Formation of Company 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Incorporation of Companies 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Steps for formation of a company Types of Company Availability of Name The Memorandum and Articles of Association duly signed, and stamped. The agreement, if any with any individual for appointment as its Managing or whole-time director. Consent of directors in Form 29. Notice of Registered address in Form 18 to be given within 30 days of the date of incorporation. Particulars of Directors in Form 32. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Steps for formation of a company Payment of Registration Fees. Power of attorney, to fulfill various legal and other formalities. Statutory Declaration in Form No. 1 that all requirements of the Companies Act and the rules thereunder have been complied with. The declaration should be made by either an advocate of Supreme Court / High Court, a practicing Chartered Accountant or a director, or a manager or a secretary named in the Articles of the proposed company. [Section 33 (2)] 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Promoters According to SEBI (Substantial Acquisition and Takeover) Regulations, 1997 the term promoters means: the person or persons who are in control of the company ;or person or persons named in any offer document as promoters. a relative of the promoter within the meaning of Section 6 of the Companies Act. Should be members of HUF only;or Are husband or wife; or Related to other as indicated in Schedule IA. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Promoters in case of a corporate body : i) a subsidiary or a holding company; or ii) any company in which the promoters hold 10% or more equity capital; or iii) any body corporate in which a group of individuals or corporate bodies or a combination thereof holds 20% or more of equity capital. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Judicial interpretation Whether one is promoter or not will be determined with reference to the nature of the role he/they play in implementing the objectives for which the company is formed. The persons who assume the primary responsibility of matters relating to promotion of a company are called Promoters. One who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Judicial interpretation Promoter is a term not of law but of business usually summing up in a single word a number of business operations familiar to the commercial; world by which a company is generally brought in to existence. (Bowen L.J., 1880) Who constitutes a promoter in a particular case is therefore a question of fact. A promoter may be a natural person or a company. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Formation of Company PROMOTION OF A COMPANY Formation of a company is a complex activity involving completion of a lot of legal formalities and procedures . To fully understand the process one can divide the formalities into four distinct stages, which are; (i) promotion ; (ii) incorporation ; (iii) subscription of capital ; & (iv) commencement of business. PROMOTION OF A COMPANY Promotion is the first stage in the formation of a company . It involves conceiving a business opportunity & taking an initiative to form a company so that practical shape can be given to exploiting the available business opportunity 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

FUNCTIONS OF A PROMOTER (i) Identification of business opportunity (ii) Feasibility studies (a) Technical feasibility (b) Financial feasibility (c) Economic feasibility (iii) Name approval (iv) Fixing up Signatories to the Memorandum of Association (v) Appointment of professionals (vi) preparation of necessary document 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

DOCUMENT REQUIRED TO BE SUBMITTED 1 DOCUMENT REQUIRED TO BE SUBMITTED 1. Memorandum of association (i) The name clause (ii) Registered office clause (iii) objects clause (a) The main object (b) other objects (iv) liability clause (v) capital clause (vi) association clause 2. Articles of association 3. constant of proposed directors 4.Agreement 5. Statutory declaration 6. Payment of fee 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

POSITION OF PROMOTER Promoters undertakes various activities to get a company registered and get it to the position of commencement of business. Promoters of a company enjoys a fiduciary position with the company, which they must not misuse. Promoters are not legally entitled to claim the expense incurred in the promotion of the comopany. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

Perform for Statutory Declaration “FORM NO. 1” The companies Act .1956 Declaration of compliance with requirements of the companies Act, 1956 on Application for Registration of a company. PURSUANT TO SECTION 33 (2) NAME OF THE COMPANY : M/S PRESENTED BY : SUSHIL KR. CHARTERED ACCOUNTANT. …(NAME OF CA)….partner of…(NAME OF CA FIRM& ITS ADDRESS) ...,do solemnly and sincerely declare that I am a CA in whole time practice in India ,who is engaged in the formation of the company “M/S, ------------ PRIVATE LIMITED” And that all the requirements of the companies Act, 1956 and the rules there under in respect of matter precedent to the registration of the said company& incidental thereto have been complied with& I make this solemn declaration conscientiously believing the same to be true. PLACE : NEW DELHI (NAME OF CA ) DATED : CHARTERED ACCOUNTANTS 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

INCORPORATION 1. The memorandum of association duly stamped, signed & witnessed. In case of a public company, at last seven members must signed it. For a private company however the signature of two members are sufficient. The signatories must also give information about their address, occupation and the number of share subscribed by them. 2.The articles of Association duly stamped and witnessed as in case of the Memorandum. However, as stated earlier, a public company may adopt table A, which is a model set of Articles, given in the companies Act. In that case a statement in lieu of the prospectus is submitted, instead of Article of Association. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

3. Written consent of the proposed directors to act as director and an undertaking to purchase qualification shares. 4. The agreement, if any, with the proposed Managing Director, Manager or whole –time director. 5. A copy of the Registrar’s letter approving the name of the company. 6. A statutory declaration affirming that all legal requirements for registration have been compiled with. This must be signed by an advocate of a high court or supreme court or a signatory to the Memorandum of Association or a Chartered Accountant or company secretary in whole time practice in India. 7. Documentary evidence of payment of registration fees. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

SPECIMEN OF CERTIFICATE OF INCORPORATION I hereby certify that …………………(name of the company) is this day incorporated under the companies Act 1956, and that the company is limited. Given under my hand at Delhi, this seventh day of November, two thousand and five. Fees: Deed Stamp Rs. ………………………. Stamp Duty on Capital Rs. ……………………….. Sd/- Registrar of companies Delhi Corporate Identity Number of company : 1352 of 2005 SEAL 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

EFFECT OF THE CERTIFICATE OF INCROPORATION A company is legally born on the date printed on the certificate of Incorporation . It becomes a legal entity with perpetual succession on such date. Some interesting examples showing the impact of the conclusiveness of the certificate of Incorporation are as under: (a) Documents for registration were filed on 16th January. Certificate of Incorporation was issued on 8th January But the date mentioned on the certificate was 6th January . It was decided that the company was in existence and the contracts signed on 6th January were considered valid. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

(b) A person forged the signatures of other on the Memorandum (b) A person forged the signatures of other on the Memorandum. The Incorporation was still considered valid. CAPITAL SUBSCRIPTION (i) SEBI Approval (ii) Filling of prospectus (iii) Appointment of Bankers, Brokers , Underwriters (iv) Minimum subscription (v) Application to stock Exchange (vi) Allotment of shares 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

COMMENCEMENT OF BUSINESS For commencement of business these following documents are required 1. A declaration that share payable in cash have been subscribed for and allotted up to the minimum subscription mentioned in the prospectus; 2. A declaration that every director has paid in cash, the application and allotment money on his shares in the same proportion as others; 3. A declaration that no money is payable or liable to become payable to the applicants because of the company to either apply for or obtain permission to deal in its security on stock exchange; 4. A statutory declaration that the above requirements have been compiled with. 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA

CERTIFICATE OF COMMENCEMENT OF BUSINESS (specimen) I hereby certify that ………… ltd. Of……………which was incorporated under The companies Act, 1956, on the …………day of ……….200…….and which has this day filed a statutory declaration in the prescribed form that the conditions of commence business . Given under my hand at…………this day of………. Two thousand……… Registrar Joint Stock Companies ……………….(state) SEAL 8/27/2018 Unit IV– Company Law, Legal Aspects of Business – Mr.K.Mohan Kumar, AP/MBA