Formation of a Company

❖ Team Unique
Group member names
➢ Imran Hossen★ (21303043)
➢IsratJerin (21303078)➢Aflatun Nessa Peauly (21303081)➢ Md Zubayer (21303082) ➢ Bibi Marium
(21303092)➢Tamim Ahmed (21303094)➢RepsonBarua (21303112)➢Rikta Chakma (21303116) ➢SathuaongMarma
(21303117)➢Shahrin Hossain (21303118)➢SharinaChy (21303122)
2nd Semester
Department of Finance
Topics

• The Formation of a Company

• 1.Defination
• 2.Essential Steps of Formation
• 3.Procedure of registration and incorporation
• 4.The certificate of incorporation
• 5.Promoters
• 6.Prospectus
• 7.Minimum Subscription
• 8.Incorporation
• 9.Necessary documents(AOA & MOA)
• Conclusion
 Formation of a Company
Formation of a company means establishing and registering a new company under the Company
Act,1994.The whole process of company formation may be divided into the following stages:

stage#1: Promotion Stage

Stage#2: Incorporation Stage,

Stage#3: Capital Subscription Stage,

Stage#4: Commencement of Business Stage;

 Promotion of a Company

Promotion is the first stage in formation of a company. There are

some steps in promotion stage. These are:-

1. Discovery of Business Idea,

2. Investigation of that Business Idea,

3. Verification,

4. Assembling of Resources,

5. Preparation of Financial Plan

 Incorporation Stage
Incorporation or Registration Stage is the second stage in the formation of a
company. In order to get a company registered or incorporated, the
following procedure is to be adopted:
A. Preliminary Activities:
1.Decide the name of a the company,
2.Get required licenses.
B. Filling of Documents with the registrar:
1.Memorandum of Association,
2.Article of Association,
3.List of Directors
4.Written consent of Directors,
5.Statutory declaration
With issuing the Certificate of Incorporation after registration,the company
takes birth with a separate legal entity.
 Subscription of the Capital
A public limited company can raise the required funds from the public using an issue of shares
and debentures. For this purpose, a prospectus is issued for inviting public to subscribe to
the capital of the company.
The following steps are required for raising funds from the public:
1.BSEC Approval
2.Filling of Prospectus
3.Appointment of Bankers,Auditors,and Brokers etc.
4.Minimum Subscription
5.Application to Stock Exchange
6.Allotment of Shares
 Commencement of Business

A private limited company can start its business after having the Certificate of
Incorporate. But a public limited company start its business only after having the
Certificate of Commencement.

The following formalities are required:

1.A declaration that shares payable in cash
2.A declaration that every director has paid in cash, the application and allotment
money on his shares
3.A declaration that no money is payable or liable to become payable to the applicants
4.Minimum subscription has been raised
5.A statutory declaration that above requirements have been compiled with
 Promoters
The term promoter is not defined in the act . Promoter is a word which is used
to describe the persons who initially plan the formation of a company and bring
it into existence.
Promoters Remuneration :
1. Selling to the company at a profit some property purchased by the promoter
before he became one .
2. Taking a commission on the shares sold.
3. Taking a grant of some shares of the company.
4. Lump sum from the company.
Functions of the promoter

1. The promoter decides the company's name and asserts

that it will be accepted by the registrar of companies.
2. He decides the details of the company's Memorandum
and Articles, the nomination of directors, solicitors
auditors, bankers and the registered office of the
company.
3. He make arrangements for printing the Memorandum and
Articles, the registration of the company and the issue of
prospectus.
4. He is responsible to bring the company into existence.
 The duties and liabilities of promoters
1. A promoter cannot be described as an agent of the company.
2. A company cannot ratify a contract made by a promoter before the incorporation of the company because
the ratifier was then not in existence.
3. For the reason stated in para 1 and 2 ,promoter cannot be a trustee of the company.
4. A promoter stands in a fiduciary position to the company.
5. A promoter cannot make secret profits .If any secret profit or undisclosed financial benefits is made by the
promoter , the company can recover it from him.
6. The promoter is not prohibited from making profits. He can do so, provided he discloses all the facts
( including the fact that a profit is being made) to the Board of Directors of the proposed company.
7. A promoter has got certain duties in connection with the prospectus , if any is issued, or the statement in
lieu of prospectus. These duties are: • He must see that the documents do not contain the particulars which
according to Schedule 2 to the act , the must contain ;and • He must see that the documents do not contain
any untrue statement
8. For failure to perform these duties the promoter , • Is liable to pay compensation to any person who buys
shares on the basis of the erroneous prospectus or statement in lieu of prospectus and suffers damage, and
• He may be prosecuted in the criminal courts according to the provisions of the Companies Act.
 Promoters and Pre incorporation Contracts
The rules regarding the subject are summarized below:
1. A company is not bound by any pre incorporation contract before its incorporation even where it
enjoys the benefit of the pre incorporation contract entered into on its behalf.
2. The other party to the contract is not bound by the pre incorporation contract.
3. A company after it is formed, cannot ratify a pre incorporation contract.
4. The promoters and the agents who had formed the company may incur personal liability for a pre
incorporation contract made on behalf of company not yet in existence, such a contract is
considered to have been entered into personally by the promoters.
5. Specific performance: Sections 15 and 19 of the Specific Relief Act ,1872 provide that if the
promoters and agents of a company enter into a pre incorporation , specific performance may be
obtained by or enforced against the company ,if the company has accepted contract and has
communicated such acceptance to the other parties.
Company: A company can ,after its incorporation , enter into a new contract with the other
parties. In this case the liability of the promoters and the agents comes to an end
 company prospectus

A prospectus is an essential disclosure document that a company has to issue at the

time of issuing investment securities to the public. These formal documents provide
detailed information to prospective investors about mutual funds, bonds, stocks,
and other investment offerings to the public.
Characteristics Of Prospectus:

Some essential characteristics such as

1.It is a document described or issued as a prospectus.

2.It includes any notice,circular,advertisement inviting deposits from the public
or other document.
3.It is an invitation to the members of the public.
4.The public is invited to subscribe the shares or debentures of the company.
5.The term public does not mean an invitation of very large number of people.It
is enough if the invitation is to a section of the public.
 Form and contents Of Prospectus

i.Principal objects of the company and particulars of signatories of the

memorandum of the company and shares subscribed by them.
ii.Number and classes of shares and extent of interest of holders.
iii.The rights in respect of capital and dividends attached to different classes of
shares.
iv.The minimum amount of subscription and amount payable on application.
v.Time of opening subscription list.
vi.Preliminary expenses incurred.
vii.Details of any premium or under writing commission paid.
viii.particulars of reserves including reserves capitalized.
ix.Names and addresses of auditors of the company.
x.The nature and extent of restrictions upon members at company
meetings.
xi.Restrictions upon the powers of directors.
xii.Voting rights,capitalisations of reserves and surplus of
revaluation.
xiii.Inspection of balance sheet,profit and loss amount.
xiv.There are two reports which must be annex to the prospectus
like; 1.Reports by the auditors 2.Reports by the accountant.
Third research area
Group member name
Supporting content

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Project Summary
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Conclusion

• Brief summary of what you discovered based on research

Appendix

• Works cited
• Additional supporting data