COMPANY LAW & SECRETERIAL PRACTICE

“FORMATION OF A COMPANY”

INTRODUCTION• Formation of a company involves many steps :

Stage 1: Promotion

Stage 2: Incorporation

Stage 3: Floatation or raising of capitals; and

Stage 4: In case of public limited company, securing a certificate for commencement of business.

STAGE 1 : PROMOTION

WHO IS A PROMOTER?

• A promoter - is defined "as a person who as principal procures or aids in

procuring the incorporation of a company.”

• FUNCTIONS OF A PROMOTER

LEGAL STATUS OF A PROMOTER

• Fiduciary position of a promoter

• Erlanger v. New Sombrero Phosphate Co., (1878)

• Summary of Fiduciary Relationship of a Promoter

1. Not to make any profit at the expense of the company. 2. To give benefit of negotiations to the company. 3. To make a full disclosure of interest or profit. 4. Not to make unfair use of position.

LIABILITY OF PROMOTERS

• Section 56

• Section 62

• Section 63

• Section 478

• Section 543

• DUTY OF PROMOTER AS REGARDS TO PROSPECTUS.

• REMUNERATION OF PROMOTERS

STAGE 2 : INCORPORATION OF A COMPANY

DOCUMENTS TO BE FILED WITH THE REGISTRAR

1. Memorandum of Association2. Articles of Association 3. Vetting of Memorandum and Articles,

printing, stamping and signing of the same 4. Printing of Memorandum and Articles 5. Stamping of Memorandum and Articles6. Signing of MOA & AOA 7. Dating of Memorandum and Articles

8. Copy of proposed agreement

9. Power of Attorney

10. Consent of the directors

11. Particulars of Directors

12. Notice of Registered address

13. Statutory Declaration of Compliance

14. Filing of documents for registration

DOCUMENTS TO BE FILED WITH THE REGISTRAR.. CONTD

SCRUTINY BY REGISTRAR

• The name selected by the company is acceptable. • The relevant provisions of the Act have been

complied with. The objects of the company are lawful. • The requisite number of persons required under the

Act have subscribed and duly signed. • The memorandum and the articles comply in all

respects with the provisions of the Act.• The statutory declaration has been properly made.

CERTIFICATE OF INCORPORATION

• Meaning

• The Legal Effect Of Incorporation

• Conclusiveness Of Certificate Of Incorporation (Sec. 35)

• Effects Of Registration (Sec. 34)

STAGE 3: CAPITAL SUBSCRIPTION

STAGE 4: COMMENCEMENT OF BUSINESS

CERTIFICATE OF COMMENCEMENT

If the company “has a share capital and had issued a prospectus inviting the public”

If the company has “a share capital but has not issued a prospectus to the public,”

(a) Minimum subscription;

(b) Every director has paid in cash the application and allotment money

(c) No money is liable to be repaid

(d) A statutory declaration

(a) Statement in lieu of prospectus

(b) Every director has paid in cash the application and allotment money

(c) A statutory declaration

PRE-INCORPORATION OR PRELIMINARY CONTRACTS

• Meaning

• Position of promoters as regards pre-incorporation contracts

1. Company not bound by pre-incorporation contract. 2. Company cannot enforce pre-incorporation contract. 3. Promoters personally liable.

• Specific performance of pre-incorporation contract

PROVISIONAL CONTRACTS• Meaning

PRE-INCORPORATION

PROVISIONAL

Contracts which are entered before the company comes into existence

Contracts entered into by a company after its incorporation and before commencement of business

No effect so far as the company is concerned

Not binding until the company is entitled to commence business and ratified the contract

Can be enforced against the company only if warranted by the terms of incorporation

Cannot be enforced if the company goes into liquidation without commencing business

CONCLUSION

ANY QUERY??

NATASHA GOPINATH 06D0613.

RITESH .R. CHUGANI 06D0633.

ELIZABETH 06D0640.

ESTHER P EZEKIEL 06D0641.

SHILPA PRITHVIRAJ 06D0648.

SWATHI D 06D0651.

MOSES 06D0660

RAKSHA RAO 06D0672.