Formation or incorporation of A Company – For the formation of a company, a company passes through the following three stages :-
1. Promotion Stage.
2. Incorporation Stage.
3. Commencement of business stage.
1. Promotion Stage: The stage of conceiving an idea and its working is termed as promotion of a company. The person involved in this task is termed as “Promoter”. There are certain important decisions which are taken before the formation of the company. There first important matter to decide could be either :-
(1) To start a new business altogether, or
(2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to dispose of that business to avoid huge losses. In such a case it may be better to acquire a running business with favorable terms and conditions and it may prove to be a good decision.
The other important matters be decided before the formation of the company could be the decision regarding the product to be produced, the size of the company, the capital involved in the project, the sources of the capital and whether it shall be a Private Company or a Public Company.
Any of the above decisions i.e., to start a new business altogether or to acquire an already running business, along with the other matters shall have to be taken by some person or persons who are at the helm of the affairs. They are called PROMOTERS.
Where it has been decided to form a Private Company 2 persons and where it has been decided to form a Public Company at least 7 persons shall subscribe their names to a Memorandum of Association and they shall also comply with the other formalities in respect of the registration of the company under the Indian Companies Act, 1956.
Document to be filed with the Registrar: It is desirable to ascertain from the Registrar (Registrar of the State in which the Registered office of the company shall be situated) of the companies that whether the proposed name of the company shall be approved if registration is sought for a new company with such name.
Where already a company with such name is existing, it shall not be allowed by the Registrar, because tow companies with the similar name cannot be registered.
But if he says yes, because no other company is registered with that name, an application for the registration of the company should be presented to the Registrar of the State in which the Registered office of the company shall be situated. The appl9ication along with necessary fee shall be presented along with the following documents :
(1) The Memorandum of Association.
(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
(4) A statement of the nominal capital of the Company.
(5) A notice of address of the registered office of the company.
(6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
(7) A declaration that all the requirements of the Companies Act have been complied with, shall also be submitted, which shall be signed by one nay of the following persons :
(i) An advocate of the Supreme Court or High Court, or
(ii) An attorney or a pleader entitled to appear before a High Court, or
(iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or
(iv) A person named in the Articles as a Directors, Manager or Secretary of the company.
Where the Registrar of Companies is satisfied that all the requirement have been complied with, he will register the company and enter the name of the company in the Register of Companies.
2. Incorporation Stage : Where the Registrar of Companies is satisfied that all the requirements have been complied with, he will register the company, and enter the name of the company in the Register of Companies.
When a company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation in which he certifies that the company is incorporated under his hand and in the case of a limited company that the company is a Limited Company.