Summary

For raising capital, a proposed public company needs to prepare and issue a prospectus. A prospectus
must be duly filed with the Registrar before it is issued and must be issued in strict compliance of the
statutory provisions in this behalf, failing which the company and every person who is party to the
issue of the prospectus shall be punishable.

To facilitate start-ups, ministry of corporate Affairs, Government of India, provides for online
incorporation of a company which implies obtaining “Certificate of Incorporation of a company, which
implies obtaining “Certificate of Incorporation” through electronic mode. There are two options to
incorporate a new company online:

Option 1: By filling form INC-29 – Integrated Incorporation Form

Option 2 : Apply for the name of a company to be registered by filing Form INC-1. After
name approval, depending upon the proposed company type, file the prescribed
incorporation forms.

Memorandum of Association act as the charter of the company and sets out the (a) name Clause

(b) Objects clause, (c) registered office clause (d) liability clause (e) capital clause (f) association clause

A right issue is a preferential subscription right that entitles a company’s existing securities directly
from the company in proportion to their existing holdings, within a fixed time period. In a rights
offerings, the subscription price at which each security may be purchased in generally at a discount to
the current market price. Rights are often transferable, allowing the holder to sell them on the open
market.

Bonus shares are additional shares given to the current shareholders without any additional cost in
proportion to their holdings. These are company’s accumulated earnings which are not given out in
lieu of dividends, but are converted into free shares.
GLOSSARY
Incorporation: Giving legal form to an association of persons by registering it under the
Companies Act; a procedure full of documentary formalities.
Prospectus: A document containing detailed information about the company, included
in the certificate of incorporation.
Red herring prospectus: A prospectus that enables a company to issue securities
utilising the same document more than once, which will help cut costs and save time.
Shelf prospectus: A single prospectus for multiple, undefined future offerings or issues.
Certificate of incorporation: A document that evidences that the company bearing a
specific name is a registered entity.
Memorandum of Association: a document that regulates a company’s external
activities.
Articles of association: A document that outlines the responsibilities of the directors,
kind of business to be undertaken, and the means by which the shareholders exert
control over the board of directors.

DOCTRINE OF ULTRA VIRES

The word ‘ultra’ means ‘beyond’ and the word ‘vires’ means ‘powers’. Thus, Ultra Vires
means doing an act beyond the powers. Any activity done contrary to or in excess of
the scope of activity of directors, Articles, Memorandum of Companies will be Ultra
Vires.

Share capital: the funds raised by the company by selling its stock to a number of
persons for cash or other considerations.
Issued capital: Aggregate face value of the company’s shares offered for subscription
by the general public or by a private placement, in case of a private Ltd. Company.
Right Issue: A preferential subscription right that entitles a company’s existing security
holders to buy additional securities directly from the company in proportion to their
existing holdings, within a fixed time period.
Bonus shares: Additional shares given to current shareholders without any additional
cost in proportion to their holdings.
APPROPRIATE REFERENCES
1. Sheth Tejpal (2012), Legal Aspects of Business, 3rd Edition
Pearson, New Delhi
2. Kumar Ravindra(2016), Legal Aspects of Business , 4th Edition,
Cengage learning
3. THE COMPANIES ACT, 2013 retrieved from
http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf