COMPANY FORMATION
Dr. Opeyemi
Company
Is an Artificial Person created by Law.
Company means an association of many persons who contribute money or
money`s worth to a common stock and employed for a common purpose.
The common stock so contributed is denote in money and is capital of a
company. The person who contribute it or to whom it belongs are members.
The proportion of capital to which each member is entitled is his share.
Share are always transferable although the right to transfer is often more or
less restricted.
The stages in the formation of a company
• Promotion
• Incorporation
• Capital Subscription
• Commencement of Business
Promotion
• 1st stage in the formation of a company
• Promotion of a Company: The promotion of a company
refers to all those steps which are taken from the time of
having an idea of starting a company to the time of actual
starting of the company business.
• Who is a promoter?
Promotion of a Company
Who is a promoter?
1. People who think of forming a company and take necessary steps
in its formation are known as “Promoters” or “Company Promoters”.
2. The person who conceives such an idea is called “Company
Promoter”.
Functions of Promoters
To discover an idea for establishing a company.
To make detailed investigations about the demand for
the product, availability of power, labour, raw material.
To investigate the idea and know whether the formation
of the company is possible and profitable.
To find out suitable persons who are willing to act as first
directors of the company.
Renumeration of Promoters
He may be paid a certain lump sum.
He may be given commission of the shares sold
by the company.
He may be given an option to buy the shares of the
company at par when their market price is higher.
He may sell his own property to the company at higher
price and earn profit.
Incorporation or Registration
A company is said to be incorporated when it is
registered with the registrar of the joint stock company.
This brings the company into existence.
A company is said to be in existence, if it is registered as
per the Companies Act, 2013. In order to get a company
registered, some documents need to be provided to the
Registrar of Companies.
Steps In Registration
There are several steps involved in the registration phase, and
are as follows:
1. Memorandum of Association: A memorandum of association
(MoA) must be signed by the founders of the company.
A minimum of 7 members are required in case of a public
company and 2 in case of a private company. The MoA
must be properly registered and stamped.
Steps In Registration
2. Article of Association: Article of Association (AoA) is
also required to be signed and submitted. All members
who previously signed MoA, should also be signing the
AoA.
3. The next step is preparing a list of directors which should
be filed with the Registrar of Companies.
Steps In Registration
4. Directors of the company should provide a
written consent agreeing to be directors, should
be filed with the Registrar of Companies(RoC).
5. The notice of address of the office needs to
be filed.
Steps In Registration
6. A statutory declaration should be made by any
advocate of either the High Court or Supreme
Court, or a person of the capacity of Director,
Secretary or Managing Director.
This declaration shall be filed with the RoC.
Certificate of Incorporation
Certificate of Incorporation: Certificate of
incorporation is issued when the registrar is
satisfied with the documents provided. This
certificate validates the establishment of the
company in the records.
SPECIMEN OF CERTIFICATE OF INCORPORATION
Capital Subscription
This is the process by which companies raises
fund. Public companies can do this through the
issuance of shares and debentures.
Certificate of Commencement of Business
Certificate of commencement of business: Certificate
of commencement of business is required for a public
company to start doing business, while a private
company can start business once it has received the
certificate of incorporation.
