Q. 6

Discuss the stages of formation of a company?

Answer :

The stages of formation of a company are as follows-

1. Promotion is the first stage in the formation of a company. It involves conceiving a business idea and taking an initiative to form a company so that practical shape can be given to exploiting the available business opportunity. The promoter is said to be the one who undertakes to form a company about a given project and to set it going and who takes the necessary steps to accomplish that purpose.


Steps in Promotion


i. Approval of the company's name is taken from the Registrar of


Companies


ii. Signatories to the Memorandum of Association are fixed


iii. Certain professionals are appropriated to assist the promoters


iv. Documents necessary for registration are prepared


Necessary Documents


a. Memorandum of Association


b. Articles of Association


c. Consent of proposed directors


d. The agreement, if any, with proposed managing or whole-time director


e. Statutory declaration


2. After completing the aforesaid formalities, an application is made by promoters to the Registrar of Companies along with necessary documents and registration fee. The Registrar, then scrutiny the documents and issue certificate of incorporation. The certificate of incorporation is conclusive evidence of the legal existence of the company.


3. Capital Subscription A public company can raise the required funds from the public using the issue of securities (shares and debentures etc.). For doing the same, it needs to take the following steps for fundraising:


(i) SEBI approval;


(ii) File a copy of the prospectus with the Registrar of Companies;


(iii) Appointment of brokers, bankers and underwriters etc.


(iv) Ensure that minimum subscription is received;


(v) Application for listing of company’s securities;


(vi) Refund/adjust excess application money received;


(vii) Issue allotment letters to successful applicants; and


(viii) File return of allotment with the Registrar of Companies (ROC).


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