Formation of a Company Essay

Refers to the entire process by which a conjunction is brought into introduction. It starts with the conceptualisation of the birth a a play along and determination of the single-valued function for which it is to be ca-caed. The persons who conceive the family and invest the initial funds be known as the promoters of the order. The promoters enter into preliminary contracts with vendors and make arrangements for the preparation, advertisement and the circulation of course catalogue and placement of ceiling.However, a person who merely acts in his professional power on behalf of the promoter (eg lawyer, CA, etc) for drawing up the agreement or some other documents or prepares the figures on behalf of the promoter and who is paid by the promoter is non a promoter. The promoters book certain basic duties towards the smart set formed - In face of default on the part of the promoter in fulfilling the above duties, the familiarity may - A promoter may be rewarded by the comp whatever for efforts undertaken by him in forming the troupe in several ways.The to a greater extent common ones are - If the promoter fails to disclose the profit made by him in course of promotion or knowingly makes a dark statement in the prospectus whereby the person relying on that statement makes a impairment, he will be liable to make good the loss suffered by that other person. The promoter is liable for untrue statements made in the prospectus. A person who subscribes for any touchs or debenture in the troupe on the faith of the untrue statement t wholeyed in the prospectus apprize sue the promoter for the loss or damages sustained by him as the result of such untrue statement.II. Incorporation by adaption The promoters moldiness make a decision regarding the type of company i. e a pulic company or a orphic company or an un special(a) company, etc and accordingly prepare the documents for incorporation of the company. In this connexion the archive and Articl es of necktie (MA & AA) are crucial documents to be prepared. roll of Association of a company Is the constitution or charter of the company and contains the powers of the company.No company move be registered under the Companies Act, 1956 without the scroll of association. Under Section 2(28) of the Companies Act, 1956 the inscription means the memorandum of association of the company as originally frame or as altered from time to time in following with any of the previous companies law or the Companies Act, 1956. The memorandum of association should be in any of the one form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956.Form in circumvent B is relevant in case of companies restrain by the divisions , form in elude C is relevant to the companies limited by guarantee and not having character capital, form in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to unlimited companies. Contents of Memorandum The memorandum of association of every company must(prenominal) contain the following articles - stool clause The expose of the company is mentioned in the relieve oneself clause.A cosmos limited company must end with the word Limited and a occult limited company must end with the words hole-and-corner(a) Limited. The company gougenot start out a name which in the mentation of the Central Government is undesirable. A name which is identical with or the nigh resembles the name of another company in existence will not be allowed. A company cannot use a name which is veto under the Names and Emblems (Prevntion of Misuse Act, 1950 or use a name suggestive of connection to government or State patronage.Domicile clause The state in which the registered say-so of company is to be situated is mentioned in this clause. If it is not possible to state the exact location of the registered office, the company must state it provide the exact extend either on the mean solar day on which commences to carry on its business or within 30 days from the date of incorporation of the company, whichever is earlier. Notice in form no 18 must be given to the record-keeper of Comapnies within 30 days of the date of incorporation of the company.Similarly, any change in the registered office must also be intimated in form no 18 to the Registrar of Companies within 30 days. The registered office of the company is the official cry of the company where the statutory books and records must be normally be kept. all(prenominal) company must affix or paint its name and address of its registered office on the outside of the every office or place at which its activities are carried on in. The name must be written in one of the local languages and in English.Objects clause This clause is the some important clause of the company. It specifies the activities which a company can carry on and which activities it cannot carry on. The company cannot c arry on any activity which is not authorised by its MA. This clause must specify - In case of the companies other than trading corporations whose objects are not confined to one state, the states to whose territories the objects of the company extend must be specified. Consequences of an ultravires transaction -However, the doctrine of ultra-vires does not take in in the following cases - The following are exceptions to the rule of limited financial obligation of members - Capital clause The amount of share capital with which the company is to be registered split up into shares must be specified giving details of the tot up of shares and types of shares. A company cannot issue share capital greater than the maximum amount of share capital mentioned in this clause without altering the memorandum.Association clause A declaration by the persons for subscribing to the Memorandum that they desire to form into a company and agree to take the shares place against their respective name must be given by the promoters. Articles of Association The Articles of Association (AA) contain the rules and regulations of the internal circumspection of the company. The AA is nothing but a contract among the company and its members and also between the members themselves that they shall abide by the rules and regulations of internal management of the company specified in the AA.It specifies the rights and duties of the members and directors. The provisions of the AA must not be in conflict with the provisions of the MA. In case such a conflict arises, the MA will prevail. Normally, every company has its own AA. However, if a company does not have its own AA, the model AA specified in Schedule I Table A will apply. A company may adopt any of the model forms of AA, with or without modifications. The articles of association should be in any of the one form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956.Form in Table B is applicable in case of comp anies limited by the shares , form in Table C is applicable to the companies limited by guarantee and not having share capital, form in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to unlimited companies. However, a private company must have its own AA. The important items covered by the AA admit - Alteration of articles of association A company can alter any of the provisions of its AA, subject to provisions of the Companies Act and subject to the conditions contained in the Memorandum of association of the company.A company, by special resolution at a general meeting of members, alter its articles provided that such alteration does not have the effect of converting a public limited company into a private company unless it has been approved by the Central Government. The articles must be printed, divided into paragraphs and numbered consequently and must be signed by each reviewer to the Memorandum of Asso ciation who shall add his address, description and occupation in figurehead of at least one witness who must attest the contact and likewise add his address, description and occupation.The articles of association of the company when registered bind the company and the members thereof to the same extent as if it was signed by the company and by each member. III. Registration of the Company Once the documents have been prepared, vetted, stamped and signed, they must be filed with the Registrar of Companies for incorporating the Company. The following documents must be filed in this connection - school textlist-item textlist-item textlist-item Certificate of IncorporationOnce all the above documents have been filed and they are found to be in order, the Registrar of Companies will issue Certificate of Incorporation of the Company. This document is the birth security department of the company and is proof of the existence of the company. Once, this certificate is issued, the company cannot cease its existence unless it is dissolved by order of the Court. IV. Commencement of Business A private company or a company having no share capital can commence its business immediately after it has been incorporated.However, other companies can commence their activities only after they have obtained Certificate of Commencement of Business. For this purpose, the following additional formalities have to be complied with - If a company has share capital and has issued a prospectus, then - textlist-item textlist-item textlist-item textlist-item textlist-item textlist-item textlist-item Once the above provisions have been complied with, the Registrar of Companies grants Certificate of Commencement of Business after which the company can commence its activities