FORMATION OF A COMPANY

MADE BY- SHANTANU TYAGICLASS- XI-B

ROLL NUMBER- 42

Acknowledgment

It is with great pleasure that i find myself penning down these line to express my sincere thanks to various people who helped me a long way in completing this powerpoint presentation. The harmonious climate in our school provided proper guide for preparing the project . It was a privilege to have been guided by “Mrs. Arti Agarwal”

Shantanu Tyagi Roll no: 42 XI-B

Formation of a company is a complex activity involving completion of a lot of legal formalities and procedures . To fully understand the process one can divide the formalities into four distinct stages, which are : ---(i) Promotion (ii) Incorporation (iii) Subscription Of Capital (iv) Commencement Of Business.

Introduction

Meaning Of Promotion

The term promotion refers to the sum of total activities by which a business enterprise is brought into existence.

Definition Of Promotion

• According to C.W Gerstenberg

“ Promotion is the discovery of business opportunities and the subsequent organization of funds, property and management ability into business concern for the purpose of making profit there from”

FUNCTIONS OF A PROMOTER (I) Identification of business opportunity (ii) Feasibility studies (a) Technical feasibility (b) Financial feasibility (c) Economic feasibility(iii) Name approval (iv) Fixing up Signatories to the Memorandum of Association(v) Appointment of professionals(vi) preparation of necessary document

STAGES IN PROMOTION

1) Discovery of business idea: It begins with the conception of an idea or

business opportunity. @. New business or @. Take over existing one.

STAGES IN PROMOTION

2. Detailed investigation:-- Once the idea has been conceived thorough investigation

made to establish the soundness of the proposition in terms of technical feasibility and commercial viability.

Study market demand, availability of raw materials , machinery etc..

STAGES IN PROMOTION

After investigation is completed the findings are presented in a type written report, known as project report or feasibility report.

The report helps in judging whether proposition will yield the fair return on the investment and for the risks undertaken.

It is also helpful in procuring licenses and finance from governmental agencies.

STAGES IN PROMOTION

The report contains the data's collected, estimates of costs and revenue, experts opinion and recommendations , etc…

STAGES IN PROMOTION

Assembling:-- 1. once the promoter is convinced, he takes steps to

give the idea a practical shape. 2. He persuade other persons to join hands with him

and gets the invention made. 3. He may also acquire some patent rights.

He selects the factory site, decides about the plant and machinery and contacts suppliers of raw materials,etc…

Assembling also involves making contracts for the purchase of materials,building,machinary,tools,capital.etc..

STAGES IN PROMOTION

STAGES IN PROMOTION

1. The Business preposition is presented to the public in the form of a “prospectus”

2. In order to persuade them that it deserves their financial support.

3. Agreements are made with underwriters. stock brokers , bankers , etc..

DOCUMENT REQUIRED TO BE SUBMITTED1. Memorandum of association(i) The name clause(ii) Registered office clause(iii) objects clause (a) The main object (b) other objects(iv) liability clause(v) capital clause(vi) association clause 2. Articles of association3. constant of proposed directors4.Agreement5. Statutory declaration6. Payment of fee

MEMORANDUM OF ASSOCIATION

• 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 :---

• COMPANY SHOULD NOT USE ANY OBJECTIONAL 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, COMMERCE ETC , THE WORD “ LIMITED ” IS NOT NEEDED.

OBJECTIVE CLAUSE :-

• HERE THE COMPANY SHOULD MENTION ITS– MAIN OBJECTIVES– SUBSIDARY OBJECTIVES– OTHER OBJECTIVES

LIABILITY CLAUSE :-

• THE EXTENT AND NATURE OF THE LIABILITY OF SHARESHOLDERS SHOULD BE STATED LIKE– LIMITED LIABILITY– LIMITED BY GAURANTEE– UNLIMITED

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.

ASSOCIATION CLAUSE:-

• THIS CLAUSE CONTAINS DELCARATION OF MEMBERS.

