Incorporation of a Company & Matters Incidental Thereto

Incorporation of a Company & Matters Incidental Thereto

Various legal formalities are to be fulfilled for organising a company and it has to cross so many stages. These stages can be divided as under-

1.Promotion stage
2.Incorporation stage
3.Capital subscription stage
4.Commencement of business stage

Since that very time, when an idea of forming a company arises, till that time when the company starts its func-
tion, the public company has to cross the above said all the four stages, but the private company has to cross first two
stages only.

1) Promotion Stage- At the promotion stage,
chances pertaining to business are explored. Thereafter from profit earning point of view, capital, property and managing,efficiency are organised. The persons, who start the company, are called promotors. Farsight, courage, organising
capacity, will-power, allegiance and company concerned.statutory knowledge are required in the promotors.

There are three main grades of the promotors-

1.Discovery of idea and preliminary investigation.

2.Necessary action for practical form to idea
Detailed investigation.

b.Assembly of necessary material.

(iii) Financing the proposition.

(2) Incorporation stage- Second stage is the incorporation. At this stage it is necessary to decide the name of the company, obtaining license for industries and preparation of requisite documents. It is necessary to forward the following documents to the company-registrar of that state in which the head office of the company is located.

(i) Memorandum of Association- It is an important document in connection with the incorporation of company.

In this document, the detailed description of seal of the company and its members, names, addresses, professions, signatures and the shares held by them, is most necessary.

Incorporation of any company is not possible in the absence of memorandum. As a matter of fact the memorandum of the company is its charter which defines the rights of the company under the Act. There are basic facts in the memo- randum and on the basis of these facts, the incorporation of the company is permitted.

Each memorandum must be divided into printed paragraphs, serially numbered and signed by the members and duly certified by at least one witness. The memorandum of company must be affixed with stamps of assessed value.

(ii) Articles of Association- It is a second important document prepared by the promotors of the company for its establishment. The company’s internal rules and sub-rules  mentioned in the articles, which are made for the objects and fulfillment of the works explained in the memorandum of the company. Registration of the articles alongwith the application for registration of share limited public company is are not necessary.

If such a company does not get it registered then table ‘a’ of the first schedule of Companies Act become its articles and these shall be applicable as if it has got registered. It is necessary to get the articles registered alongwith the memorandum for registration of an unlimited company and private company limited by shares or limited by guarantee and this document must be signed by the same persons who have signed the Memorandum of Association.

(iii) The promotors of the company are supposed to give necessarily this undertaking in respect of the proposed name of the company that they are fully assured for this point that there is no other company existing having the same or similar name. This undertaking must be forwarded to the company-registrar in duplicate on the assessed document.

(iv) The promotors have to certainly forward the following other documents also alongwith the memorandum of company to the registrar other than the above mentioned documents for incorporation of company.

a.A notice in respect of the location of authorised office of the proposed company, in which it is necessary to quote complete address of the company and the name of that district wherein it is located.

b.Declaration of this intention duly signed by the advocate or the auditor having knowledge regarding the establishment of company that all the requisite formalities are fulfilled for incorporation of the proposed company. In case of non-availability of advocate or appraiser, declaration of this intention can be given also by any such director or managing agent or secretary and treasurer or manager of that company whose name is endorsed in the article of the company.

c.Knowledge regarding the directors.

d.List of such persons who have accepted the the director of that company.

e.It is necessary to forward the documents of agreement made with the managing agent or secretary and treasurer by the company to the registrar alongwith the application for incorporation.

f.If the directors are appointed according to the articles then his acceptance duly signed by each direc-tor in which his full address, name and signatures of the evidences are also necessary.

g.If the appointment of the managing agent, secretary and treasurer etc. is due to be made by the company, then a copy of the contract, which is to be made by the company with these expected officials, must also.be enclosed with the application for registration.

h.If is necessary for the nominated directors of the company to forward this in black and white to the company duly signed by them that they are ready to purchase the merit shares assessed for appointment of the director-post and registry of their merit shares has been done in the register of the company in its name.

(v) Certificate of Incorporation- After presenting the above said documents, the certificate is obtained from the office of the registrar. Certainly it must be signed by the registrar and affixed with his office-seal. If that company is limited then this intention must be clearly mention by the registrar in this certificate that the company is a limited company.

The company has got the status of incorporated institution from the very date of its registration and since that very day it becomes an institution of a perpetual entity and hereafter itself the business of company can be commenced.

(3) Capital Subscription Stage- Thereafter, managing of capital is most important for establishing the company. Private company can collect its capital from the limited members but the public company has to comply with the various legal rules for collection of capital. For this purpose, packers are appointed. Prospectus is to be propagated and advertised in the public. The allotment of shares at this stage
formalities.

(4) Commencement of business stage- When the legal declaration is filed with the registrar in accordance with Section 149(1) and Section 149(2), then the registrar issues a certificate for commencement of company business. This is called as a certificate of commencement of business.