What is meant by promotion of a company? What formalities must

What is meant by promotion of a company? What formalities must be complied in the formation of a company under the Indian Companies Act?

What steps are required to be taken for the formation of a company?

Draw a note detailing the various steps and indicating the forms etc. to be filed with ROC in regard to the formation of a company.

Ans.

STEPS OF FORMATION OF COMPANY

Following steps are taken in the formation of a company:

(i) Promotion

(ii) Registration with ROC

(iii) Capital subscription”

(iv) Commencement of business

PROMOTION

These are as under:

According to G.W. Gerstenberg, “Promotion may be defined as the discover of business opportunities and subsequent organization of funds, property and managerial ability into a business concern for the purpose of making profits there from.”

According to L.H. Haney, “Promotion may be defined as the process of organizing and planning the finances of a business enterprise under the corporate form.”

Promotion is the process of creating a specific business enterprises. The aggregate of activities contributed by all those who participate in the building of the enterprise constitutes promotion.

A promoter should identify a new idea. Following are the steps of promotion:

1. Preliminary investigation and detailed investigation.

2. Assembling different factors.

3. Financing.

4. Preparation of certain documents and instruments.

5. Decision on name of the company.

6. Approval of the Central Government to issue capital.

7. Licence, if necessary.

CERTIFICATE OF INCORPORATION

The Registrar will-make a scrutiny of these documents and if they are in order and he believed that the all statutory formalities for incorporation of the company have been complied with he will register the company and issue a certificate of incorporation (the company’s birth certificate).

The certificate of incorporation shall be issued by the ROC in Form No. INC.11. This certificate is a conclusive evidence that the company has been duly registered.

On obtaining this certificate the company becomes a body corporate with perpetual succession and a common seal.

MINIMUM SUBSCRIPTION

When a company invites the public to subscribe for its shares, it cannot allot these shares until the minimum amount stated in the prospectus has been subscribed. This amount stated in the prospectus is known as the ‘minimum subscription.’

After obtaining a certificate of incorporation a private company or public company not having share capital can commence business immediately. But in case of a public company limited by shares it will be necessary convene a meeting of Board of Directors and decision should taken for capital subscription. Necessary resolution to decide the amount of minimum subscription shall be passe^^V prospectus is prepared and filed with Registrar and then issued to general public. Now the company receives application from public for allotment of shares. If it gets minimum subscription, the company can allot shares. A return of allotment is filed with the Registrar of Companies. A Shareholders Register is prepared to keep the record of shareholders. Now share certificates are prepared and distributed to shareholders.