRACTS

Preliminary contract are contracts purported to be made on behalf of a company before its incorporation. Before its incorporation a company has no capacity to contract.

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THANK YOU
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