'Formation of a Company Essay\r'

'Refers to the entire summons by which a alliance is brought into cosmos. It starts with the conceptualisation of the gain a a confederacy and determination of the think for which it is to be framinged. The psyches who conceive the lodge and invest the sign funds atomic number 18 known as the promoters of the corporation. The promoters autograph into preliminary contracts with v displaceors and make arrangements for the preparation, advertisement and the circulation of course catalog and position of heavy(p).\r\nHowever, a person who merely acts in his nonrecreational capacity on behalf of the promoter (eg lawyer, CA, etc) for drawing up the agreement or other chronicles or prepargons the figures on behalf of the promoter and who is paid by the promoter is non a promoter. The promoters lead certain basic duties towards the caller-out formed :- In showcase of default on the part of the promoter in fulfilling the above duties, the high society may :- A promoter m ay be rewarded by the fellowship for efforts to a lower placetaken by him in forming the comp either in several ways.\r\nThe more common ones ar :- If the promoter fails to disclose the profit made by him in course of promotion or knowingly makes a false bowment in the prospectus whereby the person relying on that statement makes a passing play, he will be apt(predicate) to make favorable the loss suffered by that other person. The promoter is liable for untrue statements made in the prospectus. A person who subscribes for all shares or debenture in the familiarity on the faith of the untrue statement contained in the prospectus understructure sue the promoter for the loss or damages sustained by him as the result of much(prenominal)(prenominal) untrue statement.\r\nII. Incorporation by fitting : The promoters essential make a finding regarding the type of confederation i. e a pulic conjunction or a private alliance or an un confine order, etc and accordingly pr epare the documents for incorporation of the caller. In this connection the enumeration and Articles of Association (MA & AA) are crucial documents to be prepared. Memorandum of Association of a partnership : Is the constitution or charter of the company and contains the powers of the company.\r\nNo company bottom of the inning be registered under the Companies Act, 1956 without the memorandum of linkup. Under Section 2(28) of the Companies Act, 1956 the memorandum doer the memorandum of railroad tie of the company as before framed or as altered from term to time in pursuance with any of the forward companies law or the Companies Act, 1956. The memorandum of association should be in any of the one form stipulate in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956.\r\n work on in postpone B is relevant in case of companies limited by the shares , form in sidestep C is applicable to the companies limited by underwrite and non having share capital, f orm in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to absolute companies. Contents of Memorandum : The memorandum of association of every(prenominal)(prenominal) company moldiness contain the side by side(p) cla maps :- Name clause The recognise of the company is mentioned in the name clause.\r\nA public limited company moldiness end with the word ‘Limited’ and a private limited company must end with the words ‘Private Limited’. The company cannot pee a name which in the opinion of the fundamental Government is undesirable. A name which is identical with or the nearly resembles the name of another company in existence will not be allowed. A company cannot use a name which is out(p) under the Names and Emblems (Prevntion of Misuse Act, 1950 or use a name suggestive of connection to giving medication or State patronage.\r\nDomicile clause The state in which the registered of fice of company is to be primed(p) is mentioned in this clause. If it is not possible to state the little location of the registered office, the company must state it tender the exact conductress either on the twenty-four hours on which get under ones skins to black market on its business or at heart 30 days from the date of incorporation of the company, whichever is earlier. Notice in form no 18 must be given to the fipple flute of Comapnies within 30 days of the date of incorporation of the company.\r\nSimilarly, any change in the registered office must withal be intimated in form no 18 to the Registrar of Companies within 30 days. The registered office of the company is the official address of the company where the statutory books and records must be normally be kept. Every company must affix or paint its name and address of its registered office on the outside of the every office or place at which its activities are carried on in. The name must be scripted in one of th e local languages and in English.\r\nObjects clause This clause is the most important clause of the company. It specifies the activities which a company can carry on and which activities it cannot carry on. The company cannot carry on any drill which is not authorised by its MA. This clause must specify :- In case of the companies other than business corporations whose objects are not confined to one state, the states to whose territories the objects of the company extend must be condition. Consequences of an ultravires transaction :-\r\nHowever, the tenet of ultra-vires does not apply in the pursual cases :- The following are exceptions to the rule of limited liability of members :- jacket clause The amount of share capital with which the company is to be registered divided into shares must be specified giving details of the number of shares and types of shares. A company cannot issue share capital greater than the supreme amount of share capital mentioned in this clause with out altering the memorandum.\r\nAssociation clause A declaration by the persons for subscribing to the Memorandum that they desire to form into a company and agree to take the shares place against their single name must be given by the promoters. Articles of Association The Articles of Association (AA) contain the rules and regulations of the internal direction of the company. The AA is nothing but a contract amidst the company and its members and also between the members themselves that they shall abide by the rules and regulations of internal management of the company specified in the AA.\r\nIt specifies the rights and duties of the members and directors. The pabulum of the AA must not be in conflict with the provisions of the MA. In case such a conflict arises, the MA will prevail. Normally, every company has its own AA. However, if a company does not meet its own AA, the model AA specified in Schedule I †Table A will apply. A company may adopt any of the model forms o f AA, with or without modifications. The articles of association should be in any of the one form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956.\r\nForm in Table B is applicable in case of companies limited by the shares , form in Table C is applicable to the companies limited by guarantee and not having share capital, form in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to unlimited companies. However, a private company must have its own AA. The important items covered by the AA accommodate :- Alteration of articles of association : A company can alter any of the provisions of its AA, subject to provisions of the Companies Act and subject to the conditions contained in the Memorandum of association of the company.\r\nA company, by special resolution at a general meeting of members, alter its articles provided that such alteration does not have the effect of converting a public limited company into a private company unless it has been approved by the Central Government. The articles must be printed, divided into paragraphs and numbered consequently and must be sign by each subscriber to the Memorandum of Association who shall add his address, description and occupation in presence of at least one line up who must attest the signature and likewise add his address, description and occupation.\r\nThe articles of association of the company when registered bind the company and the members thereof to the same extent as if it was signed by the company and by each member. III. Registration of the Company at one time the documents have been prepared, vetted, stamped and signed, they must be filed with the Registrar of Companies for incorporating the Company. The following documents must be filed in this connection :- {text:list-item} {text:list-item} {text:list-item} certification of Incorporation\r\nOnce all the above documents have been filed and they are fou nd to be in order, the Registrar of Companies will issue corroboration of Incorporation of the Company. This document is the birth certificate of the company and is proof of the existence of the company. Once, this certificate is issued, the company cannot cease its existence unless it is change state by order of the Court. IV. Commencement of Business A private company or a company having no share capital can commence its business immediately after it has been incorporated.\r\nHowever, other companies can commence their activities only after they have obtained security department of Commencement of Business. For this purpose, the following additional formalities have to be complied with :- If a company has share capital and has issued a prospectus, then :- {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} Once the above provisions have been complied with, the Registrar of Companies grants â€Å"Certificate of Commencement of Business” after which the company can commence its activities\r\n'