Formation of

Company
Ms. Muskan Sharma
Introduction

 A company comes in to existence when a number of persons comes

together with a view to form an association to exploit the business
opportunities by bringing together men, material, money and
management.
Stages of Formation of a Company
Section 3
 Promotion of a Company
 Incorporation/Registration of a Company Section 7
 Raising/Subscription of Capital
 Commencement of Business
Promotion of a Company

 Promotion of a company is a first important preliminary stage. It is

the process of organising and planning the finances of a business
enterprises.
 The person who undertake the task for promotion are called
promoters. The promoters is a person who bring a company into
existence. A company may have several promoters. A promoter may
be an individual, a firm or a body corporate. One existing company
may promote another new company.
 Promoter stands in a fiduciary position towards the company
 The person who undertakes responsibility to bring the company into
existence are called promoters.
Promoter define u/s 2(69)

 “promoter” means a person—

 (a) who has been named as such in a prospectus or is identified by the company in
the annual return referred to in section 92; or
 (b) who has control over the affairs of the company, directly or in directly whether
as a share holder, director or otherwise; or
 (c) in accordance with whose advice, directions or instructions the Board of
Directors of the company is accustomed to act:
 Provided that nothing in sub-clause (c) shall apply to a person who is acting merely
in a professional capacity
 Affairs of Company means “formation, capital, operations, property, debts, profits,
and relationships with stakeholders like shareholders and directors. It also
encompasses broader functions like managing the company's public image,
handling regulatory compliance, communicating with stakeholders, and overseeing
corporate governance to ensure ethical and transparent operations.”
Promotion of a Company
Section 3(1)
 —(1) A company may be formed for any lawful purpose by—
 (a) seven or more persons, where the company to be formed is to be a public
company;
 (b) two or more persons, where the company to be formed is to be a private
company; or
 (c) one person, where the company to be formed is to be One Person Company
that is to say, a private company,
by subscribing their names or his name to a memorandum and complying with the
requirements of this Act in respect of registration.
Such incorporated company may be company:
1. Limited by Shares
2. Limited by Guarantee
3. Unlimited Company
Incorporation/Registration of a Company
Section 7

 Steps before proceeding with the procedure of filling documents:

A. DIN (Directors Identification Number) has to be obtained
B. Digital Signatures of the Promoters
C. Both DIN and Digital Signatures will be registered with the MCA (Ministry
of Corporate Affairs) Portal.
After registration and verification of DIN and digital signatures of the
promoter the following step will be taken:
1. Availability of the name
2. Document to be filled with registrar
3. Registration by ROC (Registrar of Company)
4. Certificate of incorporation
Availability of the name

 The promoters are required to select at least six alternative

names in the order of the preference for the proposed company.
 Registrar of the companies is required to inform about the approval of
the name and rejection of the proposed name within seven days.
Once name is approved, it is kept reserved for 60 days. If the
application for the incorporation is not submitted within 60 days, the
name of the company can be allotted to the another applicant.
Document to be filled with registrar
 MOA: It is charter of the company. This improves its objectives, its name, the address of the registered
office, the capital, the liability of the members as well as the names address and the agreement of
the people who agree to form a company.
 AOA: this document contain the rules and regulations relating to the internal mgmt. of the company.
 Declaration Section 7(1)(b):
 Affidavit Section 7(1)(c)
 Address Section 7(1)(b):
 Particulars of Subscribers Section 7(1)(e)
 Particulars of First Directors Section 7(1)(f)
 Particulars of the interests of first directors in other firms or bodies corporate Section 7(1)(g):
 Power of Attorney: the power of attorney to be given on a non judicial stamp paper of appropriate
value with reference to the state in which the office of the ROC is situated
 Consent of the Director Section 152(5): According to section 266, in the case of Public Ltd company
having share capital, every director has to give this his consent in writing to act as a director. Consent
of directors is not required in the case of private company.
 Particulars of Directors along with DIN (Directors Identification Number): Where a company by its AOA
appoint any person or persons as a directors, it may also file their particulars with the Registrar at the
time of incorporation.
 Fillling of Agreement: the agreement if any, which the company propose to
enter with any individual for appointment as its
i. Managing Director
ii. Whole-time Director
iii. Manager
A public company or a subsidiary of a public company with paid-up capital of Rs.
5 Crore or more is required to have a Managing Director or Whole-time director
or manager.
 Notice of Registered address must be made to Registrar
 Statutory Declaration of Compliance: A declaration is to be filled in Form INC-
8 with the Registrar of Companies that all requirements of the Companies Act
and its rules relating to registration have been complied with.
Registration by ROC

 If the register of the companies is satisfied that all the requirements

have been complied with, then he will register the company and
place its name on the Register of the company.
 The registrar cannot refuse registration on any reason other than non-
compliance. If there is any minor defect in any document, the
registrar may ask for its rectification. If statutory requirements have
been complied with, the registrar has no option but to register it.
Certificate of Incorporation Section
7(2)
 All registration registrar will issue a certificate of incorporation in the
Form INC-11 in which he certified that the company is incorporated as
a ‘limited’ public or private company.
 Under section 7(2), the registrar shall allot to the company a
“corporate identity number” which shall be distinct identity for the
company and which shall also be included in the certificate.
 Online filing of documents can also be done for the incorporating the
company.
 Section 9 discuss legal effects of incorporation.
Conclusiveness of the Certificate of
Incorporation (COI)
 The COI shall be conclusive evidence that;
 1. all the requirement of the Act have been complied with in respect
of registration
 The company is duly registered
 That the company came into existence on the date mentioned in the
certificate.
Raising/Subscription of Capital

 When a company has been registered and has received certificate of

incorporation, it can go ahead with raising capital necessary to
commence business and to carry on its operation satisfaction.
 Private company is prohibited from inviting public to subscribe to its
share capital. It has to raise the necessary capital from friends and
relatives by private agreement.
 Public Company to take either of the following:
1. Issue a Prospectus:
2. File a statement in lieu of prospectus
Commencement of Business Section
10A
 A public as well as private company without a share capital can start
its business immediately after getting certificate of incorporation.
Such company is not required to get certificate of commencement of
business.
 Certificate of Incorporation is mandatory now for public and private
companies having share capital , to be obtained within 6 months of
incorporation without which it cannot commence it business.