• THE NAMES, ADDRESSESS AND OCCUPATIONS OF THE SUBSCRIBERS SHOULD BE MENTIONED.

• THE SIGNATURES ARE TO BE ATTESTED BY PROPER WITNESS.

ARTICLES OF ASSOCIATION

http://topics2c.blogspot.com

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 :-

• DECLARATION OF DIVIDEND AND ISSUE OF BONUS.• METHOD TO APPROPRIATION OF PROFITS.• DIVISION, CONSOLIDATION AND RE-ORGANISTION OF SHARE

CAPITAL.• RULES FOR ADOPATION OF PRIMARY CONTRACTS.• USE OF COMMON SEAL.

OTHER DOCUMENTS

LIST OF DIRECTORS :-

• THE LIST OF DIRECTORS WHO HAVE AGREED TO ACT AS A DIRECTORS SHOULD FILED WITH REGISTRAR.

• THEY SHOULD SUBMIT THEIR - NAMES - AGE - OCCUPATION - FULL ADDRESSES• IN CASE WHEN THE LIST IS NOT READY MEMORANDUM WILL BE

DEEMED TO BE THE DIRECTORS.

CONSENT LETTER OF DIRECTORS :-

• EVERY PERSON WHO IS READY TO ACT AS DIRECTOR MUST GIVE A WRITTEN UNDERTAKING STATING THAT HE IS WILLINGLY AGREED TO ACT AS A DIRECTORS OF THE COMPANY.

• ALONG WITH THE LETTER THE MUST SUBSCRIBE THE QUALIFICATION OF SHARES AS MENTIONED IN ARTICLES OF ASSOCIATION AND HAVE PAID YHE AMOUNT ACCORDINGLY.

NAME APPROVAL CERTIFICATE :-

• A COPY OF LETTER FROM THE REGISTRAR ANNOUNCING THAT THE NAME OF COMPANY WAS APPROVED WITHOUT ANY OBJECTION.

STATEMENT OF AUTHORISED CAPITAL :-

• THE COMPANY SHOULD PREPARE AND SUBMIT A STATEMENT OF PROPOSED CAPITAL WHICH IS AUTHORISED TO COLLECT FROM THE PUBLIC

• IT CONTAIN THE NUMBER OF SHARES AND DEBENTURESAND THE AMOUNT OF EACH CATEGORY

STATUTORY DECLARATION :-• A COPY OF STATUTORY DECLARATION SHOULD BE

ENCLOSED STATING TO THAT ALL THE FORMALITIES HAVE DULY COMPILED WITH AS PER THE PROVISIONS OF COMPANIES ACT.

• IT SHOULD BE SIGNED BY AN ADVOCATE OF HIGH COURT OR THE SUPREME COURT OR A CHARTED ACCOUNTANT OR A DIRECTOR OR A SECRETARY OR MANAGER .

RECEIPT OF REGISTRATION FEE :-

• IT IS NECESSARY TO ATTACH THE RECIPT OF THE REGISTRATION WHICH IS PAID TO REGISTRAR OFFICE OF WHICH IT IS CALCULATED BASIS ON THE AUTHORISED CAPITAL OF THE COMPANY.

CONSENT LETTER OF DIRECTORS :-

• EVERY PERSON WHO IS READY TO ACT AS DIRECTOR MUST GIVE A WRITTEN UNDERTAKING STATING THAT HE IS WILLINGLY AGREED TO ACT AS A DIRECTORS OF THE COMPANY.

• ALONG WITH THE LETTER THE MUST SUBSCRIBE THE QUALIFICATION OF SHARES AS MENTIONED IN ARTICLES OF ASSOCIATION AND HAVE PAID YHE AMOUNT ACCORDINGLY.

POSITION OF PROMOTER

Promoters undertakes various activities to get a company registered and get it to the position of commencement of business. Promoters of a company enjoys a fiduciary position with the company, which they must not misuse. Promoters are not legally entitled to claim the expense incurred in the promotion of the company.

