Incorporation of Company Procedure in Company Law

Incorporation of Company Procedure in Company Law (1)

Incorporation means the registration of the company as a body corporate under the Indian Companies Act, 2013 and receiving the certificate of incorporation.

Steps in Incorporation Includes

  1. Application for incorporation

The promoter makes an application for the incorporation of the company to the registrar of companies along with the necessary documents.

  1. Filing of necessary documents-
  • MoA- Memorandum of Association- it defines the objective and activities of the company.
  • AoA- Article of Association- the rules regarding internal management of a company.
  • Statement of Authorized Capital – Authorized capital is the maximum capital that the company will be authorized to raise through the issue of shares.
  • Written consent of proposed director to act as directors and an undertaking to purchase and pay for qualification shares.
  • Agreement with proposed managing director or whole-time director or manager
  • Copy of registrar’s letter approving the name of the company.
  • Notice of the address of the registered office. If the notice is not submitted at the time of registration, it can be submitted within 30 days of the receipt of the certificate of incorporation.
  • Statutory declaration affirming that all the legal requirement for registrations has been completed. This must be signed by the advocate of the High Court or Supreme Court or a signatory of memorandum of association or CA.
  1. Payment of fees- Along with the filing of the above documents, registrations fees have to be deposited which depends on the amount of the authorized capital.
  2. Registration- The registrar verifies the entire document submitted and the documentary evidence of payment of registrations fees. If he is satisfied then he enters the company name in his register.
  3. Certificate of Incorporation- After entering the name of the company in the register, the register issues a certificate of incorporation which may be called the birth certificate of the company.

Effect of the Certificate of Incorporation

A company is legally born on the date printed on the certificate of Incorporation. It becomes a legal entity with perpetual succession on such a date. It can legally enter into valid contracts on or after this date. The certificate of incorporation is conclusive evidence of the legal existence of the company.

Decided case – Jubilee Cotton Mills vs. Lewis – Document for registration was filed on 6th January. Certification of incorporation was issued on 8th January. But the date mentioned on the certificate was 6th January. On 6th January the company allotted some shares to lewis. It was held that the allotment of shares was valid since, in the eyes of law, the company was formed on 6th January.

Capital Subscription

A public company can raise funds from the public by issuing shares and debenture for this it has to issue a prospectus and undergo various other formalities.

  1. SEBI Approval- A public company is required to take prior approval from SEBI to raise funds from the public.
  2. Filing of prospectus- A prospectus means any document which invites the public to purchases shares or debenture of the company.
  3. Appointment of bankers, brokers, underwriters- Banker of the company receives the application money. Brokers encourage the public to apply for the shares and sell them to the public. Underwriters are the person who undertakes to buy the share, if these aren’t subscribed by the public, they receive a commission for underwriting the issue.
  4. Minimum subscription- A company must receive the amount of minimum subscription in cash within 120 days from the date of issue, otherwise, the allotment cannot be made and the application money received must be returned to the applicant within the next 10 days.
  5. Application to stock exchange- A public company must get its share listed on a stock exchange within 10 weeks to form the dates of closure of the subscription list. Otherwise, the allotment shall become void. Consequently, all the money received from the applicants will have to be returned to them within 8 days.
  6. Allotment of shares- Allotment of shares means acceptance of share applied, and allotment letters are issued to the shareholders.

After the Capital Subscription next step is

Commencement of Business

To commence a public company, the company has to obtain a “certificate of commencement of business”. For this following document is needed to be filed to the registrar of companies.

  1. A declaration about meeting the minimum subscription requirement.
  2. A declaration that all directors have paid in cash in respect of allotment of shares made to them.
  3. A declaration about no money is payable to the applicant because of the failure of the company to obtain permission to deal in its shares on a recognized stock exchange.
  4. A statutory declaration that the above requirement has complied and must be signed by the company director or secretary.

Effect of conclusiveness of the certificate of commencement of business with the grant of this certificate, the formation of a public company is complete and the company can now legally start doing business.

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