COMPANY LAW &

SECRETERIAL PRACTICE

“FORMATION OF A COMPANY”
 INTRODUCTION
• Formation of a company involves many steps :

Stage 1: Promotion
Stage 2: Incorporation
Stage 3: Floatation or raising of capitals; and
Stage 4: In case of public limited company,
securing a certificate for commencement of
business.
STAGE 1 : PROMOTION
 WHO IS A PROMOTER?
• A promoter - is defined
"as a person who as principal procures or aids in
procuring the incorporation of a company.”

• FUNCTIONS OF A PROMOTER
LEGAL STATUS OF A PROMOTER
• Fiduciary position of a promoter

• Erlanger v. New Sombrero Phosphate Co.,

(1878)

• Summary of Fiduciary Relationship of a

Promoter
1. Not to make any profit at the expense of the company.
2. To give benefit of negotiations to the company.
3. To make a full disclosure of interest or profit.
4. Not to make unfair use of position.
LIABILITY OF PROMOTERS
• Section 56
• Section 62
• Section 63
• Section 478
• Section 543
• DUTY OF PROMOTER AS REGARDS
TO PROSPECTUS.

• REMUNERATION OF PROMOTERS
STAGE 2 : INCORPORATION
OF A COMPANY
 DOCUMENTS TO BE FILED
WITH THE REGISTRAR

1. Memorandum of Association
2. Articles of Association
3. Vetting of Memorandum and Articles,
printing, stamping and signing of the same
4. Printing of Memorandum and Articles
5. Stamping of Memorandum and Articles
6. Signing of MOA & AOA
7. Dating of Memorandum and Articles
DOCUMENTS TO BE FILED WITH
THE REGISTRAR.. CONTD
8. Copy of proposed agreement
9. Power of Attorney
10. Consent of the directors
11. Particulars of Directors
12. Notice of Registered address
13. Statutory Declaration of Compliance
14. Filing of documents for registration
SCRUTINY BY REGISTRAR

• The name selected by the company is acceptable.

• The relevant provisions of the Act have been
complied with. The objects of the company are lawful.
• The requisite number of persons required under the
Act have subscribed and duly signed.
• The memorandum and the articles comply in all
respects with the provisions of the Act.
• The statutory declaration has been properly made.
CERTIFICATE OF INCORPORATION

• Meaning

• The Legal Effect Of Incorporation

• Conclusiveness Of Certificate Of
Incorporation (Sec. 35)

• Effects Of Registration (Sec. 34)

 STAGE 3:
CAPITAL SUBSCRIPTION
STAGE 4: COMMENCEMENT
OF BUSINESS
CERTIFICATE OF COMMENCEMENT

If the company “has a If the company has “a share

share capital and had
issued a prospectus
inviting the public”
(a) Minimum subscription;
(b) Every director has paid in
cash the application and
allotment money
(c) No money is liable to be
repaid
(d) A statutory declaration
capital but has not issued a
prospectus to the public,”
(a) Statement in lieu of prospectus
(b) Every director has paid in cash
the application and allotment money
(c) A statutory declaration
 PRE-INCORPORATION OR
PRELIMINARY CONTRACTS
• Meaning

• Position of promoters as regards pre-

incorporation contracts
1. Company not bound by pre-incorporation contract.
2. Company cannot enforce pre-incorporation contract.
3. Promoters personally liable.

• Specific performance of pre-incorporation

contract
 PROVISIONAL CONTRACTS
• Meaning
PRE-
INCORPORATION
Contracts which are entered before the
company comes into existence
No effect so far as the company is
concerned
Can be enforced against the company
only if warranted by the terms of
incorporation
PROVISIONAL
Contracts entered into by a company
after its incorporation and before
commencement of business
Not binding until the company is
entitled to commence business and
ratified the contract
Cannot be enforced if the company
goes into liquidation without
commencing business
CONCLUSION
ANY QUERY??
NATASHA GOPINATH 06D0613.

RITESH .R. CHUGANI 06D0633.

ELIZABETH 06D0640.

ESTHER P EZEKIEL 06D0641.

SHILPA PRITHVIRAJ 06D0648.

SWATHI D 06D0651.