FORMATION OF

COMPANY

Presented By:Vanisha

Assistant Prof.(Commerce & Management)

Formation of company

• Min 2 members are required to form a private company.

• Min 7 persons are required to form a public company

• One person can form a one person company.

Steps to form a companyPromotion of a company

Incorporation of a company

Flotation of raising capital

Commencement of business

1.Promotion

• It is the first stage where necessary steps are taken for the registration of the company.

• Promotion is a process organizing and planning the finance of business under the corporate form.

• In other word we can say that it is the process of grouping members to achieve the common objective of the company.

Who is a promoter?

• Acc to sec 2(69) of the companies act 2013.• Promoter means a person who has been named

as such in a prospectus or is identified by the company in the annual return referred to in section 92

• Who has control over the affairs of the company, directly or indirectly whether as a shareholder , director or otherwise.

• In accordance with whose advice, directions or instructions the board of directors of the company is accustomed to act.

• A promoter may be an individual , a firm, or body corporate.

• A person who merely acts in professional capacity on behalf of a promoter such as a engineer, accountant, is not a promoter in the eye of law.

functions

Discovery of ideas

Detailed Investigation

Assembling of resource

Preparing preliminary document

Entering into preliminary

contracts

Naming a company

Appointment of bankers,

brokers, & underwriters

Legal position of Promoter

• The promoters of a company have hold fiduciary position in the company.

• They have the powers of defining how , when & in what shape and under what supervision it shall came in to existence & began to act as a trading corporation.

Rules for promoters

• A promoter cannot make either directly or indirectly any profit at the expense of the company he promotes, without the knowledge and expense of the company.

• If he does so in disregard to this rule, the company can compel him to account for it.

• Where the promoter fails to make full disclosure of the profits that he is making the company may sue him for damages for breach of feduciary duty, & recover from him any profit made.

Conti….

• A promoter is not allowed to derive a profit from the sale of his own property to the company unless all material facts are disclosed.

• If a promoter contracts to sell his own property to the co without making a full disclosure the co may either repudiate the sale or affirm the contract & recover the profit made out of by the promoter.

Rights of promoters

1. Right to receive preliminary expenses:- ( expenses include in setting up and registering the company from board of directors.

The articles may provide for the payment of preliminary expenses to the promoter.)

2.Right to recover proportionate amount from the co-promoters:- (the promoters are held jointly and severally liable for the secret profits made by them in formation of a company , if the entire liability arising out of mis statement in the prospectus is borne by one of the promoters, he is entitled to recover proportionately from the co-promoters)

3. Right to Remuneration:- (a promoter having made proper disclosure, has a right to be paid remuneration for his efforts.)

Incorporation of a company

• A co comes into existence when a number of persons come together with a view to exploit some business opportunity.

• These persons are called promoters , under section 3 any seven or more persons, 2 or more in the case of private company, 1 person in case of one person company may form a incorporated company.

• The purpose for which a company is going to be incorporated must be lawful.

• Steps before proceeding with the procedure of filing documents.

DIN ( directors identification numbers)Digital signature of the promoters.Both DIN & Digital signature will be registered

with the Ministry of corporate affairs portal.