Q.5a). Examine the steps to be taken to form a Public Ltd. Company in inception. Or Discuss the procedure for the incorporation of a Public and Private Company?
Ans. Three main stages has involve for the formation of a company
1. Promotion of a company;
2. Incorporation or registration of a company; and
3. Commencement of business of the company.
1. Promotion of a Company- Before a company is formed, there must be some persons who have an intention to form it and take necessary steps to bring it into existence. The persons who initiate the process of formation of a company are called ‘promoters’. They not only conceive the idea of forming the company but also take necessary steps to complete the formalities of incorporation and registration and also make arrangement for capital or assets with which the company is to be started. Thus, the promotion of a company is, therefore, a comprehensive term which denoted the process by which a company is incorporated or brought into existence, as a corporate body and established as a running concern. The persons who assume the primary responsibility of matters relating to formation and promotion of a company are known as promoters of a company. According to Prof. Gerstenberg, “Promotion of a company is the discovery of business opportunities and the subsequent organization of funds, property and managerial ability into a business concern for the purpose of making profits therefrom”. Obviously, the preliminary duties. which are necessary to bring a company into existence, are performed by the “promoters” who play a pivotal role in the formation of a company.
2. Incorporation of a Company— In order to get certificate of incorporation fora new Public company from the registrar of Companies, the following formalities shall have to be complied with the promoters-
(i) An application in the prescribed Form IA of the Companies (Government’s) General Rules & Forms, 1956 along with a fee Rs. 100/ as required under Rule 4A shall be filed to Registrar of Companies of the State in which the registered office of the proposed company is to besituated. The application must specify the name of the company proposed to be incorporated as its name and the kind of company, namely, whether it is a public or a private company.
(ii) The Memorandum and Articles of Association should be prepared and printed and a copy of each of them has got to be stamped according to the Stamp Act. A public company limited by shares may adopt Table A of Schedule 1 of the Act, and in that case, it need not prepare its own Articles ofAssociation.
(iii) The memorandum and articles are to be signed by at least seven subscribers in case of public company and two in case of private company and each subscriber should give, his address, description and occupation, etc. and number of shares subscribed by him. The subscribers must sign these documents in the presence of at least one witness who shall attest the signature. The documents should also bear the date.
(iv) The following documents should then be filed with the Registrar of Companies—
(a) Duly stamped memorandum;
(b) Articles,. if the company intends to get them registered. They should be duly stamped.
(c) The agreement, if any, which the company proposes to enter into with any individual for appointment as managing or whole time director or manger; .
(d) A declaration of compliance on Form 1 on a requisite non judicial stamp paper duly signed by an advocate, an attorney or a pleader entitled to appear before a High Court or a whole-time company Secretary or a (‘bartered Accountant practicing in India, or by a person named in the Articles as and director, manager or secretary, has also to be filed with the Registrar of Companies.
(e) In case the company to be incorporated is a public company having a share capital—
(i) A written consent of each director or Form No. 29, to act, as director signed by him of his agent authorized in writing, and
(ii) A written,undertaking in the same Form to take from company his qualification, shares and pay for them if he has not already taken them or has signed the memorandum for such shares. The documents mentioned in (e) (i) and (ii) above need not be filed in case the proposed company has no share-capital or is a private company.
(v) The following two documents, although not required for the purpose of registration of the company, are usually filed along with the aforesaid documents, since the firsi in any case has to be filed within thirty days of incorporation and the second within thirty days of appointment, whether the company is public or a private Company-
(a) The address of the registered office of the company in Form 18,
(b) Particulars of directors, manager and secretary in Form 32 in duplicate.
(vi) A filing fee as per Schedule X of the Companies Act has also to be deposited along with the aforesaid documents. The Registrar of the companies on being satisfied that all the requirements have been duly complied with will enter the name of the company in the Register of Companies maintained by him and issue a certificate of incorporation to the company under his signature U/S.34 of the Companies Act. The company becomes a body corporate with perpetual succession and a common seal form the date of the certificate, even if, that is not in fact the date when it was issued. It must be noted that if the documents are in order and the object of the company is legal, the registrar has no discretion in the matter and he must grant the certificate of incorporation. A writ of mandamus can therefore, be issued by the High Court to any of the subscribers ordering the registrar to register the company since he is acting as a quasi-judicial authority in the matter.
Procedure for Incorporation of a Private Company—
The procedure for the incorporation of a private company is virtually the same as that of a public company as described above, except with the following exceptions-
(i) Only two subscribers to the memorandum are necessary instead of seven.
(ii) Form No. 29 is not required to be filed in case of a private company;
(iii) Registration of Articles of Association with the Registrar is mandatory;