Process of formation of a company | How to form a Company?

Ans: The process of formation of a company can be discussed and divided in following four stages:
1) Promotion,
2) Incorporation or Registration,
3) Capital Subscription,
4) Commencement of Business

Of these stages only two are necessary for the formation of a private company and of a public company not having any share capital. They may commence business immediately after they have received a certificate of incorporation. But a public company having a share capital has to pass through all the above mentioned four stages before it can commence business or exercising any borrowing powers.

1. Promotion: Before a company can be formed, there must be some persons who intend to form a company and who take the necessary steps to carry that intention into operation. Such persons are called promoters. The promoter is a person “who The promotion is the first stage in the formation of the company. Promotion may be defined as “the discovery of business opportunities and the subsequent organization of funds, property and managerial ability into a business concern for the purpose of making profits therefrom.”

2. Incorporation of a Company: Any seven or more persons or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their name to a memorandum of associations and otherwise complying with the requirement of this Act in respect of registration, form an incorporated company, with or without limited liability. a. Documents to be filed for registration: After ascertaining the availability of name, the promoter should prepare the following documents and file with the registrar of companies:

I. Memorandum of Association: The memorandum of association is the charter of the company. This includes its objectives, its name, the address of its registered office, the capital which the company is authorized by law, the nature of members as well as the names, addresses and agreement of people who agree to form a company.

II. Articles of Association: The other important document is the articles of association which contains the rules and regulations relating to the internal management of the company. However, it is not necessary for a public company limited by shares to file the Articles of Association. If such public company does not file Articles of
Association, it is deemed to have adopted “Table A” of schedule I of the Act.

III. Copy of proposed agreement: If a company purposes to enter into an agreement with any individual for appointment as a Managing Director, or a whole-time director or manager, a copy of such an agreement should also be filed with the Registrar of companies.

IV. Consent of Directors: According to Section 266, in the case of a public limited company having share capital, a person cannot be appointed as a Director by the Articles of Association unless, he has, before the registration of the articles, either himself or through his agent, signed and filed, with the registrar his consent in writing to act as Director.

3. Certificate of Commencement of Business: A private company can commence business immediately after incorporation. However, in the case of companies other than the private company and a company having no share capital, further requirement is to be compiled with, namely, obtaining ‘a certificate of commencement of business’ before it can commence its business.
Objectives of statutory meeting as per companies Act
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Process of formation of a company | How to form a Company? Process of formation of a company | How to form a Company? Reviewed by Hosne on 9:22 PM Rating: 5

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