FORMATION OF A COMPANY

BY SAHIL KATOCH

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COMPANY : 

Company is artificial person created by law. Company means an association of persons 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. if necessary 3 . in case of foreign collaboration Approval of govt. under monopolies and restrictive trade practice act 1961.

DOCUMENTS NEEDED       MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION LIST OF THE DIRECTORS CONSENT LETTER FROM DIRECTORS STATEMENT OF CAPITAL STATUTORY DECLARATION 4 .

MEMORANDUM OF ASSOCIATION 5 .

MEMORANDUM OF ASSOCIATION It is an important document which defines  Objectives.  Scopes and  Relations with outsiders Some of the important clauses of memorandum of association are as follows 6 .  Powers.

The words “ Private Limited ” in case of private and “ Limited ” in case of public company at the end. the word “ limited ” is not needed. culture. commerce etc . 7 . Companies which are formed for the arts.NAME CLAUSE:   Company should not use any objectional or identical according to emblems and names act 1950.

SITUATION CLAUSE :   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 8 .

OBJECTIVE CLAUSE : HERE THE COMPANY SHOULD MENTION ITS – MAIN OBJECTIVES – SUBSIDARY OBJECTIVES – OTHER OBJECTIVES 9 .

LIABILITY CLAUSE : THE EXTENT AND NATURE OF THE LIABILITY OF SHARESHOLDERS SHOULD BE STATED LIKE – – – LIMITED LIABILITY LIMITED BY GAURANTEE UNLIMITED 10 .

CAPITAL CLAUSE :    DIVISION OF CAPITAL INTO SHARES OF DIFFERENT DOMINATIONS THE EXTENT OF EACH CAPITAL SHOULD BE SPECIFIED THE AUTHORISED CAPITAL SHOULD BE MENTIONED A COMPANY IS NOT AUTHORISED TO ISSUE ABOVE AUTHORISED CAPITAL 11 .

ADDRESSESS AND OCCUPATIONS OF THE SUBSCRIBERS SHOULD BE MENTIONED THE SIGNATURES ARE TO BE ATTESTED BY PROPER WITNESS 12 .ASSOCIATION CLAUSE:   THIS CLAUSE CONTAINS DELCARATION OF MEMBERS THE NAMES.

ALTERATION OF A MEMORENDUM      WITH REGARD TO CHANGE THE NAME.SPECIAL RESOLUTION IN CASE OF CHANGE IN REGISTRAR OFFICE – PERMISSION OF THE COMPANY LAW BOARD IS REQUIRED. A COPY SHOULD PASS TO REGISTRAR WITH IN 30 DAYS 13 . IN CASE OF CHANGE IN OBJECTIVE CLAUSE . .GOVERNMENT PERMISSION .SPECIAL RESOLUTION WITH COMPANY LAW BOARD PERMISSION.

 IN CASE OF CAPITAL INCREASE ORDINARY RESOLUTION AND  IN CASE OF DECREASE IN CAPITAL SPECIAL RESOLUTION ALONG WITH COURT PERMISSION IS REQUIRED 14 .

ARTICLE OF ASSOCIATION 15 .

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 16 .

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 REISSUE OF SHARES PAYMENT OF COMMISSION ON UNDERWRITING AND BROKERAGE ON SHARESAND DEBENTURES DECLARATION OF DIVIDEND AND ISSUE OF BONUS METHOD TO APPROPRIATION OF PROFITS 17 .

      18 . CONSOLIDATION AND RE-ORGANISTION OF SHARE CAPITAL RULES FOR ADOPATION 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.  DIVISION.

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 19 .

PERMOTER 20 .

blogspot. to carry that intention into operation? The promoter is a person who brings a company into existence. http://topics2c.com . Promoter is one who have an intention to form a company and who take the necessary steps.. Only section 62 refers to the liabilities of a promoter.WHO IS A PROMOTER ?    21 The word promoter is not been defined anywhere in the Companies Act.

They also make arrangements for advertising and circulating the prospectus. 22 .The promoter of a company decides the scope of its business activities. if necessary.   They negotiate. and placing the capital. for the purchase of an existing business.

DUTIES AND LIABILILITIES OF THE PROMOTER 23 .

Section 56 lays down matters to be started and reports to be set out in the prospectus. Beside civil liability. the promoters are criminally liable under section 63 for the issue of prospectus containing untrue statements. Section 56 lays down matters to be started and reports to be set out in the prospectus. Section 63 imposes severe penalty on promoters who make un true and deceptive statements in a prospectus with a view to obtain capital.   24 . He may be held liable for the non-compliance of the provisions of the section. He may be held liable for the non-compliance of the provisions of the section.

where the promoter has misapplied or retained any property of the company or is guilty of misfeasance or breach of trust in relation to the company. A company may proceed against a promoter for deceit or breach of the duty under section 543. (Section 478).  25 . 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.

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