Formation of company
There are following four stages in the formation of the public company:
The first stage in the formation of a company is promotion. Promotion is the discovery of business opportunity and organization of funds, property and ability in business for the purpose of making profit. Promotion is always made through the promoters, and promoters are those persons who actually promote (Sponsor) the company.
Promoters can be further divided into three classes.
a. Professional Promoters: are those persons who form the company as their profession when the company is incorporated, they either get the commission or a fixed amount for the formation o company.
b. Occasional Promoters: are those persons who undertake to form a company occasionally and take the forming of a company as their part time jobs.
c. Promoters: are those persons who make all investigations, preparation and arrangements for incorporating a company.
Following are the functions of the promoters.
a. Identification of new idea
b. Detailed investigation
c. Assembling of different factors
d. Financing the proposition (Proposal or Plan)
e. Preparation of essential documents
f. The name of the company
g. Sanction (Authorized) for capital
2. Incorporation (Merger)
The second step for establishment of a company is to get the company incorporated or registered. The promoters prepare and file number of documents to register the company. These documents as under:
a. Filling of documents
i. Memorandum of association
ii. Articles of association
iii. Registered office
iv. Statutory declaration
v. List of Directors
vi. Written consent (approval) of directors
vii. Declaration of the qualifying shares
b. Payment of registration fees
c. Certification of incorporation
If all the above documents approved by the registrar then he will issue incorporation certificate. After receiving the incorporation the public limited company can commence business but public company requires commencement certificate.
A private company can commence business on receipt of certificate of incorporation. However, a public company has to fulfill another requirement of subscription to obtain the certificate of commencement of business. Following are the requirement of subscription.
a. Resolution for appointment of chairman, bankers, auditors, secretary, etc.
b. Resolution for different contracts
c. Listing of shares in a stock exchange
d. Print and issue of prospectus
e. Invitation of application for shares
f. Allotment of shares
g. Send allotment letters
h. Share certificates to shareholders within 2 months of allotment
4. Commencement of Business
a. Prospectus or statement in lieu of prospectus
b. Declaration of fulfillment of minimum subscription
c. Declaration of fulfillment of directors, contract to purchase qualification shares.
d. Statutory declaration of compliance of legal conditions precedent on certificate of commencement of business.