Perform for Statutory Declaration

“FORM NO. 1” The companies Act .1956Declaration of compliance with requirements of the companies Act,

1956 on Application for Registration of a company. PURSUANT TO SECTION 33 (2) NAME OF THE COMPANY : M/S PRESENTED BY : SUSHIL KR. CHARTERED

ACCOUNTANT.…(NAME OF CA)….partner of…(NAME OF CA FIRM& ITS

ADDRESS) ...,do solemnly and sincerely declare that I am a CA in whole time practice in India ,who is engaged in the formation of the company “M/S, ------------ PRIVATE LIMITED”

And that all the requirements of the companies Act, 1956 and the rules there under in respect of matter precedent to the registration of the said company& incidental thereto have been complied with& I make this solemn declaration conscientiously believing the same to be true.

PLACE : NEW DELHI (NAME OF CA )DATED : CHARTERED

ACCOUNTANTS

INCORPORATION1. The memorandum of association duly stamped, signed &

witnessed. In case of a public company, at last seven members must signed it. For a private company however the signature of two members are sufficient. The signatories must also give information about their address, occupation and the number of share subscribed by them.

2.The articles of Association duly stamped and witnessed as in case of the Memorandum. However, as stated earlier, a public company may adopt table A, which is a model set of Articles, given in the companies Act. In that case a statement in lieu of the prospectus is submitted, instead of Article of Association.

3. Written consent of the proposed directors to act as director and an undertaking to purchase qualification shares.4. The agreement, if any, with the proposed Managing Director, Manager or whole –time director.5. A copy of the Registrar’s letter approving the name of the company.

6. A statutory declaration affirming that all legal requirements for registration have been compiled with. This must be signed by an advocate of a high court or supreme court or a signatory to the Memorandum of Association or a Chartered Accountant or company secretary in whole time practice in India.

7. Documentary evidence of payment of registration fees.

EFFECT OF THE CERTIFICATE OF INCROPORATION-

A company is legally born on the date printed on the certificate of Incorporation . It becomes a

legal entity with perpetual succession on such date. Some interesting examples showing the

impact of the conclusiveness of the certificate of Incorporation are as under:

(a) Documents for registration were filed on 16th January. Certificate of Incorporation was

issued on 8th January But the date mentioned on the certificate was 6th January . It was decided

that the company was in existence and the contracts signed on 6th January were considered

valid.

SPECIMEN OF CERTIFICATE OF INCORPORATION

I hereby certify that …………………(name of the company) is this day incorporated under the companies Act 1956, and that the company is limited. Given under my hand at Delhi, this seventh day of November, two thousand and five. Fees: Deed Stamp Rs. ………………………. Stamp Duty on Capital Rs. ……………………….. S d /-

Registrar of companies Delhi Corporate Identity Number of company : 1352 of 2005

SEAL

CAPITAL SUBSCRIPTION

(i) SEBI Approval(ii) Filling of prospectus(iii) Appointment of Bankers, Brokers , Underwriters(iv) Minimum subscription (v) Application to stock Exchange(vi) Allotment of shares

COMMENCEMENT OF BUSINESSFor commencement of business these following documents are required 1. A declaration that share payable in cash have been subscribed for and allotted up to the minimum subscription mentioned in the prospectus;2. A declaration that every director has paid in cash, the application and allotment money on his shares in the same proportion as others;3. A declaration that no money is payable or liable to become payable to the applicants because of the company to either apply for or obtain permission to deal in its security on stock exchange;4. A statutory declaration that the above requirements have been compiled with.

CERTIFICATE OF COMMENCEMENT OF BUSINESS (specimen)I hereby certify that ………… ltd. Of……………which was incorporated under The companies Act, 1956, on the …………day of ……….200…….and which has this day filed a statutory declaration in the prescribed form that the conditions of commence business . Given under my hand at…………this day of………. Two thousand………

Registrar Joint Stock Companies ……………….(state)

SEAL

BIBLIOGRAPHY

• www.wikkipedia.com

• www.investopedia.com

• www.google.com

• www.googleimages.com