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Company Formation

COMPANY FORMATION AND INCORPORATION- INDIA

The four intrinsic stages involved in the formation of a Company are:

  • Promotion of a Company
  • Incorporation of a Company
  • Subscription of capital
  • Commencement of the business

A brief overview, giving an insight of these stages are as under:

Promotion of a Company  

In India, the first stage towards formation of a Company is its Promotion. Promotion refers to a process wherein a Company comes into existence. Basically, it begins with the birth of a Company followed by determination of the object or purpose for which it is formed. A promoter is a person who undertakes the formation of a Company by investing initial funds required to start a business.

Following are the documents required to be submitted during formation of a Company:-

  1. Memorandum of Association- MOA explains the objective behind formation of a Company. It contains various clauses such as Name clause, Registered Office clause, Object Clause, Liability clause, etc.  
  2. Articles of Association- AOA are rules & regulations in respect of the internal management Company. These rules shall not exceed anything mentioned in MOA as they are subsidiary to the MOA. 
  3. Consent of the Directors- Apart from MOA & AOA, the directors are required to give written consent in respect of buying or paying for qualification shares which is mentioned in the AOA.     
  4. Agreement- The Agreement, if any, entered between the Company and any individual for appointment as a whole time Director/Managing Director, is required to be filed with the Registrar of Companies w.r.t formation of Company.
  5. Fee Payment- Along with the above mentioned documents, payment of fees is necessary for registration of the Company.   

Incorporation of a Company

After complying with the abovementioned formalities, promoters are required to make an application to the Registrar of Companies of the state (where they wish to establish their registered office) for incorporation of the Company. Once Certificate of Incorporation is issued to the Company, it becomes a conclusive proof of existence/formation of the Company.      

Subscription of Capital

A public company, by means of issue of shares & debentures, can raise funds from the general public. For doing so, a public company is required to issue prospectus inviting the general public to subscribe to the share capital of the Company.    

Commencement of business

A private company, having no subscription of share capital can immediately commence its business just after receiving certificate of incorporation. However, a public company can commence its business only after raising minimum subscription by way of issue of new shares/debentures followed by issuance of Certificate of Commencement of business. 

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